29 APRIL 2013
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David McMillan, Chair of the Flight Safety Foundation, and also a Board Member of Gatwick Airport Ltd under the Chairmanship of Sir Roy McNulty, was the speaker at London’s Aviation Club last week.
In a broad ranging speech he discussed his time at Eurocontrol and more specifically ‘Single Skies’. Asked by this publication when something might actually happen, he pointed out that Eurocontrol had been established in 1960, and that in October 2001 the European Commission adopted proposals for a Single European Sky to create a Union regulator for air traffic management within the EU, Norway and Switzerland. “By 2019 we might see some progress”, he said.
Mr McMillan emphasised what he called “The three C’s”. Competition (between airlines), Connectively (at the airports), and Certainly (Political guarantees that things will go through).
Mr McMillan has vast experience of the legislators having served in the UK’s Department of Transport for 10 years and also as Transport Secretary at the British Embassy in Washington. His comment on the Davies Commission has real strength: “I am very sensitive to moving the (UK) hub to the East”.
For the full speech continue
AVIATION CLUB ADDRESS
It is a pleasure to be with you today, as your guest speaker – looking at the list of those who have spoken, I may be a slightly unusual choice of speaker, but I hope that my thoughts and observations, based on what I was distressed recently to hear described as “a long and distinguished career” – surely the death-knell for anyone– can provoke some interest here today.
The initial invitation to me was to reflect on what had changed on the European aviation scene over my five years at the head of Eurocontrol, which is already a significant challenge; but I can’t resist also making a pitch for the Flight Safety Foundation; and as a former Secretary to the RUCATSE report on South East Runway Capacity back in the 80s and someone who spent a lot of time on airport issues as the UK DGCA – and indeed as someone who has just joined the board of a London airport, I will also say a word or two about the great airport debate, here in the UK. I do, though, need to stress that I’m talking today in a personal capacity, rather than in any particular professional capacity.
Civil Aviation In Europe
Aviation in Europe has been through a tough 5 years or so. The economic crisis hit aviation very hard, with a significant downturn in traffic. Since 2009, the number of flights in Europe has fallen by over 8%. And it’s continuing to fall. Overall, Eurocontrol forecasts do not expect traffic to be back at 2008 levels until 2015 at the earliest. Its beginning to look like a decade long drop in activity.
Of course, it’s not a homogeneous picture across the whole of Europe. For example, some areas have performed much better than others – such as Turkey and the Baltic states. Turkey in particular has seen quite a lot of growth over the last few years, especially on internal flights, but also to destinations such as Russia.
Indeed, in the summer months Russia is now Europe’s largest partner, overtaking the United States. Over the past 5 years, North Atlantic traffic has fallen slightly – by six or seven percentage points. In contrast, we’ve seen significant growth in flights to the new hubs in the Middle East.
And those hubs are an interesting phenomenon – standing in stark contrast to the difficulties we have in Europe of building new airports or even new runways and also reflecting the restrictions on night flights we have here.
Because airports look like being the major constraining factor for growth. By 2018, one forecast is that there will be an unsatisfied demand of over 100,000 flights per year in Europe as a result of airport capacity constraints – that’s 1% of total flights. And that’s assuming that the huge new airport in Istanbul is up and running by then.
Airlines naturally tend to focus on the number of passengers, where the story is not quite as bleak, as airlines have improved their load factors, squeezing more seats into aircraft or just amalgamating flights into bigger aircraft. They have also had to focus hard on generating as much ancillary revenue as possible; and on cutting costs wherever they can. And that includes the airport costs and, most relevant to me in my last job, the cost of air traffic control.
Air Traffic Management (ATM)
Now before I go into all the changes that have happened in ATM, I must say a few words about safety.
Because that is central to everything that ATM does. And that’s reflected in the statistics – there were no accidents in Europe directly related to ATM in any of the last four years on record [2008 to 2011] and only four with an indirect ATM contribution – none of which were fatal.
We can be proud of our excellent safety record in Europe, but we should not be complacent: because it’s easy to take your eye off that ball when you’re under pressure. And ATM is definitely under pressure – perhaps as never before. The financial pressure in particular has become very much more immediate.
On one side, there are the airlines clamouring for a reduction in traffic charges. On another, there’s a reduction in the income from fewer flights: tough in an infrastructure business. And the industry is probably equally irritated by people like me when we say that we still have to look ahead to growth which means that we have to invest now in order to improve future performance – and adopt some radical policies to cut costs.
Now, that word performance – that’s a word we hear a lot more of now that we did five years ago.
