Development of an Air Transport Strategy for the Far South ... Documents... · The Development of an Air Transport Strategy for the Far South West 2 of 187 1 Executive Summary 1.1

Development of an Air Transport Strategy for the

Far South West of England

A report for the South West Regional Development Agency, South West Regional Assembly, Government Office South West and Department for Transport

June 2003

The Development of an Air Transport Strategy for the Far South West

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1 Executive Summary 1.1 Introduction

This chapter is a summary of the main report. Information and data used is sourced within the footnotes of the respective chapters of the main report.

This report is structured to enable the key issues to be understood and clearly distilled.

• Chapter 1 provides an executive summary of the report’s findings.

• Chapter 2 provides details of the context in which the study was undertaken.

• Chapter 3 describes air transport in the far South West, including passenger throughput and route networks at the three principal airports being considered.

• Chapter 4 provides a review of traffic forecasts and route development opportunities at the three key airports under consideration. The impact of such development scenarios is also assessed, at a high level, on Bristol and Bournemouth. The key outputs from the passenger forecasting work are:

Development of a ‘bottom–up’ network plan for each airport, under each scenario.

Integration and testing of outputs with ‘top–down’ analysis into the forecasts.

Development of “Peak Hour” and “Busy Day” forecasts for each airport.

• In Chapter 5, existing airport infrastructure is described, alongside any potential development proposals that operators may have for their airport in the medium and long term. The proposal for the development of a new airport at South Hams is described. In addition a new masterplan for Newquay is included, developed by AviaSolutions in conjunction with Newquay Airport Ltd. Infrastructure implications are assessed using the following criteria:

Airside analysis, including runway, taxiway and apron capacities.

Landside analysis, including terminal and car parking.

• In Chapter 6, the development options are appraised under each option, at each airport. These are appraised in terms of their: -

Financial Viability

Economic Contribution (including potential impact on Tourism and Inward investment)

Environmental Sustainability

Surface Access Impacts

Land Use Impacts


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The table below details the outputs associated with the impact appraisal of the development options.

Financial Economic Environmental Surface Access Land Use • Capital

requirements and funding

• Revenue costs • Potential revenue

streams • Return on capital • Funding vehicles

• Employment generation

• Contribution to SW GDP and productivity

• Effect on economic linkages

• The effect on the competitiveness of the region

• High level analysis regarding impacts on ecology, water quality and air quality

• Forecast noise contours, based on busy day schedules for each airport

• Any showstoppers

• High level analysis regarding impacts at each airport

• An appraisal of future surface access schemes

• Identification of surface access enhancements

• Analysis of the land use implications for each airport

• Assessment of urbanisation issues and integration with RPG, Devon and Cornwall Structure Plans and local plans

In Chapter 7, a series of “strategies for delivery” are described. This includes consideration of route development funds, development of Public Service Obligation (PSO) routes, options for funding infrastructure development, financing and delivery and potential tourism market engagement strategies.

In Chapter 8 a conclusion of the key issues is provided.

1.2 Context

In July 2002, the Department for Transport (DfT) published a series of Regional Consultation Documents (RCDs), including one for the South West, which set out options for the development of air transport in the United Kingdom to 2030.

The delay in the consultation process until 30th June 2003, as a consequence of the Gatwick Airport judicial review, has provided the opportunity for stakeholders in the South West to undertake this further work and to revisit their original responses.

AviaSolutions was appointed by the SWRDA, SW Regional Assembly, Government Office South West and DfT to undertake this study. It specifically focuses on three development options. They are:

• Option 1: (Base Case): The three existing airports (Exeter, Newquay, and Plymouth) are developed within their physical and operational constraints.

• Option 2: Plymouth is closed, leaving Newquay and Exeter to serve the far South West.

• Option 3: A new airport is developed in the South Hams replacing both the existing Plymouth and Exeter airports. Newquay remains operational.

In assessing each option, this report:

• Reviews the DfT’s traffic forecasts and sets out alternative forecasts.


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• Assesses the potential infrastructure implications arising from the options forecast.

• Presents a high level appraisal of the options undertaken in terms of their financial viability, economic contribution (including tourism), environmental impacts, surface access implications and broader land-use issues.

• Suggests mechanisms for delivering the options; how a potential air transport strategy for the far South West could be implemented.

Discussions have taken place with a wide variety of stakeholders. The study has also been undertaken within the context of a significant amount of work already completed to inform the production of the Government’s Regional Consultation Document. In addition a wide range of stakeholders have undertaken a number of other studies. In preparing this report, we have sought to (where possible) avoid duplication of previously undertaken studies.

1.3 Existing Air Services and Current Proposals

Exeter airport has experienced growth of 6.6% per annum during 1992 – 2002, reaching a passenger throughput of 0.34 million passengers per annum (mppa) and 5,283 air transport movements (atms) (source CAA Statistics, which do not correspond to Exeter Airport’s own statistics for atms of 7286). The majority of passenger traffic at Exeter is focused around the charter market. The airport offers year round holiday flights to the Mediterranean and to the Alps, as well as a weekly summer only service to Toronto. The airport also serves more specialist charter destinations, with, for example “one-off” flights to the Caribbean connecting with cruise ships and to New York for Christmas shopping. A new service to London City (originating in Newquay) is currently under consideration.

Plymouth airport has experienced growth of 3.2% per annum over the period 1991 – 2000. By 2001 the airport had grown to a throughput of 0.12 mppa and 7,130 atms. However, the BA CitiExpress network at Plymouth was reduced in early 2002, as a consequence of BA’s corporate review of the airline’s route network. This saw a withdrawal of services, such as Dublin and Cork, leaving only the London/Newquay service and a daily service to Bristol. As a consequence, passenger throughput and aircraft movements fell significantly in 2002, such that they had fallen back to levels that were achieved during the early nineties. The airport offers no charter services and no Low Frills services, primarily due to infrastructure (runway) constraints.

Since this study was commissioned, British Airways’ announced that it would terminate its services from Plymouth and Newquay to Gatwick (and from Plymouth to Bristol) in October 2003. Unless an alternative carrier takes over the route, it is likely that Plymouth’s traffic will reduce significantly. However since this announcement was made, Sutton Harbour Holdings has announced the formation of Air South West, which intends launching services to Gatwick at the end of October with a fleet of Dash 8 aircraft. The airline has indicated that it will also launch services to other destinations in the UK and to Europe over time. In addition Air Wales has indicated that it too is interested in launching services to Gatwick. Services to Gatwick should therefore continue, provided slots at Gatwick can be secured.

Newquay airport experienced steady growth up until 2002, rising dramatically after commencement of the Ryanair service in spring 2002. Accurate statistics are not available before 1998/9. However in the period between 1998/99 and 2001/02, year on year growth was around 6% per annum. Following the introduction of the Ryanair service in May 2002, traffic has more than doubled reaching a passenger throughput of 0.185 mppa and 8,128 atms. Newquay therefore handles more passengers than Plymouth. As with Plymouth, the future of the Gatwick service was placed in doubt with the decision by BA CitiExpress to withdraw the route. Both Air South West and Air Wales have indicated that they are considering a replacement service. In addition a new service to London City via Exeter is currently under consideration.


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Sutton Harbour Holdings plc, which has the leasehold and operates Plymouth airport, has submitted a proposal to re-provide the airport in South Hams on a site that they consider has greater potential for long term development. The location of the airport, with its proposed 2,500m runway and parallel taxiway, is near Sherford, to the East of Plymouth alongside the A38.

The new airport would be designed to overcome the limitations of the existing Plymouth airport, allowing it to handle a variety of aircraft types supporting services to a variety of destinations. The site has also been identified within the Devon Structure Plan as a location for the development of 3,500 new homes. Sutton Harbour Holdings has stated that with a higher density of housing, some of these homes could be built upon the current Plymouth airport site.

The new airport is predicated on the closure of both Plymouth and Exeter airport, with provision of all air services serving these catchment areas being concentrated at South Hams. The closure of Exeter would release further land that could be used for the development that is proposed in the Exeter area.

1.4 Base Line Forecasts

Passenger forecasts for the three existing airports and the proposed new airport in South Hams, under the three development options being considered have been produced.

The key market segments considered under each option are:

• Full Service Domestic and International

• Low Frills Domestic and International

• Charter (inbound and outbound medium haul i.e. Europe)

• Long Haul (for long haul we have assumed charter operations only as the market is insufficient to sustain scheduled services during the forecast period)

The forecasts are presented by option and at two points in time; 2015 and 2030. A full data set is contained within Appendix A of the main report.

The forecasts developed for this report have been produced within the context of a considerable amount of forecasting work undertaken by the DfT. They produced forecasts to inform the Regional Consultation Documents based on a number of scenarios. These were based on assumptions regarding the level of forecast demand satisfied within the UK through the provision of infrastructure. The impact of future infrastructure provision on forecast passenger growth is a critical factor, particularly at those airports where demand is forecast to exceed “supply” such as those in the South East and Midlands

The scenario upon which we have undertaken our forecasting is based upon the RASCO Reference Case scenario with three new runways in the South East assumed during the period up to 2030. We have assumed that Bristol airport is not constrained during this period (although based on DfT forecasts, it may become so towards the latter end of the forecasting period).

Forecasting was approached from both a “top-down” and “bottom-up” perspective. Top down forecasts were based upon CAA Origin and Destination (O&D) survey data for the catchment areas of the airports being modelled, and an allocation of that traffic between airports. Bottom-up forecasts were also based upon CAA O&D survey data but were calculated on a route-by-route assessment of demand from each airport to build an overall level of potential demand. Both methodologies were used to enable each to “sense check” the other, and also to reflect the low


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traffic base upon which forecasts are based, which makes “top-down” forecasting alone open to challenge.

