14 NOVEMBER 2011

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Article from BTNews 14 NOVEMBER 2011

COMMENT: Where now for UK aviation?

These are tumultuous times in the world of air travel, at least in the UK.

AERBT thought it might be worthwhile to review the situation and bring readers up to date.

Three items top the bill.

Firstly, APD is being reviewed with an announcement during the Autumn Budget on Tuesday 29 November.  The Treasury is being lobbied remorselessly by airlines, the travel industry and the world of commerce.

Secondly, a Government review is being carried out with the first tentative steps announced in March.  This will probably include an indication of Downing Street’s view on the future regarding the South East airports.  

And thirdly, Lufthansa has indicated that British Airways is the preferred buyer of bmi, an airline that at one time it coveted but when forced to purchase was reluctant by all accounts.  There is a moral to this story.  Lord Glendonbrook (Michael Bishop) must be laughing all the way to the bank.

All three topics come under the aegis of the new Secretary of State for Transport (and now Cabinet Minister) Justine Greening, although APD is a past interest (or is it?) from her time at the Treasury.  They are also intertwined.

APD tops the bill.  Whether it is the Pacific Area Travel Association (PATA) (see this issue WTM), Governments in the Caribbean, or industry bodies in the UK, all agree that APD is a pure income.  It always has been except that previous Chancellors liked to keep up the pretence of an environmental tax.  Sharp-eyed followers of Westminster will note that suddenly the Government is agreeing it is just a revenue generator.  Why?  The legal people have realised that Europe is also charging on an environmental basis from January.  Even Whitehall has not the effrontery to arraign twice for the same reason.  If you have to tax why not on a straight mileage basis.  It makes more sense.  

Next up is the Government review of aviation.  The problem here is that it covers a vast field with all manner of interests putting forward their views.  Just taking the case of where a new runway should go opens a can of worms.  The spring offering is likely to be just words, with little action.  Let us hope we are wrong.

The integration of bmi into BA will be a complex operation with the pension obligations, wage differentiations and crew seniority problems to overcome. In airline terms bmi is not large, employing 3,600 staff and a fleet of 27 (mainly) Airbus A320 series aircraft. On its head to head routes into Heathrow there will be initially no competition, although other carriers, those who can get the slots, might wish to invest at some point in the future. By all accounts Virgin is suffering now that long haul Glasgow clients need to fly on BA into Heathrow. Predators might be hovering to divert passengers through other hubs.

As for British Airways and Lufthansa, one presumes that bmi Regional is being sold off separately which leaves bmi Baby, rattling its own pram.  Virgin Atlantic has highlighted its objection and the takeover might well include some sort of slot trading in order to pacify Sir Richard Branson.  He is now talking of joining an Alliance. 

The Star Alliance obligations will need unravelling and likewise integration into oneworld. bmi is also a shareholder in NATS. British Airways will still not have as much dominance as Lufthansa, Air France and KLM have at their respective airports.

On the surface one of the biggest losers is BAA.  Yes, it will have to find new tenants for the bmi hangar complex, but more importantly T2 is still very much in the planning/construction stage.  Better now to reconfigure than when the nice new bmi lounge is in place ready for occupancy.  Who moves in the airport version of musical chairs BAA will have to decide.

With bmi, BA now has the slots to plan for at least the next five years.  And with plenty of new aircraft on the way too.

Over to you Minister.  Plenty to sort out.

Malcolm Ginsberg
Editor in Chief

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