That’s a good thing and – although this may be an unusual thing to say here in London, a lot of the credit must go to the European Union and, in particular, the European Commission. Now, seeing your reaction, I agree with many of you – it does feel slightly unnatural to be praising the European Commission. It’s rather like congratulating HMRC – they may be doing their job well, but you instinctively feel that you shouldn’t encourage them.
Nonetheless, the fact is that, for many years, Europe suffered from the lack of political leadership in ATM. The creation of Eurocontrol back in 1960 was intended to be the start of creating a Single Sky for Europe. But the politicians failed to follow through and it’s only now that we are moving – slowly - towards a Single European Sky. And that movement is a direct result of the political authority of the European Union.
I say ‘moving towards’ and ‘slowly’ because we’re not there yet – not by a long way. Even the Transport Commissioner said in a speech last year that the Single European Sky is “10 years on and still not delivering”. So where are we, what has been achieved and what’s holding us back?
Performance is at the heart of the European Union’s Single European Sky initiative – that means setting ambitious Europe-wide targets, getting everyone to plan how they’ll meet them and then enforcing compliance with those plans. I hope you’re impressed by the way I managed to get through that sentence with a straight face. Because nothing is ever that simple.
The good news is that the Performance Scheme has started. The Performance Review Body has been created. The targets for the first and second reference periods have been agreed and plans have been drawn up. Already there are concerns about the level of ambition and robustness of these targets – and again this is largely because of lower traffic volumes. It’s much easier to reduce unit costs when volumes are rising.
But how is it that the new performance targets are to be met? As is the case for many activities, the mere act of setting a target will tend to help improve performance. Everyone knows what they are supposed to achieve and they focus their efforts towards achieving the goal.
But that’s not enough and so there are a number of initiatives to help. There is now a Network Manager – a role allocated to Eurocontrol. It incorporates the flow management function that has been operating successfully for some years now, but it goes further.
The Network Manager can take a more proactive role in addressing the day-to-day issues of disruption as a result of the weather, strikes or shortage of capacity. It can work with individual Air Navigation Service Providers to tackle chronic causes of delays or diversions. And it has developed a Network Strategic Plan – all with the aim of encouraging everyone to think of the network implications of their actions – not just the impact in their particular country. Because that’s a major cause of inefficiency in Europe – the fact that it’s a patchwork of comparatively small countries. And these countries have borders that, remarkably, seem not to be have based on the needs of air traffic management.
More seriously, while we have about the same number of controllers as the United States, we have many, many more support staff – about forty thousand compared to their twenty thousand. We also have lots of different systems – all adding to complexity and to cost.
To address this, the EU has urged all the Air Navigation Service Providers to join together in Functional Airspace Blocks, or FABs. And these FABs – nine of them – have indeed been created. But many exist only on paper and it will be some time until we see real operational and cost benefits coming from those.
Why has it proven to be so difficult? Well, with national monopolies providing well paid jobs in sometimes remote areas; with an excellent safety record; with newly commercialised organisations having CEOs and CFOs who are very focussed on optimising their operations; and with charges that may be too high but are broadly speaking coming down, its sometimes hard for politicians to see what the problem is. So the process has lacked any real political oomph. And the UK’s early move to privatise NATS has not been adopted anywhere else in Europe. I remember making the case for the PPP by saying that it would give us “first mover advantage” in Europe. I don’t think I appreciated just how long that advantage would last!
Short of privatisation which could unleash much needed M+A activity, there are some pretty obvious things that should be done. Much more, for example, on the common procurement, or common provision of services. Here, I’m not necessarily talking about a single control room covering the whole of Europe – although the EUROCONTRONTOL centre at Maastricht, covering the upper airspace of four countries, does show how efficient such an approach might be. Rather, I’m talking about a lot of the data and IT infrastructure.
And we already have some successful examples of this – which have shown how coming together can yield concrete benefits. But we have to look further and see how many of the ANSPs’ services can be made more efficient and more interconnected – especially as that is the way the technology is going.
And it’s new technology that is the third enabler for improved performance – the third way in which the European Union is trying to help the sector achieve the targets.
Here I’m talking about SESAR – the Single European Sky Research Programme. A lot of work is being done to see how we can move forward, to get to a position where aircraft fly as close as possible to their optimum trajectory – saving money and reducing the impact on the environment.
Indeed we’re now at the stage where we’re looking at how deployment of the research projects will happen. And here again the economic crisis has a major impact. It’s very hard to find money for investment now and we have to be very clear about the cost and the benefits.