Under Option 1, it is assumed that the three existing airports continue to operate and develop. Total traffic in the far South West is forecast to grow from 605,000 in 2002 to 3.61 mppa by 2030. This comprises Exeter at 2.24 mppa (million passengers per annum), Newquay at 1.01 mppa and Plymouth at 0.355 mppa.

Under Option 2 it is assumed that Plymouth Airport is closed, and that Exeter and Newquay serve the far South West only. Exeter is forecast to grow to around 2.44 mppa (around 120,000 more passengers than under Option 1) and Newquay is forecast to grow to around 1.12 mppa (around 100,000 more passengers that under Option 1). Under this scenario total traffic in the far South West is forecast to grow to 3.56 mppa by 2030. However this total is approximately 55,000 passengers less than under Option 1, given that Plymouth Airport closes and some passengers are unwilling or unable to travel from the alternatives in the far South West and use airports outside the study area (either Bristol or London).

Under Option 3 it is assumed that both Exeter and Plymouth airports close, and that the far South West is served by Newquay and a new airport close to Plymouth in South Hams. South Hams is forecast to grow to around 2.32 mppa (around 276,000 less than the combined total for Exeter and Plymouth under Option 1) and Newquay is forecast to grow to around 1.04 mppa (around the same total as Option 1). Under this scenario total traffic in the far South West is forecast to grow to 3.4 mppa by 2030 (approximately 200,000 passengers less than Option 1). Compared to Option 2, South Hams attracts around 122,000 passengers less than Exeter. This is partly a function of the smaller catchment area and due to some passengers in the Exeter area using Bristol rather than South Hams.

1.5 High Forecasts

When looking 30 years ahead, many factors may influence the number of passengers flying to and from the region, which may result in passenger traffic being higher than that forecast under our base case. Factors that could result in passenger numbers being greater than that forecast include: -

• Higher than assumed GDP growth

• A step change in the number of tourists arriving at the far South West’s airports

• Growth in the population of the region

• Growth of low frills airlines in the region

Each of these factors has been considered within the context of “what if” to enable consideration of the impacts of higher growth. This has resulted in a significantly more optimistic set of forecasts. We have found that the high forecasts for Plymouth have a small effect on the throughput at the airport (confirming the constraints of the runway length) whilst at Exeter and Newquay the throughput has more than doubled over that forecast.

1.6 Infrastructure Implications

In assessing infrastructure implications, it is important to note that our assessment is based upon the “base-line” forecasts produced. Additional infrastructure would be required over and above that appraised in the event that the high forecasts were achieved.


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Exeter and Devon Airport Ltd submitted an outline planning application in January 2000 for a new North Side Terminal Area Development. This planning application was based upon studies undertaken by Halcrow Transport Infrastructure Group, which sets out the airport’s development strategy to 2016. The planning application was accompanied by a detailed assessment of airborne and ground operational aircraft noise and supporting documentation including an Environmental Statement, Transportation Impact Assessment and a Historic Airport Survey.

The planning application envisages that the existing terminal is replaced by a new terminal with a capacity of circa 2 million passengers. The proposed facilities have been sized “based upon accepted industry practise relating to floor space, busy hour rates and other parameters to provide a level of passenger services commensurate with an airport of this sort (Halcrow). On the basis of discussions with Exeter Airport’s Managing Director, our review of the planning application, and having not undertaken a detailed airfield planning study of our own, we have no reason to conclude otherwise in this report.

The new terminal would be built in a single phase, although the fit out of key areas (such as check-in) would be phased within the structural envelope. Apron areas, car parking and support facilities would be phased in line with demand. The planning application submitted in 2000 was based upon a development strategy, which assumed an opening date for the new terminal in 2008. The planning application has not been determined (although it was indicated in our discussions with Exeter Airport that a decision was expected during Summer 2003).

At Plymouth Sutton Harbour Holdings, which operates the airport, are required by the CAA to increase the Runway End Safety Area (RESA) from 30 m to 90 m. As part of this project the A386 will need to be re-routed to provide the necessary additional land without reducing runway length. In 2003 this work will commence, and will also comprise the installation of runway centre line lights and the laying of a porous friction course on the runway to improve drainage. The overall cost of the works is approximately £4.2 million, of which £1.5 million will be spent on upgrading the runway and extending the RESA and a further £2.7 million will be spent on diverting the A386 over and above the expenditure necessary simply to upgrade the road on its existing alignment.

Sutton Harbour Holdings do not have any significant capital expenditure plans at Plymouth over and above the work on the runway identified above.

The assumptions made regarding development at Plymouth under Option 1 are important to understand. For forecasting purposes, we have assumed that the runway at Plymouth is not extended. Thus the range of services and passenger numbers assumed reflects the constraints arising from the short runway, and restrictions on the aircraft used. A forecast, which assumed a runway extension, is likely to deliver marginally more traffic, but is unlikely to be materially different to that contained within this report.

Thus for forecasting purposed we have assumed that potential airlines have the right aircraft to use the airport up to 2030. However there is a considerable risk that, over time, the existing runway length will preclude operations by the majority of aircraft types using the airport. For instance if there are no Dash 8 300s or ATR 42 aircraft in the fleets of potential airlines, it is highly unlikely that such airlines would acquire aircraft specifically to operate Plymouth services as these would not be consistent with aircraft in the rest of the fleet. Under these circumstances it would become increasingly difficult to attract (or indeed retain) services, putting the long-term viability of the airport at risk.

With this in mind, we have made reference to the Scott Wilson and The Aviation and Travel Consultancy Ltd study undertaken in August 1999 for the then DETR and Government Office South West, which investigated the possibility of extending the runway by around 100m.

The study was based upon an extension of the runway some 60 m to the north west (adjacent to the A386) and 25.5 metres to the south east. However since this study was undertaken the CAA


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has instructed Plymouth Airport to extend the runway end safety area (RESA) by 60m. This work has resulted in the land that had been earmarked for the extension to the north west becoming unavailable. Thus any extension would most probably have to be at the south east end of the runway.

An extension of the runway to, say, 1,199 metres would enable airlines to operate services with a wider range of aircraft and at a greater payload (at this length, the runway would be similar to that at London City).

AviaSolutions has not undertaken a detailed technical evaluation of the practicality of such an extension. However, we are aware, based upon a site visit and discussions with a number of stakeholders, that such an extension would necessitate the infilling of land which currently drops away from the south east end of the runway, and the demolition of a number of industrial units in the nearby business park. It is stressed that accurate cost estimates have not been undertaken, but is assumed that the cost of extending the runway entirely to the South East would be in the region of £15million to £20 million. A cost of £18 million has been assumed in the financial appraisal.

Newquay airport has identified a long term need to grow the facilities at the airport to cater for the forecast passenger numbers that they believe can be attracted to the airport. The current terminal site could be extended by adding additional bays at either end of the building, providing a small (un-assessed) incremental increase in capacity. Beyond say 500,000 passengers per annum; the terminal facilities may need to be relocated to an alternative site on the airfield.

The MoD (who owns the site) has indicated that there is an opportunity to develop commercial operations at the airfield at an alternative location to the current terminal. An area of land to the south east of the airfield may become available following the MoD’s ‘Tri Fields’ review, which is due for completion by July 2003. This site is more suitable for long-term development than the location of the current terminal, particularly in the event that the upper end forecasts are achieved.

AviaSolutions was retained to develop a masterplan for Newquay based upon projected levels of growth forecast. A key assumption is that the results of the MoD Tri-field study are finalised, thus enabling long term planning at Newquay to proceed with confidence. This will be a key factor in any investment decisions taken in the future. For master planning purposes two development plans were developed:

• Baseline forecast plan: designed to handle up to 1 million passengers per annum (mppa)

• High forecast plan: designed to handle up to 2 million passengers per annum (mppa)

The baseline development would comprise a new 5,000 sq m terminal, new aircraft parking stands, new car parking and ancillary facilities and designed such that it could be extended to handle traffic up to 2 mppa over time (high growth). Details of the master planning study are contained within Chapter 5 of this report.

South Hams - Sutton Harbour Holdings plc (who has the leasehold and operate Plymouth airport) has submitted a proposal to re-provide the airport in South Hams near Sherford, east of Plymouth adjacent to the A38. This site, it is proposed, has potential for long-term development. The airport could be developed in phases to handle 3 mppa, and would be built with a 2,500m runway and parallel taxiway, providing unrestricted operational capability for the majority of aircraft expected to use the airport. The site is currently identified in the Devon Structure Plan for a new settlement, providing additional housing for the Plymouth area. It is proposed that the existing Plymouth Airport could be used as an alternative site for housing development, but this site would not be available until the new airport opens.


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Our analysis of the master planning work undertaken indicates that the infrastructure proposed would be more that sufficient for the forecast level of passenger demand. In addition we have assumed that the existing infrastructure at Exeter and Plymouth would be sufficient to meet demand until the new airport opens.


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1.7 Appraisal of Impacts

1.7.1 Option 1: Summary of Appraisal - Base Case (Exeter, Newquay and existing Plymouth)

Exeter Newquay Plymouth

Forecast Growth 2030 2.2mppa 1.0mppa 0.36mppa

Financial Appraisal

Exeter Airport is expected to achieve a strong financial performance in spite of a large expansion programme totalling £19.8m. The operating margin excluding capital depreciation (EBIDTA) is forecast to be in the region of 19% by 2015 gradually improving to 30% by 2030. Operating profits (EBIT) are forecast to be around 8% and 25% respectively. The airport is expected to post net profits throughout the next 27 years with average net profit margins gradually improving from current 4% to 17% by 2030.

