a new airport for London

The whole debate about the question of a new airport for London (or extension of the present airports) is ridden with prejudice, misinformation and self-interest. It should, therefore, be valued with those thoughts in mind.

The coalition government´s decision to prohibit any extension of Heathrow, Gatwick and Stansted was a preelectoral sop to voters to ensure their parties´ election - take note that no mention was made of Luton where there are Labour held seats.

The expansion of Southend, Lydd and Manston airports together with "London" Oxford smacks of hypocrisy of the highest order. Airports are not just runways and terminals. They are ancillary services, connexions, public transport, taxis, cars, lorries, noise and air pollution. By expanding these airports are you trying to alleviate the problems at other established airports? - I doubt it, you are just creating more problems than ones you are supposedly resolving..

The established airports have the infrastructure in place. London is privileged to have four major airports (plus London City) to serve its and the nation´s needs. The problem is and has been the lack of political will to solve the problems of lack of capacity in the South East. In comparison Frankfurt has one airport, Paris has two while New York has three.

Heathrow has grown to full capacity because everyone wants to connect through there - to the detriment of the UK traveller who sees his connexions reduced. Therefore, the need for a third runway is obvious, not for long distance traffic but to ensure connexions with the rest of the British Isles and near Europe(the Benelux countries and Paris). Any limitations on such extra traffic should be based on noise and engine pollution.

Gatwick´s new owners say they do not want to expand to a second usable runway. They cannot anyway , until 2019, at least. What they really want is to get everything up and running well  before that date so they can present a good convincing business case when the time comes and then show what a mess everything is elsewhere so their case for extension is incontestable(which airport owner would deny the opportunity to expand?).

Stansted was pushed as London´s second airport in the early 1970s (and rejected). It has grown by stealth since then. The traffic levels subsequently achieved were probably not even imagined then. Even though there is now a dip in passenger numbers, growth will continue in the mid to long term. Here the basic infrastructure is in place and any improvements would have to be made anyway (especially in the rail corridor).

Luton is the one airport not mentioned but in the best position. Forget that the majority of its traffic is devoted to charter and holiday flights (was that not the case for many years at Gatwick?). Luton has excellent connexions on the Midland Main Line(MML) to East Midlands, South Yorkshire and Leeds - which could be improved through electification and even to Manchester. When the Thameslink project is eventually finished then 24 trains per hour will provide direct service to South of the Thames and the South coast.

The solution is therefore, based on demand. Heathrow must expand to three runways with the view that that is the limit. Then another airport must be named as its major compliment. By the type of present traffic Gatwick would be the ideal place to lay a second runway. However, the affluent residents of that near area would not be too keen and so would probably ensure it is not built.

Stansted was proposed as the second airport and has been trying to achieve that objective. However, it is in an area where it is out on a limb which would need tremendous investment to make it an attractive proposition. The Crossrail project could give it good connexions to Central London, the M4 corridor and Heathrow if such were the desire. On the other hand, like Gatwick the affluent nimbys would probably put a stop to it.

What is left is Luton. This is well connected to both Gatwick and East Midland airports. Customers from south of the Thames will be able to  reach it as well as those from north of London who could do so without entering the capital. As said before it is on the MML giving it excellent connexions northwards meaning passengers would not have to put pressure on London´s transport system.

(c) The Times

Thus our conclusion is that Luton should be focused on as the next major London airport.(this was explained in our blog of 5 July 2010 - Luton, the Next Best Bet?) A second runway should be laid down and land reserved for a possible third and even fourth runway. If not then all the airports should be permitted to expand to at least two runways. The cost should be born by the owners of the airports. If there were free choice in the matter of expansion then market forces would come into play to ensure that the costs to the users do not become prohibitive. The cost to the government would be the necessary upgrading of the infrastructure to the airports (this has to be done anyway so is not extra).

The onus must be on public transport and connectivity. Where public transport exists it should be bettered, making it more attractive to use and encouraging the public to leave the car at home. The connexions to London, other cities and other airports have to be a priority to increase the attractiveness of public transport thus reducing traffic and subsequently pollution. Until the love affair with the car is broken then the problems of traffic volume, air pollution and noise will not be reduced.  

Some decisions on infrastructure and rolling stock - but are they enough?

Now that the Government has decided on its priorities, at least in part, on transport, we have a clearer idea of its intentions. Crossrail will go ahead as planned though there have been modifications, especially in the design of the stations so as to save about GBP1bn. Thameslink also escapes the hatchet, though with certain delay so as to spread the cost over a longer period.