And that’s especially true because the forecasts have changed. Only a few short years ago, the plan was to triple capacity in order to cope with a base case 73% increase in traffic between 2005 and 2020. But that increase is no longer expected to be 73% – it’s more like 29%
So we need to target investment much more carefully. And that may mean focusing on the investment on the ground rather than in the air. In general, it’s cheaper; and there’s a lot that existing onboard systems can already do.
So what of Eurocontrol itself? How did it change over the last five years I was there; and where does it stand now?
Well, I’m not sure that everyone knows what Eurocontrol is and how it evolved, so I’ll give you the one-minute history tour.
It was founded back in 1960 with the aim to create a single sky for Europe – sound familiar? Of course, by Europe, what was really meant was northwest Europe – the British Isles, France, Germany, Benelux and the Netherlands. But even for these few countries, there was never really the political will to create a unified air traffic control centre for Europe – not even for the upper air space, although the creation of the ATC centre at Maastricht that I mentioned earlier showed what might be done.
But despite this, Eurocontrol survived and indeed has grown over the years – it is about to welcome Georgia as its 40th Member State. And it has taken on all sorts of responsibilities over the years – from flow management to collecting route charges and coordinating new technical developments across the network.
Despite all this good work – and to over simplify and caricature the position so as to make the point - when I arrived the Agency was living in an ivory tower, rather disconnected from the EU developments, following its own agenda with a top heavy management structure and a budget funded through the unit rate system that grew inexorably.
And what of today? Well, I’d be the first to say that the Agency isn’t perfect but through setting a clear agenda, cutting the top management down to size, liberating the forces for change inside the Agency – and a robust approach to staff numbers and costs, the Agency made huge strides over those five years.
Perhaps most important is how the organisation is now seen externally with many people recognising again how the Agency could be used as an important means of defragmenting the European network and thus making it much more efficient than it currently is.
But, for Eurocontrol and the rest of the ATM industry, continuing and rapid change are here to stay. For example, while we still have all the main drivers associated with ATM – that’s to say capacity, safety, efficiency and the environment, the focus has changed towards efficiency – towards saving money. And we can expect this to last for quite some time.
And the reason I suggest that the pendulum shift towards efficiency will last for a time is two-fold. First, more efficiency in ATM is also great for the environment. And so, as the industry and world governments seek to reduce aviation’s environmental impact, any operational efficiency that ATM can deliver will reduce fuel burn and so be accepted with open arms. Secondly, we are for the moment well ahead of the demand curve in most of Europe, on account of reduced demand. The proof of that is in the fact that – setting aside industrial action in one or two places – there were virtually no ATM induced delays in the system last year.
Lest I sound too relaxed, let's get on the table right away that ATM – and airports – are infrastructure businesses which tend to provide capacity in chunks; and that compares to the mobile assets that enable airlines to play incremental tunes on capacity. For so long as you are operating within the last chunk of capacity provided, all is hunky dory. But as soon as you get near to capacity limits, the problems – and the delays – can grow exponentially.
Given where we are on ATM capacity, the pinch points today remain our overcrowded runways. We are not unique in the UK in finding it difficult to deliver new runway capacity – but we do seem to have found a way to raise it to an art form. I sincerely hope that the new Davies Commission will find the means to get us out of a revolving door that we have all been around many times before. In my own case, I have been involved in the issues closely on two occasions; first, I was secretary to the RUCATSE report back in 1994; and I was DGCA for a period when the last Labour Government was trying to implement the 2003 Aviation White Paper. Neither of those reports – and there have been others – delivered new runway capacity, but both strongly advocated the need for that capacity.
Ladies and Gentlemen, there are a number of things to consider. Given my involvement in European ATM for many years, I am personally sensitive to the thought of moving London’s main aviation activity 100 or so kilometres closer to the airports in Amsterdam, Paris and Brussels. And, of course, we have to deliver an outcome that stands the test of delivering in the interests of UK plc, rather than simply that of any particular group of stakeholders: or even investors! But there are just a few more thoughts I’d like to share with you.
I have been encouraged by what I have seen so far of the work of the Davies Commission; there seems to be a willingness to ask the difficult questions which I hope will be matched in time by a willingness to recommend robust answers to Government. I am particularly pleased with the way the Commission has articulated the questions behind its assessment of Need:
• Does the UK need more capacity?
• If so, when does it need it by? And
• What sort of capacity does it need?
Within the debate so far, there has maybe been more heat than light – perhaps because there have been rather too many people telling us all what the answers are, and not enough people thinking about what the questions really should be. I remain optimistic that Davies will bring much-needed clarity to the questions.