Under Option 1, Exeter is the only airport that produces a positive NPV. It is worth at today’s values about £10.4m and produces an IRR of 25%. Furthermore, the airport would require financial loans of £10m in order to fully finance its capex programme as well as working capital requirements.

Newquay Airport has comparably lower traffic charges than other UK small airports. This is expected to deteriorate even further with the growth of low-cost traffic. Therefore the airport is forecast to post operational losses of around £1m p.a. This negative trend is further impacted when depreciation charges as result of a heavy capital expenditure programme of £13.9m are included, estimated to reach -7% by 2015 but improve to -2% by 2030.

Under on-going trading conditions, Newquay Airport is expected to show a large funding deficit even at an operational level with accumulated cashflows of £2.3m up to 2030. This is well below the cash levels required to finance the capex programme of £13.9m. Therefore it is assumed that public sector funding of up to £24m is required to fund the new terminal development (based upon capex to deliver capacity of around 2 mppa). The airport would also require borrowing of about £2.9m in order to cover the remaining operational gap.

Plymouth Airport is forecast to record a sustainable operational performance. It is expected to achieve EBITDA margins of 32%, with a strong contribution from traffic charges. Operating margins would be impacted by a large capital expenditure of £19.5m, which we have assumed takes place between 2005 and 2008. Interest charges due to financing of capex would have a negative impact upon net profit margins which would fall to an average of 3% per year from an existing level of 7%.

Although Plymouth Airport generates enough cash to cover its capital expenditure programme (available cash-flow of £26.9m) up to 2030, it would require a combination of public sector funding and commercial borrowings to fully cover capex (assuming a runway extension) and working capital requirements. In order for this airport to produce an IRR of 9.7%, it would be necessary to secure £9m and £7.7m in public sector and commercial loans respectively. The NPV for this airport is £145,000.

Economic Impact

Relative to the option assessed with the highest economic benefit (Option 2) Option 1 has the advantage that the dislocation effects at Plymouth would be avoided. And the passenger forecasts suggest it might generate slightly more passengers overall. But the flights available are expected to be less popular with business passengers, but provide greater opportunities for leisure passengers. There is a potential for a negative impact on the competitiveness of the far South West’s economy as a whole. However this “potential” impact needs to be considered advantages of retaining Plymouth Airport, and the crucial role it plays in serving businesses based in the city.


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Environmental Impact

Exeter and Newquay are best placed to absorb growth because of their rural setting and the existing low operational base and associated noise and emissions impacts. (No local residents fall within the Newquay 57 Leq contour in the present case or in the RASCO Case (broadly equivalent to Option One in this study) at 2030 and at Exeter there is moderate growth to include between 700 and 900 local residents within the contour at 2030 from base of zero.) Plymouth is the most sensitive site for noise and emissions because of the larger population affected by overflying (1,400 at present with between approximately 2,400 (RASCO) to 4,900 (Avia) by 2030 and urban background levels of pollution respectively. Nevertheless, at Plymouth, the growth is experienced from a very small base and the aircraft fleet is assumed to remain dominated by small turboprops, which prevents the much larger expansion of the contours and emissions inventory that would be expected with the introduction of jet aircraft. Airport related emissions at Plymouth are unlikely to have a significant impact on the local ambient air quality background.

The development of a new terminal and associated facilities at Exeter would involve some small scale but significant ecological losses but creates an opportunity to see a significant improvement to the quality of the River Clyst.

In broad terms, the available data indicates that the predicted growth in operations at all three airports can be absorbed into the carrying capacity of their local environments with the appropriate investment in environmental protection infrastructure (e.g. noise bunds, aircraft run pens, provision of interceptors/foul drainage etc) and the introduction of systematic environmental management and controls and community relations programmes.

Surface Access Impact

Public transport mode share of both passengers and staff is likely to be small (10-15%). There would be no key road links operating at more than 60% capacity (considered to be ‘no congestion’) and that airport traffic would be no more than 10% of total flows. If the airport develops as proposed, a new access road would be provided from the junction with the A30 (T).

A rail station one mile from the airport, associated with a new community development, connected by a shuttle bus to the airport, would improve public accessibility.

Road access is poor close to the airport. If the airport develops as proposed, a new access road would be provided to the A3059. At the forecast level of throughput, this unlikely to result in airport traffic being a major component of total trips (e.g. it would still be less than 5% on the A30).

The prospects for public transport in all scenarios are limited, but the numbers of inbound tourists could make a service linked to key hotels viable.

There could be around 1000 employees in 2030. Some will live in Newquay, although others may travel significant distances from the towns and villages throughout the region. A local bus service could attract some custom.

The airport is about 3 miles from the city centre. Taxis are likely to be the favoured mode of inbound passengers, with private cars used by most outbound. The location, combined with the numbers and types of passengers and the numbers of employees (around 400) make it unlikely that significant volumes of public transport would be viable.

The RCD indicated that at the RRC level of throughput (0.5mppa in 2030) there would be 4 key road links operating at between 60 and 80% capacity (considered to be ‘minor congestion’) and one at 80 to 100% (‘intermediate congestion’) but that airport traffic would be less than 2% of total flows. The forecasts now considered are slightly below the RCD/RRC forecasts so the conclusions can stand.

Land Use Planning Impact

A positive and integrated land-use and transportation strategy and set of land-use policies are being put in place to promote and encourage the long term development of Exeter Airport as a key component of the region’s economic and social progress. There are no land-use constraints or planning policy restrictions to limit this strategy.

The land-use planning policy framework provides encouragement to the gradual expansion of Newquay Airport. Proposed improvements to the local road system will gradually improve accessibility to the airport, not only from Newquay, but also from the wider sub-region.

In the light of the economic, social and transport policies contained in RPG10 there is a need for greater clarity to be given in the Development Plan to the role and functions of Plymouth Airport and the land-use and transportation strategies to underpin the future development of the airport, links to it and wider economic measures associated with it.


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1.7.2 Option 2: Summary of Appraisal - Newquay and Exeter (Plymouth closed)

Exeter Newquay Plymouth (closed) Forecast Growth 2030 2.4 mppa 1.1mppa N/A

Financial Appraisal

Traffic throughput at Exeter Airport is expected to be higher by an average of 9% compared to Option 1. With almost no significant increase in operational expenditure and capex requirements remaining constant, such traffic increases translate into an improved financial performance. It is forecast to achieve strong EBITDA margins of 25% and 31% by 2015 and 2030; while operating margins are estimated to improve from 11% to 26% during same period. In reality stronger growth may result in the need for marginal increases in capital, which will reduce overall returns. However these are not expected to be significant.

At Newquay Airport the financial picture slightly improves over Option 1. The airport is expected to achieve operational break even by 2030 (2% EBITDA margin). However, when depreciation charges due to future developments are brought into the equation, the airport is forecast to post an operating loss of -6%. Newquay remains financially non-viable in spite of traffic growth of 10% compared to Option 1.

Cost of closing airport likely to be significant. However this could be offset by revenues from alternative uses of the site which could be greater than that achieved by the airport. Alternative use revenue streams have not been modelled.

Economic Impact

Although there is little to choose between the three options in terms of passenger numbers, the benefits derived from bringing extra overseas business and leisure passengers into the region yields a slight preference for Option 2. Despite passenger numbers varying by as much as 250,000 across the three options by 2030, this difference is not large enough to generate significant differences in aviation related employment. Option 2 implies marginally fewer jobs will be created by the immediate impact of the aviation industry than in Option 1, but the loss in aviation related employment is slightly outweighed by the positive spill-over on the far South West economy of more overseas business and leisure passengers.

Of the three options, the second implies the largest number of business passengers, who would potentially boost productivity by bringing new technology and working practices to the far South West. The OEF regional aviation model suggests the shift between business and leisure passengers in Option 2 would give a small increase of 0.1% to employment in the South West by 2030 and a 0.3% rise in GDP compared to a scenario leaving all three airports operating.

Option 2 would also bring in more overseas leisure visitors than either of the other options. Even though fewer domestic visitors would arrive than if all three airports remained open, this is more than offset by the fact that overseas visitors spend a lot more than those from the UK. This spending would create fractionally more jobs in tourism than the other options.

Taking the second option does assume the closure of Plymouth airport; this would undoubtedly hit the local economy as several firms could re-evaluate their location decisions. Potentially significant loss to local economy. However it is likely that some of the economic activity would be redistributed elsewhere in the South West. A high level estimate of jobs lost is circa 2000 to 5000. However on balance, our analysis suggests that the number of jobs lost in Plymouth would be slightly more than offset by those created elsewhere in the far South West.


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Under Option 2, Plymouth Airport closes and no new site is developed and the growth in passenger numbers (similar in scale as that under Option 1) is absorbed at Exeter and Newquay. Aircraft types and fleet mix are also consistent with the analysis for Option one and the conclusions for environmental impacts, including noise and air quality are similar at both sites with the added gain of the removal of up to 4,900 of population from the Plymouth 57 Leq contour and other associated environmental impacts of the airport. The closure of the site would further safeguard the two SSSIs which lie to the south of the airfield from aviation related impacts.


As option 1 – with only marginal additional traffic forecasts.

As Option 1 – with only marginal additional traffic forecast.

Site could become available for alternative uses (such as housing). Alternate uses potentially have greater surface access impacts than current use.

Land Use Planning Impact As Option 1 As Option 1

The closure of Plymouth Airport would provide the City with a major brownfield development site (53ha). Under Option 2, the airport could close at any time between now and say 2011. .