The GWML electrification scheme, to Bristol, Cardiff and Swansea, has not been decided upon. However, the much mooted extension of the Crossrail project from Maidenhead to Reading is now being turned into an extension of GW surburban services through Reading to Didcot and Oxford on one hand , while to Newbury on the other. It has not been stated whether these are part of Crossrail or not.  


There is a certain logic here since the rolling stock needed will be commuter stock so it makes a logical operational decision to take advantage of the "wires" to run electrical commuter stock under them to the limits of where they will go. The rolling stock needed for the West and South Wales services are long distance and that is where the decision has been postponed until the New Year.

The electrification projects approved in North West England are:

· Liverpool to Manchester via Newton-le-Willows

· Huyton to Wigan

· Preston to Blackpool North

· Manchester to Preston via Bolton

These are basically fill-ins which, more than anything, will facilitate the use of electric traction units using the already electrified WCML between Liverpool and Manchester with Glasgow and Edinburgh. This a long overdue decision since many of these connections were only available with a train change at Wigan or Preston, or the use of diesel units for the whole journey when they were only needed for a short non-electrified section - a gross misuse of resources. Other commuter opportunities are also opened up especially with the extension from Preston to Blackpool which will result in a greater, more efficient use of material. The material used will be cascaded, and should be renovated(though the DfT says nothing about this) from the Thamelink lines which will receive new stock.

HS2 is to go ahead but no definitive route has been decided upon. We suspect that there will be little change (just tinkering) from the route as laid out by the previous government (in March 2010). The present government will just choose its moment to make the route known so as to reduce the negative political impact among its own supporters as much as possible. The no news with regard to the electrification of the MML from Bedford to Nottingham, Sheffield and Leeds was received with great disappointment. However, we suspect that a lot will depend on the final route of HS2 from Birmingham to Leeds. A great part of this route will pass through the aforementioned cities. Therefore, they might get a better than anticipated service when the route is finally announced. Thereafter, the electrification of the MML from Bedford to Nottingham will be a logical fill-in in the next stage.

The main content of the announcement made on 25-11-10 refers to the number of new rolling stock to be purchased. The figures mentioned are about 2100 new carriages, "including vehicles" for the Thameslink and Crossrail projects.The net gain in carriages is calculated to be in the region of 1850. The Intercity Express replacement programme complements this but as yet is still undecided. 

We feel we have to make a comment which has nowhere been made up to date.

One rapid way to increase the numbers of locomotives and coaches on the railway network is to cut a deal with Eurostar.

Eurostar trains were built to British standards(limitations) with a narrower gauge and a dual traction system so they could run on the third rail DC system into Waterloo. Since these limitations no longer exist on HS1 into St.Pancras, then the stock is superfluous to needs and Eurostar will be thinking about replacements for that stock. If the UK government were willing to pay a fair price for the stock (which is only about 15 years old) Eurostar might be persuaded to bring forward its replacement programme so as to have a more modern, more comfortable and a more standardised fleet, thus reducing its own running costs. 

This would be of special importance if DB is to be allowed to run trains into St.Pancras with underfloor traction units and not the end traction units used at present on Eurostar trains.

The UK government would benefit by obtaining a large number of traction units of dual standard together with a large number of coaches which can be used on any long distance line, all at a knock-down price. The timetable, for introduction of the vehicles on to the UK network, might even be quicker.

2018 (Thameslink & Great Northern routes)

The dual standard locomotives are what Thameslink needs and will need for trains on the differing systems both north and south of the Thames. They might not be appropriate for stopping commuter services but certainly would work for fast limited stop services. The future network envisaged for Thameslink would run from Peterborough and Kings Lynn, as well as Bedford, to various destinations on or near the south coast. The locomotives might also be useful for both passenger and freight traffic on the Southampton to Birminghan corridor. This would especially be the case as the GWML has been confirmed as being electrified from Reading to Oxford. This could then be connected to HS2 and so open the rest of the electrified network - especially the WCML.

The number of coaches for these services might be more than needed which opens the possibility of cascading them to other lines.

What we need is some lateral thinking on the whole question of fleet renewal. This idea could be quicker and cheaper than alternatives.

Maybe BA has found a new way

With our last blog in July we questioned British Airways´(BA) strategy and its focus. Apart from the intended, now cleared, merger with Iberia to form International Airlines Group (IAG) there seemed to be no clear way forward for the company to compete with its two Europe main rivals Air France/KLM and Lufthansa.


In this summer period several movements have taken place which have altered the picture. Either BA has changed its ways or its incorporation into IAG has made it rethink its strategy. Before we comment let us look at what has happened in two months.