And I would like to suggest, if I may, that there are three “Cs” that the Commission needs to consider: they are Competition, Connectivity and Certainty.
First, competition. We now have the three largest London airports in separate ownership. The BAA monopoly was broken up so as to give passengers and airlines an increasing range of choice. I look to Davies to make recommendations that will make the most of that new advantage. How can we provide the connectivity that is required by exploiting the benefits that competition among airports can provide?
Secondly then, connectivity. This is what the UK needs: lets not forget that IATA figures show that over 90% of passenger journeys taken through London start or end in London. Of course, transfer traffic is important in sustaining or developing some marginal routes. But the real question is how best to deliver that connectivity overall – through a single, dominant airport – or through airlines competing to provide attractive services for passengers at a range of airports? Of course, this point links also to passenger convenience. Does concentration of supply – or its dispersion at a range of airports – provide better access for passengers?
And thirdly, certainty. A key lesson from the past is that runway capacity, like high speed rail lines, is an area where you will not make progress without some firm political guarantees that a selected project or projects will be allowed to progress properly through the planning system. That implies making choices – and it may need some kind of parliamentary process, possibly a hybrid bill like those that delivered HS1 and Crossrail. Without that, I fear we may spend yet more years in that revolving door.
And, if we do not escape from that revolving door, we will put at risk the benefits we have seen delivered through airline liberalisation and the opening up of the anti-competitive bilateral system. If we do not provide the needed capacity, the operational needs of the system and environmental pressures will force the ATM system to do something about it; and that something will be very similar to the old economic regulation that we were all so keen to see the back of – it will effectively re-regulate the system, but it will do so on operational grounds, starting with where the pressure is most intense in so-called “core-Europe”, roughly the triangle created by London, Frankfurt and Paris – are we really sure that this would give the optimal outcome?
Coming back to safety, the Flight Safety Foundation has been around for more than fifty years and I am pleased to have been appointed as the first non North American to Chair the Foundation’s board. This is a signal of the Foundation’s wish to reiterate its global ambition and to give fresh life to its worldwide activities. And this comes at a fascinating time for the safety debate.
We have traditionally learned from experience, investigating accidents and reacting with appropriate measures to prevent them from happening again. The FSF has been a key player in much of this activity and we have witnessed the focus rightly change to a more proactive one, where industry identifies risk and mitigates the threats that cause it. That was a major step forward, but now the Foundation believes that its time to push beyond the proactive into a predictive era.
We gather thousands of data reports each day across the industry; we need to secure agreement to a de-identified global database that can be processed and analysed so as to predict future events – and, of course, then hope to take action that will disprove those predictions. This is not the work of ten minutes, days or months. But nor should it be the work of 10 years; and it is the Foundation’s belief that data analysis for specific and unknown risks will be the key to keeping the accident rate down as and when growth returns and thus keep the system efficient, economically vibrant and drive commonly high safety standards across the globe.
In this work, the FSF is a neutral, impartial not-for-profit organisation focussed on lowering the risks inherent in aviation and advocating an informed and common sense approach to safety. It can do this with authority as it is not an industry association as such. If you or your organisation is not yet a member, I’d ask you to seriously consider becoming one: it doesn’t cost much, but it’s a great way of giving something back to the activity that brings us all here today.
Ladies and Gentlemen, I have covered a lot of ground. I hope I have not sounded too pessimistic – my thinking has in part been coloured by the fact that I was not blessed to be the Director General of Eurocontrol at a time of a booming European economy or during a period when civil aviation was in its normal growth mode. Indeed, I am unique in having presided over a fall in traffic!
So I want to leave you with a reminder – if you needed one - of the crucial importance of the aviation sector to our modern economies. This was demonstrated by a single incident that took place during my term as Eurocontrol’s Director General – the Icelandic volcanic eruption in 2010. For several days our radar screens showed almost no aircraft in much of Europe. The ash crisis caused major disruption and, in doing so, it demonstrated beyond doubt the huge dependence of our modern economy on air transport. Goods and people did not get to where they needed to be; our economies were given a buffeting they could ill afford at a time of economic hardship.
More than ever before, in today’s interdependent world, an efficient and effective aviation and ATM system is one of the infrastructures on which we all depend. We owe it to our industry, but we also owe it to our fellow citizens, to make the case for aviation having the licence to deliver great service – efficiently, sustainably and cost-effectively and to do so with modern, adequate infrastructure. If we can do that, we will all be winners. Thank you very much.
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