The agreement between the airport operator and Plymouth City Council makes provision for the two parties to enter into a property development business to redevelop the site for a mixed-use development scheme, if the airport closed.


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1.7.3 Option 3: Summary of Appraisal - Newquay and South Hams only

Newquay South Hams Exeter and Plymouth Close

Forecast Growth 2030

1.0mppa 2.3mppa N/A

Financial Appraisal

The negative financial performance at Newquay Airport continues. The airport breaks even in operations by 2030 excluding depreciation charges. It is expected to show a loss of £1m by 2015 and just over £0.7m by 2030. Margins improved during this period, from -6% to -2% respectively. These financial results are similar to those achieved under Option 1 at a similar level of traffic throughput.

In the case of the proposed new South Hams Airport, it is foreseen to post strong operating margins of 32% and 20%, excluding and including depreciation charges respectively, by 2030. As it was assumed that this new airport would only become operational by 2010, it is expected to show a modest operating margin of 2% by 2015. If we assume the same traffic growth rates for another 10 years, the airport is projected to show a strong operating profit and net margins of 23% and 16% respectively by 2040 which is comparable to those achieved by similar size airports. It is assumed that no further capital investments would be required once the airport expands to a capacity of 3m passenger per annum.

Cost of closing airports likely to be significant. However this could be offset by revenues from alternative uses of the site which could be greater than that achieved by the airport. Alternative use revenue streams have not been modelled.

Economic Impact

The OEF regional aviation model suggests that Option 3 would provide the same level of employment by 2030 and a 0.1% rise in GDP compared to Option 1.

A net benefit likely to Plymouth sub region as economic activity re-located from Exeter. A comparison between the economic benefit of developing the airport, and disbenefits of not using the land for housing has not been factored into our assessment and would need to be considered. It is likely that some economic activity centred around Exeter would divert to Plymouth, but this has not been quantified in the study.

A potential loss of circa 600 jobs to the far South West (at Exeter airport) due to risk that flyBe may relocated head office and engineering outside region (rather than South Hams). The study has not assessed in the detail the implications specifically on Exeter of closing the airport, but there are likely to be significant to the city.


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Environmental Appraisal In Option 3, Plymouth and Exeter airfields close and it is assumed that the site at Exeter would be released for housing development. A new airport serving South Devon is developed in the South Hams area involving the take of a minimum 150 hectares of land plus new road links. Operations at Newquay remain within the scope of those predicted under Options 1 and 2 and are within the carrying capacity of the local area. The redevelopment of Exeter would remove up to 900 people from the 57 Leq contour, but in the worst case would result in the loss of the entire ecological value of the site, which is high in parts.

The development of a substantial regional airport in South Hams would represent a very significant environmental impact on an entirely rural landscape currently only disrupted by the new A38. Detailed ecological, archaeological, landscape and water quality analysis is required for the full evaluation of such impacts on the immediate site. Although only 100 of the local population is estimated to fall within the 57 Leq contour in the worst case, there is also the extended impact of arriving aircraft overflying a heavily built up area of south-east Plymouth on easterly operations as well as the potential for aircraft vortex strikes in this area. Air quality is unlikely to be a significant issue. However it should be borne in mind that a larger area than that identified for the airport has been designated for housing development. Thus either way the site is likely to be developed. In the timescales available, it has not been possible to compare the relative environmental disbenefits of an airport to the proposed housing development. However it could be argued that there would be net dis-benefit associated with building the airport, as the land earmarked for housing would have to be re-provided elsewhere.


The creation of a new airport at South Hams means that no journey patterns will be established, and there could be an opportunity to make the airport attractive from a public transport viewpoint. The numbers could not justify a rail link, but a network of quality bus and coach services could attract a reasonable market share for both passengers and staff. Perhaps the most potential would be in express routes to the city centres of Plymouth and Exeter, particularly the latter as the 35-mile journey would be expensive by taxi. It is understood that the Highways Agency consider that the levels of growth are unlikely to cause network difficulties on the A38, which would become the major surface access link to this development.


Low – no major impacts, although general ‘urbanisation’ pressures increase.

There is no land-use planning framework to consider such a proposal. It would represent a departure from the existing and emerging Development Plan policy framework. However, airport strategy in Devon is due to be debated at the Structure Plan Examination-in-Public on 13 June 2003.

It would conflict with the proposals for a new community. A key issue is the phasing of such development, given that the existing Plymouth airport site could not be developed for housing until such time the new airport was open. Under this scenario, alternative sites for housing might have to be identified to provide additional housing in the period up to the opening of the new airport.

Consideration required of future use of Exeter Airport site. Its closure would have major implications for the land – use policy framework set out RPG10, the Devon Structure Plan and the emerging East Devon Local Plan. Specifically, it would require an urgent review of proposals for the Skypark employment site and inter modal freight facility, the new community and associated transport infrastructure and also the proposed access road.

The closure would allow consideration to be given to siting the new community on the airport site. There would be enough land to accommodate a new community of 3,500 homes (173 ha would be available). On the other hand there would be phasing difficulties and therefore uncertainty.


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1.8 Strategies for Delivery

The analysis of air transport in the far South West contained within this report, together with that in the Regional Consultation Document, clearly demonstrates the importance of the sector to the region. The far South West is peripheral both to the rest of United Kingdom and Europe and relies on air transport to access global markets.

Our analysis has demonstrated that whilst there may be demand, it may also be necessary to develop a range of strategies to ensure that as much of the demand originating in the far South West is captured by airports serving the region. A number of options have been explored which could help achieve this objective. They are: -

• Funding for the development of new services

• Possible introduction of PSO (Public Service Obligation) funding to increase accessibility

• Tourism strategies to encourage greater volumes of inbound tourism by air

• Funding mechanisms for the development of airport infrastructure

Funding of new routes In a number of regions in the UK (such as Scotland and elsewhere in Europe) there is a realisation that securing routes through financial incentives to the airline is now necessary to attract a new service. Funding is provided either through discounts offered by the airport itself, or through public funding to enable airports to offer even more attractive discounted user charges on a non-discriminatory basis. Thus consideration could be given to a Route Development Fund in the South West. The principles of the fund would depend on the specific requirements of the region, based upon an agreed set of funding criteria. This could include funding only those routes which it could be demonstrated bring economic benefit to the region, such those serving both inbound and outbound business markets, and inbound leisure. Whilst outbound leisure routes deliver social benefits, the net economic benefits of such services are likely to be negative. Funding for route development would have to be considered on a route-by-route basis. This would involve an appraisal of economic benefits of each route, and would probably exclude existing services. The fund would also have to be applied in a non-discriminatory manner – thus enabling all airports in the South West to benefit.

The likely spend per route would be a function of existing airport charges, projected passenger volumes and frequency. A budget for such a fund would need to be developed based against a set criteria of the key “target” markets/routes and an appraisal of net economic benefits to ensure that the fund provided “value for money” for the funding organisation. A route development fund in the South West could be viable. Its primary objective would be to enable the introduction of new services from its airports to destinations which otherwise would not have been served.

Quantifying how many new routes could be secured at this stage is difficult. However it is reasonable to expect that new services from the far South West to two or three domestic destinations and potentially direct to one or two European destinations could be secured over a period of two to three years. In addition there could be potential to attract additional inbound leisure services by low cost carriers.

Imposition of PSOs - the imposition of “Public Service Obligations” (PSOs) on given routes might provide a means of encouraging economic development through the provision of air services. PSOs offer a form of regulatory protection that entails certainty of an air service for the life of the PSO. The imposition of a PSO also may also allow public subsidy to be given to an airline to meet the


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costs of providing the service, without breaching State Aid rules. A PSO may be imposed in accordance with EC Regulation 2408/92 on access for Community air carriers to intra-Community air routes. Article 2 of EC Reg 2408/92 defines PSOs.

The Regulation states that Member States may impose a PSO on a route to a peripheral or development region, where the route is considered vital for the economic development of the region. However, there are many difficulties with the PSO regulation - in particular the criteria set out in EC Reg 2408/92 are very strict and offer little flexibility. PSO applications must demonstrate they are in the public interest and there is no recourse to other suitable transport forms. The only PSO routes in the UK are within Scotland on "lifeline" services to the Highlands and Islands; there are no PSOs on routes to London. If no carrier is operating services in accordance with the PSO, a Member State may limit access on the route to one carrier and the right to operate such services must be tendered through OJEC process with all carriers from any Member State able to apply. PSOs must be reviewed and re-tendered at least every 3 years.

EU legislation is often open to interpretation, but a case could potentially be made for the designation of PSO routes from a number of airports in the far South West. The Government has stated that any PSO application received will be considered on its merits against the criteria set out in EC Reg 2408/92. The development of proposals for the application of a PSO would require detailed consideration, costing and legal advice, which is outside the remit of this study.

Development of Strategy to Encourage Inbound Tourism by Air - Tourism is a significant contributor to the local economy of the South West. The role that aviation has serving this market is potentially under developed. The recent Ryanair service to Newquay from Stansted is estimated to have increased visitor numbers using the airport by over 100,000. However, whether this traffic is new is difficult to identify.

In 2001, there were around 21 million staying trips to the South West, with visitors staying 96.9m nights and contributing over £3bn to the local economy. The South West accounts for 15% of the total UK domestic staying trips, with visitors from overseas accounting for 13% of all staying trips in England. The regions reliance on domestic visitors was made more apparent by the events of 11th September 2001, which saw an even greater concentration of visitors from the UK. The far South West (Devon and Cornwall) accounts for approximately 60% of UK visitors to the South West and 36% of overseas visitors. The size of this market lends weight to the hypothesis that a greater proportion of visitors could access the region by air.