At a news conference on 27th July last "oneworld" members American, BA and Finnair announced the incorporation of "Air Berlin" into the alliance planning to complete the process early 2012 just before the opening of the new Berlin Brandenburg hub airport.

Air Berlin´s Austrian affiliate (49.9%) "NIKI" will become an associate member of "oneworld" while no mention is given to AB´s Swiss affiliate(49%) "Belair" nor to its German subsidiary "LTU".

Air Berlin´s sponsor is BA. While this incorporation will be tremendously beneficial to "oneworld" - filling a huge gap in Central Europe with its large affluent population in the three countries - it is not so easy to see the benefits for IAG.

Speaking in Mumbai on September 5th to announce the codeshare agreements made with "oneworld" partner Kingfisher, BA´s CEO, Willie Walsh, also announced IAG´s intention to take over and/or merge with several other airlines. From an initial list of over 40 candidates this has been reduced to 12 probables. Though WW did not mention any airline by name he suggested the main areas to be looked at were China and India.

As a result of this speculation became rife. The Guardian , Airline News, Breaking Travel News, among a host of other news sources, including Arabian Business.com, all provided lists of candidates for joining IAG.

To understand what is going on all these manouvers should be looked at as a whole not in isolation. The invitation to Air Berlin to join "oneworld" is a surprise to most people. "Oneworld" up to now has been looked upon/ or presented as an exclusive alliance of the best full service airlines. AirBerlin has been looked upon as a low-cost carrier which has moved up-market but is far from being a quality full service carrier. Maybe our perception is now wrong. However, without doubt it offers to fill up that empty space in central Europe which has been "oneworld´s " Achilles´ heel. It has been mentioned as a candidate for IAG thus providing a strong presence in Central Europe, however, it would be a very big mouthful to swallow, at least initially.

On the other hand other factors may have made BA look at the market in a different way. Way before it went bust Mexicana announced it was in difficulties which suggested that the full service airlines were not immune to problems even in such a large market as Mexico. On the other hand it has subsequently been revealed that Malev was days away from closing meaning that Central Europe could well have been left without any "oneworld" members. The partners in the alliance had no control over the events but surely had knowledge that one, or both, of its members was in difficulties.

Now it appears that Aer Lingus(EI) is talking to different alliances with the idea of joining one. "oneworld" is at an advantage as BA already codeshares with EI on the London-Irish routes and it was a member of this alliance previously. However, it is not the only suitor as EI´s CEO, Christph Mueller said to Bloomberg recently(14-9-10).

Whatever the state of the game let us look at what has been mentioned and try to put things into perspective.

Firstly in Europe.

Iberia has a large minority shareholding(45.85%) in VUELING. This has its main base at Barcelona and is a hybrid with low-cost flights combined with codesharing with Iberia. It is Iberia´s second carrier supplementing in Europe what Iberia cannot or will not provide.


AIR NOSTRUM - Iberia Regional is a francisee but does a good service for Iberia in supplying passengers from lesser airports both in Spain and in Europe.This is a strong candidate to be incorporated into IAG to protect Iberia´s backyard.

FLYBE. It claims to be the biggest regional airline in Europe. It has a strong presence at lesser airports in the UK while it has just signed an agreement with Finnair to provide regional services in Finland and across the Baltic. BA has a 15% shareholding which was obtained by selling BA Connect to Flybe. BA has had a hands off approach codesharing some flights while, inexplicably, permitting Flybe to negotiate a wide ranging code sharing agreement with Air France to feed passengers on to its flights. Maybe BA has decided to pull in the reins.


SUN-AIR Scandinavia is a BA francisee based in Billund (Denmark). The agreement was originally signed in May 1996 for Sun-Air to operate as a licensee linking BA services at Copenhagen, Oslo and Stockholm. It does not seem to have fulfilled the original intentions. The company did not even fill in the gaps left by the demise of Sterling in Denmark. However, the potential still exists to be a link between BA and Finnair in Scandinavia.

FINNAIR. This is an airline with good connections to the Far East. Now that it has signed the aforementioned agreement with Flybe it could find itself with better feeds for its long distance services. It is too small to continue on its own so is a strong candidate to enter IAG.

MALEV. This airline has been mentioned as a candidate for IAG but with its financial problems being aired recently probably nobody would want to touch it with a barge pole.

MERIDIANAFLY. The link with BA is very tenuous as BA only has one codeshare agreement with Meridiana between London and Florence. However, the company has a strong presence in Italy, both domestically and with European and Intercontinental leisure flights, which is an appealing market for IAG. This company must be on the shopping list.

The Americas.