New services to the region would assist in optimising South West Tourism’s strategy. A clear impediment to its implementation is the current difficultly potential visitors have in reaching the far South West, particularly for short breaks. A number of strategies could be developed including:-

• Developing web base technology that enables easy packaging and booking of air services with accommodation, visitor attractions, and surface transport (for example progress made by Wales tourist board and partners).

• Developing marketing strategies targeted at specific inbound tour operators and airlines, again “packaging” each component of the trip for visitors.

• Greater promotional activity with the retail travel trade, raising awareness of existing services and testing appetite for new links.

• Develop strategies for promoting specialist holiday’s such as surfing, bird watching and walking (for instance Wales Tourist Board actively promotes “extreme sports” such as mountain biking, Ireland and Scotland promote fishing and golfing holidays).


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• Develop joint approaches to market with airlines to test market opportunities. For example Ryanair in Germany (this could be linked to the route development fund initiative).

• Benchmarking marketing campaign success against comparable regions.

These factors need to be considered in the implementation of a coherent strategy to increase the number of visitors to the far South West by air, not only to benefit inbound tourism, but also the wider economy.

Funding Mechanisms for Airport Development - In our financial analysis, we have assumed that the existing ownership structures remain unchanged. However given the level of investment required, it may be necessary to change the existing ownership structures as existing shareholders may not have the necessary funds available to invest. There are a number of strategic options available to the shareholders of airports in the far South West to meet the funding requirements of the airport. We have assessed and appraised each option against the key objectives of shareholders, these being:

• Maximising shareholder value;

• Minimising risk;

• Maintaining airport viability; and

• Maintaining the broader public interest objective of maximising economic benefits to the region.

Potential funding mechanisms each have advantages and disadvantages and include:-

• Shareholder Funded Development - a capital injection from the existing Shareholders.

• Concession - letting an operating management concession which enables the shareholders to retain ownership but offer a long-term concession to manage, contractually develop and operate the airport.

• Joint Ventures with Project Financing - entering into a long-term partnership with a private sector partner on specific investment projects is also possible. The agreement would take the form of an investment in a joint venture single purpose company that undertakes a specific project.

• Strategic Alliances with Other Airport Operators – or as an alternative, the formation of a single airport group managing the three airports in the far South West.

• Minority Equity Sale - the amount to be invested will be based on the degree of control gained, financial projections and current valuation.

• Majority Equity Sale - there are two possible options that the shareholders could take to pursue a majority equity sale. These include trade sale of majority of the airport; and flotation.

However given the current market in the UK, the capital investment required and the level of passenger traffic and revenues forecast, it is unlikely that private sector funding could be attracted to invest at the levels required at Newquay (although if linked to the potential to developing the site for commercial property purposes, this may be attractive) and Plymouth (assuming a runway extension is necessary). Therefore Public Funding may be necessary.


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• Public Funding - the financial analysis contained within the report indicates that capital investment required at Newquay and Plymouth (with a runway extension) cannot be funded from cash flow. An alternative option to private equity funding described above could be that public funding is provided to deliver the capital investment required. A high level analysis indicates that the joint funding of the airports through cash flow and pubic funds would necessitate a public contribution of £24 million at Newquay and £9 million at Plymouth. Funding at Plymouth would be to fund capital investment. At South Hams, we estimate that the level of public funding necessary would be £65 million.

1.9 Conclusion

Introduction

In the time available, a significant amount of analysis has been undertaken of the three potential development options in the South West. The advantages and disadvantages of each Option are summarised in this Chapter.

Forecasts

Option 1 can be considered “business as usual” in that the existing airports continue to develop. This option delivers the highest overall number of passengers in the far South West. Based on our analysis, the route network potential from Exeter and Plymouth are comparable to that that could be achieved at South Hams. Our analysis does not support the hypothesis that concentrating all services at one location will increase the overall size of the network. This is partly a function of passengers that would have used Exeter diverting to Bristol, and others that would have used Plymouth diverting to Newquay.

There is very little difference between the total forecasts under each option (Option 1 is 3.61m, Option 2 is 3.56m and Option 3 is 3.36m respectively). Whilst Option 3 delivers less overall traffic to the far South West, the international business mix is forecast to be higher. This is explained by concentration of Plymouth and Exeter demand at the new site, which is likely to deliver the same level of frequency to a given destination from one airport than could be achieved by splitting the market between two airports. For instance two services a day from Plymouth and two a day from Exeter is likely to be less attractive to some business users than four a day from South Hams. In addition the higher frequencies offered from Bristol means that competition is more keenly felt in this sector than at Exeter than South Hams.

The differences in the traffic mix generated by option are as follows:-

• Option 1 serves more domestic leisure passengers (5.7% more than Option 2 and 12% more than Option 3)

• Option 2 serves more international leisure (7% more than Option 1 and 9% more than Option 3) and domestic business passengers (3% more than Option 1 and 9% more than Option 3)

• Option 3 serves more international business passengers (30% more than Option 1 and 21% more than Option 2)

Potential Services

All three options could potentially provide the far South West with a similar pattern of services, including destinations such as Amsterdam, Dublin, Frankfurt, Brussels, Glasgow, Edinburgh, Copenhagen, Paris, Munich, Barcelona, Zurich, Manchester, Belfast, Aberdeen, and London City.


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Option 1 and 2 potentially realise these services earlier due to the time it will take to build the new South Hams airport.

Option 1 and Option 3 continue to support the existing London Gatwick service from Plymouth.

Infrastructure

All options require a new terminal, apron, stands, new access road and additional car parking at Newquay airport.

There remains a medium to long-term question over the future of Plymouth Airport. It is constrained and could only fulfil a “niche role” serving primarily business routes with a limited range of aircraft types. In our analysis we have assumed that the runway will be extended to just under1200m. This is a big assumption in that such a development would likely be subject to a Public Inquiry and result in opposition from local communities. Such an extension would provide the opportunity for the airport to develop as the primary business airport for the region, and as such would be attractive to full service airlines in that it is unlikely that Low Frills airlines would serve the airport (due to runway constraints and likely airport charges).

Options 1 and 2 support the case for a new terminal at Exeter airport.

Option 3 includes a new airport in the South Hams and the closure of Exeter and Plymouth.

Economic Appraisal

There is little difference in the direct employment generated from each option. Business travel is higher under Option 2 and generates greater business spin offs. However the closure of the existing Plymouth airport with no new airport in the South Hams could impact significantly on the local economy, losing between 2,000-5,000 jobs.

Leisure travel is lower without the existing Plymouth airport, demand being best met by Option 1.

The business survey only generated 51 responses, of which half identified air travel as being vital to their business, Heathrow was identified as by far the most important London airport, few surveyed actually use the Gatwick air link and most responses called for better European air links from the far South West.

Land Use Planning Appraisal

In planning terms, Options 1 is likely to be the easiest to deliver. The existing structure plans are generally supportive of growth at all three airports (although a runway extension at Plymouth has not been considered). In addition the environmental assessment indicates that, with the exception of noise at Plymouth, there are no significant issues. Options 1 and 2 are consistent with adopted and future draft structure and local plans.

Option 3 is contrary to the structure and local plans and could cause severe problems for Devon in meeting its housing requirement between now and 2016.

Financial Appraisal

A key issue is the financial deliverability of each option. Each of the airports is likely to be profitable at an operational level. However the capital investment requirements are likely to be significant. The only airport likely to be able to fund its capital requirements from cash flow and borrowings is Exeter. Based upon the assumption contained within this report, alternative funding vehicles and ownership structures may be required. These could include the sale of Exeter and Newquay as


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separate businesses, or potentially the sale of both airports to a single organisation, which could bring economies of scale, and joint marketing opportunities. Plymouth could also be included within this “system” approach.

An alternative would be public funding of developments at Plymouth and Newquay. Under all options this could cost the public sector up to £24m to develop Newquay Airport, whilst under Option 1 would require an additional public sector investment of £9m for a runway extension at Plymouth airport.

Option 3 would require £65m public sector investment to develop the new South Hams airport.

Overview

There is not much difference between the options in the forecasts and potential services that could be supported.

Initial conclusions from this study are that Option 2 is preferable, providing better support for the regional economy overall and costing the public sector around £24m to deliver. Option 2 however could have a significant impact on the local economy of Plymouth. The closure of the airport is likely to bring significant economic disbenefits to the city, making it more difficult to secure inward investment, and putting at risk existing business owned by foreign companies. This statement is based primarily on both the economic analysis contained within this report, anecdotal evidence provided in discussion with key stakeholders, and on analysis undertaken by others. Continuing to support the existing Plymouth airport, and building a runway extension could mitigate this impact.

Option 3 has a significant impact on the current and future land use planning framework in Devon and generates the highest cost to the public and private sectors - £89m in total.


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2 Background 2.1 Summary

• Aviation makes a significant contribution to the region’s economy. The South West has a high proportion of businesses in the financial services sector, advanced manufacturing and IT, although these tend to be concentrated in the east of the region. In the far South West the economy is more reliant on tourism, the public sector/education and health, and agriculture.

• Exeter has maintained an average growth trend to similar airports elsewhere. Newquay and Plymouth have remained relatively static (with Plymouth achieving an average growth of 3.2% per annum, less than half the average growth per annum achieved by regional airports during the period up to 2001). However, Plymouth’s passenger throughput declined in 2002 following the withdrawal of a number of services, whilst passenger throughput at Newquay increased significantly with the launch of the Ryanair service to Stansted

• In July 2002, the DfT published a series of Regional Consultation Documents (RCDs), including one in the South West, which set out options for the development of air transport in the United Kingdom to 2030.

• The regions response to the DfT’s consultation, reflected in the South West Regional Assembly’s and South West Regional Development Agency’s formal submissions supported the case that the airports that should be developed to serve the far South West are Exeter and Newquay. However, SWRDA went onto to say that the proposal for a new airport close to Plymouth warranted further consideration.

• The delay in the consultation process until 30th June 2003, as a consequence of the Gatwick Airport judicial review, has provided the opportunity for stakeholders in the South West to undertake this further work and to revisit their original responses.

• AviaSolutions was appointed by the SWRDA, SW Regional Assembly, Government Office South West and DfT to undertake this study. It specifically focuses on three development options. They are:




• In assessing each option, this report:

• Reviews the DfT’s traffic forecasts and sets out alternative forecasts.

• Assesses the potential infrastructure implications arising from the options forecast.


• Sets out potential strategies for delivery; how a potential air transport strategy for the far South West could be implemented.

• Discussions have taken place with a wide variety of stakeholders. The study has also been undertaken within the context of a significant amount of work already completed to inform the production of the Government’s Regional Consultation Document. In addition a wide range of stakeholders have undertaken a number of other studies. In preparing this report, we have sought to (where possible) avoid duplication of previously undertaken studies.


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2.2 Introduction

The South West is a large and diverse region of the UK. It extends from the Cornwall and the Isles of Scilly in the west to Wiltshire in the east and Gloucestershire in the north. The major population centres are Bristol and Gloucester in the north, Bournemouth and Poole in the east and Exeter and Plymouth towards the south. Other large towns, such as Torquay and Weymouth have varying populations due to the seasonality of the tourist industry. Of the 5 million people who live in the region, most are concentrated within the urban centres.

The South West is witnessing an increase in population with average growth levels greater than many other UK regions. However, much of the area remains rural in character with low population density. Figure 1 shows the South West area and its main airports.

Figure 1 - South West’s Main Airports


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Aviation makes a significant contribution to the region’s economy. The South West has a high proportion of businesses in the financial services sector, advanced manufacturing and IT, although these tend to be concentrated in the east of the region. In the far South West1 the economy is more reliant on tourism, the public sector/education and health, and agriculture.

To access global markets, passengers in the far South West have to either travel to Bristol to fly onto a European hub airport to connect, or access London, the South East and its airports for international connections either by long surface journeys or by the British Airways service from Newquay and Plymouth to Gatwick (which offers a more limited range of global connections than Heathrow).

In May 2003 it was announced by British Airways that this service would be withdrawn. The ‘Thin Routes’ study showed in particular that the far South West relies on the BA CitiExpress service to London from Plymouth and Newquay and that in 2001 it was estimated the loss of this service would result in annual passenger disbenefits of £8.4m2. However discussions are being held with a number of airlines to seek a replacement for this service, provided slots can be secured at Gatwick. .

Oxford Economic Forecasting3 calculated in their study of the contribution of aviation to the economy that aviation adds £10.4 billion of value to the UK economy annually, representing some 1.4% of UK GDP. The importance of the industry varies significantly by region, ranging from 3.2% of London’s GDP and 1.8% of the South East’s, to 0.2% of GDP in Yorkshire & Humberside. In the South West, aviation’s contribution to the regional economy is amongst the lowest of all UK regions, at 0.3% of regional GDP. Much of this is due to the majority air transport users in the South West (around 65%) using airports outside of the region. Nevertheless, the region directly supports 3,500 jobs and a further 5,600 jobs within the aviation sector.4

There are five main airports serving the South West region. They are Bristol (International), Bournemouth, Exeter, Plymouth and Newquay, the latter three located in the far South West. Passenger traffic in the South West has grown significantly over the last 10 years. Between 1992 and 2002, traffic has grown from 1.3 million to 4.2 million per annum. This represents an annual growth rate of 10.8% per annum.

The network of services from airports in the far South West is limited. A wider choice of services to key domestic and European destinations is available from Bristol. The decision in 2000 by go (now easyJet) to develop Bristol as one of its UK bases, coupled with a re-focused BA CitiExpress and a considerable charter operation has seen Bristol maintain its position as the region’s largest airport capturing around 80% of the total number of passengers using airports in the South West. The airport’s share of passengers, relative to the total in the South West, is illustrated at Figure 2.

1 The term ‘far South West’ in this case means the area to the south and west of Exeter.

2 London Gatwick to Plymouth / Newquay Thin Route Study (1999) DETR

3 The Contribution of Aviation to the UK Economy: Oxford Economic Forecasting (November 1999)

4 The Future Development of Air Transport in the United Kingdom: South West


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.

Bristol proportion of all South West pax

0

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BRISTOL

Figure 2 - Comparison of South West and Bristol Airport Passenger Throughput

Figure 3 illustrates growth at the far South West’s airports compared to airports of a similar size elsewhere in the UK. In comparing the recent growth of Exeter, Newquay5 and Plymouth, only Exeter has maintained an average growth trend to similar airports elsewhere. Newquay and Plymouth have remained relatively static (with Plymouth achieving an average growth of 3.2% per annum, less than half the average growth per annum achieved by regional airports during the period up to 2001). However, Plymouth’s passenger throughput declined in 2002 following the withdrawal of a number of services, whilst passenger throughput at Newquay increased significantly with the launch of the Ryanair service to Stansted. In overall terms, Newquay and Plymouth have “under performed” relative to similar sized airports elsewhere in the United Kingdom.

This “under-performance” may be explained by a number of factors, including the absence of based airlines and aircraft, limited route development over the period and the infrastructure constraint (inadequate runway length) at Plymouth (which prevents aircraft larger than the Dash 8 or ATR 42 using the airport) whilst at Newquay, the small catchment area has not provided the airport with a sufficient demand base from which to develop services (although the Ryanair service has successfully built upon inbound demand from London and the South East and is also encouraging the development of outbound demand).

5 Newquay figures only available from 1998.


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Passenger throughput of selected regional airports

0

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1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Year

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enge

r

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ISLES OF SCILLY(ST.MARYS)PLYMOUTH

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Figure 3 - Comparison of far South West Airports and Selected Regional Airports

2.3 The Government’s Air Transport Consultation Exercise

In July 2002, the DfT published a series of Regional Consultation Documents (RCDs), which set out options for the development of air transport in the United Kingdom to 2030. The RCDs covered seven regions in the United Kingdom, including the South West. Each RCD presented a range of forecast demand scenarios for air services both at a national and regional level. The infrastructure necessary to meet forecast demand under the different scenarios was described, together with an assessment of the social, economic and environmental impacts of such development.

In the South West, the RCD set out four scenarios of forecast demand for the five principle airports in the South West (Bristol, Bournemouth, Exeter, Newquay and Plymouth) and also referred to the potential for development at some of the larger general aviation airports (such as Staverton). The document also described the interaction between airports in South West and those in other regions, particularly the South East and the Midlands.

It described the existing level of air services, existing airport infrastructure, potential enhancements to capacity to meet varying demand scenarios and identified the potential impacts such development could bring against a range of appraisal criteria. The RCD did not consider the proposed new airport near Plymouth (in South Hams) in detail in their analysis was based on the existing complement of airports. However the RCD did discuss their examination of a new site to exploit the combined catchment areas of Exeter and Plymouth.6 It was concluded that because 6 Para 7.3.11 and 7.3.12 Page 173 South West Regional Consultation Document (July 2002) DfT


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both airports have relatively small catchments, the cost of developing a new facility would be high in terms of cost per unit of capacity and that even if the existing sites could be developed for, say, residential development, it is unlikely that a new site would be financially viable. The report also identified the risk to the Newquay – Gatwick service that might arise if Plymouth were to close, given that there may be insufficient demand to sustain four direct services a day to Gatwick.

The document concluded that under all forecast scenarios; Bristol airport would remain the largest airport in the SW handling 8.6 mppa by 2030 (under the RASCO Reference Case scenario). This represents a market share of 54% of SW passenger throughput by 2030 (down from approximately 80% today, reflecting growth at Bournemouth, Exeter and to a lesser extent Plymouth and Newquay). However under certain scenarios of constraint in the South East, demand at Bristol was forecast to increase to 13.4 mppa per annum and higher still if no new runway was built in the Midlands. Under the scenario that no new runways were built in both the South East and the Midlands, demand at Bristol was forecast to be such that it would potentially be necessary to build a new airport to serve Bristol, replacing the existing airport.

The RCD formed the basis of a public consultation that followed its publication. A number of questions were asked in that document, and responses were invited, to inform the Government’s development of the forthcoming White Paper.

The region’s response to the DfT’s consultation, as reflected in the South West Regional Assembly’s and South West Regional Development Agency’s formal submissions supported the case that airports that should be developed to serve the far South West are Exeter and Newquay. However, SWRDA went on to say that the proposal for a new airport close to Plymouth warranted further consideration.

The delay in the consultation process until 30th June 2003, as a consequence of the Gatwick Airport judicial review, has provided the opportunity for stakeholders in the South West to undertake this further work and to revisit their original responses.