American Airlines has always been looked upon as a strong candidate to merge with BA. However, the US government has not made any moves on the limitation of foreign airlines having no more than a 25% shareholding. This is something BA has already experienced with its attempted investments in US Air and UNITED. The Americans would undoubtedly want to be top dog in any merger. Hopefully, the Iberia part of IAG would put a damper on that.

Another question is LAN(now established in Chile, Argentina, Peru and Ecuador).












It has just decided to merge with the Brazilian airline TAM to form a holding group called LATAM while retaining their own brands. There might well be reticence on the part of both to immediately submerge into IAG without enjoying the benefits of the merger and the possibilities of expansion as a South American group. While LAN has been a member of "oneworld" for some time TAM has only just entered into Star Alliance(May 2010). One can see a big battle between the alliances to incorporate the other member. LAN is extremely important for "oneworld" while TAM is the only Latin American member of Star - all this is more important since the demise of Mexicana. This will be a battle to watch and is certainly not decided as yet. It could be a candidate for the future.

Africa.

South African Airlines has been mentioned as a candidate for incorporation into IAG. Though it is a very interesting morsel we doubt if the SA government would want its flag carrier to be swallowed up. It is already a member of Star Alliance.
BA on the other hand has an 18% shareholding in Comair of South Africa. This airline provides domestic and regional flights connecting to BA´s services at Johannesburg and Cape Town. It also has a low cost airline, Kulula.com working mostly in the domestic market. It seems logical that IAG would take advantage of the stake to build up its presence in South Africa.


Middle East.

Royal Jordanian is already a member of "oneworld" but has not been mentioned as a takeover candidate as yet. However, Gulf Air was mentioned in Arabian Business.com(23-9-10)

With Emirates, Qatar Airways and Etihad making concerted, and so far quite successful, attempts to become important airlines with hubs in the Gulf, the other Gulf airlines are feeling the squeeze. That does not mean that "oneworld" or IAG should ignore the Gulf. Quite the opposite. It is another area where a presence is necessary. There is also a history of BOAC having a shareholding in Gulf Air. Therefore, maybe the mention is not so much wishful thinking as at first it appears to be.


Asia-Pacific.

The first candidate to be mentioned in all the press was QANTAS. The reasons for this are twofold. Firstly in March 1993 BA invested in a 25% stake in the airline - which it subsequently sold. More relevantly, though, in 2008 while negotiations between BA and Iberia were going on, Qantas proposed merging with BA. This seemed logical but irked Iberia and came to nothing.
Now Qantas seems not to want to merge with BA but go it alone in Asia. (according to Airline news of 22-9-10)


Notwithstanding that, there may be a future in a merger if both Qantas and IAG are looking at Asia for expansion. Qantas has two lost cost affiliates called Jetstar. The Australian company is 100% owned while the one based in Singapore is 49% owned - as required by local law the majority has to be owned by Singaporeans. These provide for Qantas to extend its reach in (South East) Asia.


Air Asia, which is a low cost carrier flying out of Kuala Lumpur to regional destinations together with its transcontinental subsidiary Air Asia X (flying to London and soon to Seoul,Tokyo and Paris(?)) have been mentioned as candidates for takeover. One analist suggested that such a move was unlikely while Malaysia Airlines was a better fit for IAG.


Cathay Pacific,together with its subsidiary Dragonair, a founder member of "oneworld" was mooted and flies out of Hong Kong. The problem in this case is the position of the Chinese government. As any investor in HK over the years since the return of HK to China have found that despite the economic system in HK being different to the mainland they have been "persuaded" to reduce their shareholdings in HK businesses to less than half.


If such is the case in Hong Kong then the other Chinese candidates mentioned,

"Air China, China Southern and China Eastern as willing recipients of foreign investment", then IAG will come up against the barrier of a 25% investment as a maximum.


The other market which has been focused on is India. Kingfisher has been accepted as a candidate for entry into "oneworld" with BA announcing codesharing agreements with the airline. Probably for that reason it has been looked upon as a takeover target. However, at the moment the Indian government does not, as yet, permit any foreign participation in its airlines. Thus this company is not an immediate target.

Whatever the future decision of the Indian government to allow foreign shareholdings, it is likely to be a minority foreign participation - probably 25% initially.

That being the case in both China and India, does IAG want to be a minority shareholder of any such airline? or will it be looking more longer term when such restrictions might well be eliminated?

We can now say that though BA seemed lost in July its new grouping, IAG, seems to be more focused in September. Time will only tell what IAG will do but without doubt the merger will be and has to completed before anything noteworthy happens - are we looking at two years down the line, 2012?