During the consultation a number of issues had been highlighted which focus on the airports that serve the far South West. These include: -

• In 2002, passenger throughput was 0.08 mppa at Plymouth, 0.3 mppa at Exeter and 0.19mppa7 at Newquay, whilst the DfT forecast for 2030, under their reference case scenario, was 0.5mppa, 2.0mppa and 0.4mppa respectively. There was some concern from a number of stakeholders in the South West that these figures significantly underestimated the potential ‘real’ demand that could materialise over the next 30 years. It was stated by some that the impact of Low Frills carriers and the potential for significant increases in air services serving more of the inbound tourist market could result in greater passenger volumes than that forecast. For instance, the launch of Ryanair services from Stansted to Newquay has resulted in passenger throughput at Newquay doubling in just one year. The throughput of the airport is now almost half what the RCD forecast for 2030.

• As a result, the potential for air transport to attract additional tourist visitors required further assessment. Developments such as the ‘Eden Project’ near Newquay and the fact that the South West is perceived to be a ‘safe and secure’ destination could result in a larger foreign inbound market than originally envisaged.

7 Financial year 2002/03


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• The airports of the far South West have a number of issues regarding their long-term development. Although these were highlighted in the RCD it was felt that further examination was necessary of the development potential of all three airports.

• Since the publication of the RCD, proposals have been put forward by Sutton Harbour Holdings plc (operator of Plymouth Airport) for the development of a new airport close to Plymouth, adjacent to the A38 near Plympton in South Hams. They suggested that the requirements of the region could be better served by an airport “in the correct location”, which had the ability to grow over the long term. This proposal has significant economic, environmental and land use planning implications, and is predicated on the assumption that both the existing Plymouth and Exeter airports would close thus concentrating the development of the market serving Devon at the new site. This proposal was submitted as part of their response to the White Paper Consultation and would be a fundamental change in the provision of airport capacity, which required further consideration.

The South West RCD is a core document considered in the production of this report. Where possible we have sought to avoid duplication with its content, but highlight where differences in our analysis and that contained within the RCD have arisen.

2.4 Study Brief

AviaSolutions was appointed by the SW RDA, Government of the South West and the Department for Transport to undertake this study. It specifically focuses on three development options. They are:

• Option 1: (Base Case): The three existing airports (Exeter, Newquay, and Plymouth8) are developed within their physical and operational constraints.



It is recognised that a number of other options could have been considered, such as developing a new airport in South Hams and leaving Exeter open to develop greater competition in the market. However it was considered that there is an insufficient market in the far South West to support both these airports. Given the timescales available, it was agreed that it would be prudent to concentrate

8 The assumption made regarding Plymouth under Option 1 is important to understand. For forecasting purposes, we have assumed that the runway at Plymouth is not extended. Thus the range of services and passenger numbers assumed reflects the constraints arising from the short runway, and restrictions on the aircraft used. A forecast, which assumes a runway extension, is likely to deliver marginally more traffic, but is unlikely to be materially different to that contained within this report.

This assumption is based on potential airlines having the right aircraft to use the airport up to 2030. However there is a considerable risk that, over time, the existing runway length will preclude operations by the majority of aircraft types in service. For instance if there are no Dash 8 300s or ATR 42 aircraft in the fleets of potential airlines, it is highly unlikely that such airlines would acquire aircraft specifically to operate Plymouth services as these would not be consistent with aircraft in the rest of the fleet. Under these circumstances it would become increasingly difficult to attract (or indeed retain) services, putting the long-term viability of the airport at risk. Thus in appraisal of the financial viability of the airport, we have undertaken two assessments, one with a runway extension up to 1199 m and one without.

Furthermore, if Plymouth was to close, this may have an impact on Newquay, given a number of services (such as Gatwick) have operated via Plymouth to maximise passenger loads. There may be insufficient demand from Newquay alone to justify some services.


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resource on the three core scenarios described above (although a high level assessment of the implications of the three options on Bristol and Bournemouth has been undertaken.)

In assessing each option, this report:

• Reviews the DfT’s traffic forecasts and sets out alternative forecasts. The forecasts enable analysis of the potential route network, busy day and busy hour schedules for each airport under each scenario. In addition a set of “high” forecasts have been produced which considers a high growth scenario, based upon optimistic assumptions on GDP growth, increases in population and increases in inbound tourists by air.

• Assesses the potential infrastructure implications arising from the options forecast, including a review of existing master plans at Exeter and Plymouth, the development of a high level master plan for Newquay and appraisal of Sutton Harbour’s proposals for a new airport in South Hams.


• Makes recommendations on strategies for delivery; how a potential air transport strategy for the far South West could be implemented.

The report was produced over a two-month period between 1st April and 31st May 2003. Considerable effort was placed on the development and testing of forecasts. However given the relatively short timescale, much of the appraisal of options was undertaken at a relatively high level. For instance the financial analysis is based upon existing cost plans, or a high level assessment of costs based upon benchmarks of similar airports. In the time available it was not possible to undertake detailed cost appraisals of each option. Nevertheless, for the purposes of informing the on-going debate within the South West on the provision of airport capacity, the analysis is sufficient to enable a robust consideration of policy options.

2.5 Key Source Material

This study has been undertaken within the context of a significant amount of work already completed to inform the production of the Government’s Regional Consultation Document. In addition a wide range of stakeholders have undertaken a number of other studies. In preparing this report, we have sought to (where possible) avoid duplication of previously undertaken work and to build upon the findings of these studies. For completeness, a bibliography of the documents used is contained at Appendix D.

2.6 Key Meetings Held

In addition to the source material considered, we have met with a number of key stakeholders. This includes discussion with the key airport operators involved, the South West Tourist Board, the South West Regional Assembly, the South West Regional Development Agency, Devon County Council, Restormel County Council, regional stakeholders in Devon and Cornwall, Exeter and Plymouth, the DfT and key industry and non-industry stakeholders.

2.7 Survey of Business Users


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As part of this study a survey of business users of airports in the far South West was also undertaken. The objective of the survey was to understand in greater detail the reliance business users place on air transport links, the destinations most frequently accessed and potential use of new air services in the future. The results of the survey have helped to inform the forecasting work and are discussed in more detail in Appendix B. However, it is important to understand that the sample is relatively small (54) and therefore for some questions the response rate is low.

2.8 Tourism in the South West

Tourism is a significant contributor to the local economy of the South West. The role that aviation has serving this market is potentially under developed.

The recent Ryanair service to Newquay from Stansted is estimated to have increased visitor numbers using the airport by over 100,0009. However, whether this traffic is new is difficult to identify. A survey10 carried out by Cornwall County Council in April 2002, showed that most Ryanair passengers would have previously made their journey to Newquay by other transport modes. Fewer than 10% would have not made the journey at all. This survey though is limited in scope, as it was carried out over one weekend in April 2002 and may not be representative of all passengers.

In 2001, there were over 21 million staying trips to the region, with visitors staying 96.9m nights and contributing over £3bn to the local economy. The South West accounts for 15% of the total UK domestic staying trips, with visitors from overseas accounting for 13% of all staying trips in England. The region’s reliance on domestic visitors was made more apparent by the events of 11th September 2001, which saw an even greater concentration of visitors from the UK.11 The far South West (Devon and Cornwall) accounts for approximately 60% of all trips to the region by UK residents and 36% of all trips by overseas residents. The size of this market lends weight to the hypothesis that a greater proportion of visitors could access the region by air and is illustrated further in Table 112.

As part of our analysis we have reviewed a number of reports on the inbound tourism sector, including work commissioned by South West Tourism.

Trips (m) Nights (m) Spend (m)

UK residents 12.4 51.5 £2,161 Overseas residents 0.59 5 £169

Far SW Total 12.99 56.2 £2,330

Table 1 – Overview of Devon and Cornwall Tourism (2001)

9 Newquay Cornwall Airport

10 Interview Survey Report Newquay Cornwall Airport, Cornwall County Council, April 2002

11 South West Tourism, Annual Report 2001 - 2002

12 Source South West Tourism


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2.9 Report Structure

This report is structured to enable the key issues to be understood and clearly distilled.

• Chapter 3 describes air transport in the far South West, including passenger throughput and route networks at the three principal airports being considered.

• Chapter 4 provides a review of traffic forecasts and route development opportunities at the three key airports under consideration. The impact of such development scenarios is also assessed, at a high level, on Bristol and Bournemouth. The key outputs from the passenger forecasting work are:

Development of a ‘bottom–up’ network plan for each airport, under each scenario.

Integration and testing of output with a ‘top–down’ analysis into the forecasts.

Development of “Peak Hour”13 and “Busy Day”14 forecasts for each airport.

• In Chapter 5, existing airport infrastructure is described, alongside any potential development proposals that operators may have for their airport in the medium and long term. The proposal for the development of a new airport at South Hams is described. In addition a new master plan for Newquay is included, developed by AviaSolutions in conjunction with Newquay Airport Ltd. Infrastructure implications are assessed using the following criteria:

Airside analysis, including runway, taxiway and apron capacities.

Landside analysis, including terminal and car parking.

Within the description of development options, an assessment is provided regarding whether development plans meet the requirements of the forecast Busy Day schedules.

• In Chapter 6, under each option, at each airport the development options are appraised. These are appraised in terms of their: -

Financial Viability

Economic Contribution (including potential impact on Tourism and Inward Investment)

13 The Peak Hour is defined as the a 60 minute period of the design day during which the highest traffic activity occurs (or is expected to occur) (source IATA Airport Development Reference Manual)

14 The Busy Day is defined as is defined as the day in the year during which the highest traffic activity occurs (or is expected to occur (source IATA Airport Development Reference Manual)


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Environmental Sustainability

Surface Access Impacts

Land Use Impacts

Table 2 details the outputs associated with the impact appraisal of the development options.

Financial Economic Environmental Surface Access Land Use • Capital

requirements and funding

• Revenue costs • Potential revenue

streams • Return on capital • Funding vehicles

• Employment generation

• Contribution to SW GDP and productivity

• Effect on economic linkages

• The effect on the competitiveness of the region

• High level analysis regarding impacts on ecology, water quality and air quality

• Forecast noise contours, based on busy day schedules for each airport

• Identification of any showstoppers

• High level analysis regarding impacts at each airport

• An appraisal of future surface access schemes

• Identification of surface access enhancements

• Analysis of the land use implications for each airport

• Assessment of urbanisation issues and integration with RPG, Devon and Cornwall Structure Plans and local plans

Table 2 – Option Appraisal Outputs

• In Chapter 7, a series of “strategies for delivery” are described. This includes consideration of route development funds, development of Public Service Obligation (PSO) routes, options for infrastructure development, financing and delivery, together with potential tourist market engagement strategies.

• In Chapter 8 a conclusion of the key issues is provided.


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3 Existing Air Services Provision in the Far South West

3.1 Summary

• Exeter airport has experienced growth of 6.6% per annum during 1992 – 2002, reaching a passenger throughput of 0.34 mppa and 5,283 atms. The majority of passenger traffic at Exeter is focused around the charter market. The airport offers year round holiday flights to the Mediterranean and to the Alps, as well as a weekly summer only service to Toronto. The airport serves more specialist charter destinations, with, for example “one-off” flights to the Caribbean connecting with cruise ships and to New York for Christmas shopping. A new service to London City is currently under consideration.

• Plymouth airport has experienced growth of 3.2% per annum over the period 1991 – 2000. By 2001 the airport had grown to a throughput of 0.12 mppa and 7,130 atms. However, the BA CitiExpress network at Plymouth was reduced in early 2002, as a consequence of BA’s corporate review of the airline’s route network. This saw a withdrawal of services, such as Dublin and Cork, leaving only the London/Newquay service and a daily service to Bristol. As a consequence, passenger throughput and aircraft movements fell significantly in 2002, such that they had fallen back to levels that were achieved during the early nineties. The airport offers no charter services and no Low Frills services, primarily due to infrastructure (runway).

• Since this study was commissioned, British Airways’ announced that it would terminate its services from Plymouth and Newquay to Gatwick (and from Plymouth to Bristol) in October 2003. Unless an alternative carrier takes over the route, it is likely that Plymouth’s traffic will reduce significantly. However since the announcement was made Sutton Harbour Holdings has announced the formation of Air South West, which intends launching services to Gatwick at the end of October with a fleet of Dash 8 aircraft. The airline has indicated that it will also launch services to other destinations in the UK and to Europe over time. In addition Air Wales has indicated that it too is interested in launching services to Gatwick. Services to Gatwick should therefore continue, provided slots at Gatwick can be secured.

• Newquay airport experienced steady growth up until 2002, rising dramatically after commencement of the Ryanair service in spring 2002. Accurate statistics are not available before 1998/9. However in the period between 1998/99 and 2001/02, year on year growth was around 6% per annum. Following the introduction of the Ryanair service in May 2002, traffic has more than doubled reaching a passenger throughput of 0.185 mppa and 8,128 atms. Newquay therefore handles more passengers than Plymouth. As with Plymouth the future of the Gatwick service was placed in doubt with the decision by BA CitiExpress to withdraw the route. Both Air South West and Air Wales have indicated that they are considering a replacement service. In addition a new service to London City via Exeter is currently under consideration.

• Sutton Harbour Holdings plc, which has the leasehold and operates Plymouth airport, has submitted a proposal to re-provide the airport in South Hams on a site that they consider has greater potential for long term development. The location of the airport, with its proposed 2,500m runway and parallel taxiway, is near Sherford, to the East of Plymouth alongside the A38.

• The new airport would be designed to overcome the limitations of the existing Plymouth airport, allowing it to handle a variety of aircraft types supporting services to a variety of destinations. The site has also been identified within the Devon Structure Plan as a location for the development of 3,500 new homes. Sutton Harbour Holdings has stated that with a higher density of housing, these homes could be built upon the current Plymouth airport site.

• The new airport is predicated on the closure of both Plymouth and Exeter airport, with provision of all air services serving these catchment areas being concentrated at South Hams. The closure of Exeter would release further land that could be used for the housing development that is proposed in the Exeter area.

• In the next chapter the forecasts for future growth under the range of development options being considered are described.


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3.2 Introduction

In this chapter, the provision of air services from the airports considered in this report are described. In addition existing proposals for a new airport in South Hams serving both Plymouth and Exeter are considered in order to provide context for the subsequent analysis. Following analysis of forecasts in the next chapter, the existing and future infrastructure requirements are discussed in Chapter 5 and appraised in Chapter 6.

3.3 Exeter

Exeter airport has experienced growth of 6.6% per annum during 1992 – 2002, reaching a passenger throughput of 0.34 mppa15 and 5,283 atms16,17. The majority of passenger traffic at Exeter is focused around the charter market. The airport offers year round holiday flights to the Mediterranean and to the Alps, as well as a weekly summer only service to Toronto. The airport also serves more specialist charter destinations, with, for example “one-off” flights to the Caribbean connecting with cruise ships and to New York for Christmas shopping. Figure 4 details the passenger throughput and ATM’s during this period.

0

50,000

100,000

150,000

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1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Pax

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ATM PAX

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Figure 4 - Exeter Passenger and Aircraft Movements

Scheduled operations at the airport are less developed. FlyBe has regular routes to Dublin, Guernsey and Jersey18, whilst Skybus operates a summer only scheduled service to St Marys on 15 mppa: Millions of passengers per year – source CAA

16 ATMs: Air Transport Movements – source CAA

17 Exeter Airport ATM statistics are different to those published by CAA. In 2000 - 9675, in 2001 - 9073 and in 2002 - 7286.

18 Once a week service to Belfast due to commence in May 2003


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the Isles of Scilly. However given the Dublin service is only once per day, this precludes the ability to conduct a day’s business in Exeter or Dublin / Cork without a night stop. FlyBe used to operate a ‘shuttle’ to Birmingham; however this was cancelled because of losses incurred and the disposal of the Shorts 360 aircraft used. FlyBe use a 30 to 50 seat Havilland Dash – 8 whilst Skybus use their 18 seat Twin Otter aircraft.

3.4 Plymouth

Plymouth airport has experienced growth of 3.2% per annum over the period 1991 – 2000. By 2001 the airport had grown to a throughput of 0.12 mppa and 7,130 atms. However, the BA CitiExpress network at Plymouth was reduced in early 2002, as a consequence of BA’s corporate review of the airline’s route network. This saw a withdrawal of services, such as Dublin and Cork, leaving only the London/Newquay service and a daily service to Bristol. As a consequence, passenger throughput and aircraft movements fell significantly in 2002, such that they had fallen back to levels that were achieved during the early nineties. The airport offers no charter services and no Low Frills services, primarily due to infrastructure (runway) constraints.

Figure 5 details passenger throughout and ATM’s during this period.

0

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40,000

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80,000

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140,000

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

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Figure 5 - Plymouth Passenger and Aircraft Movements

Although BA CitiExpress has reduced services, these have in part been replaced by Air Wales. The airline began operations at the airport in Autumn 2002 with 19 seat Beech 1900 aircraft on daily services to Dublin and Cork. In Spring 2003 the airline upgraded the equipment used to larger ATR42 aircraft (44 seats). However given the services are only once per day, this precludes the ability to conduct a day’s business in Plymouth or Dublin / Cork without a night stop.

Since this study was commissioned, British Airways has announced that it will terminate its services to Gatwick and Bristol in October 2003. Unless an alternative carrier takes over the route, it is likely that Plymouth’s traffic will reduce significantly. However since the announcement was made Sutton Harbour Holdings has announced the formation of Air South West, which intends launching services to Gatwick at the end of October with a fleet of Dash 8 aircraft. The airline has indicated that it will also launch services to other destinations in the UK and to Europe over time. In addition


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Air Wales has indicated that it too is interested in launching services to Gatwick. Services to Gatwick should therefore continue, provided slots at Gatwick can be secured.

3.5 Newquay

Newquay airport experienced steady growth up until 2002, rising dramatically after commencement of the Ryanair service in spring 2002. Accurate statistics are not available before 1998/9. However in the period between 1998/99 and 2001/02, year on year growth was around 6% per annum. Following the introduction of the Ryanair service in May 2002, traffic has more than doubled reaching a passenger throughput of 0.185 mppa and 8,128 atms. Newquay therefore handles more passengers than Plymouth.

Figure 6 details passenger throughput and ATM’s during this period.

0

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98-99 99-00 00-01 01-02 02-03

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Figure 6 - Newquay Passenger and Aircraft movements

Until 2002, BA CitiExpress represented the airport’s principle operator. The route to London Gatwick and Plymouth operates four times per day (although the airline will withdraw this service at the end of October 2003 and discussions are being held to secure an alternative service). Skybus also has a summer only service to St Mary’s and Bristol. BA CitiExpress use the de Havilland Dash - 8, whilst Skybus use the 18 seat Twin Otter and / or the smaller Islander aircraft.

In 2002, Ryanair commenced daily operations between London Stansted and Newquay. This represented a step change in passenger volumes at the airport, with the utilisation of B737 – 800 aircraft, seating up to 189 passengers. Airport throughput has more than doubled during the first year of operation.

Ryanair increased frequency in early May 2003 to twice a day, although the airline reduced the size of the aircraft used to the B737–300, seating up to 148 passengers. This represents a 67% increase in capacity over 2002 and is expected to increase the attractiveness of this service for


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business and inbound leisure ‘day tripper’ users as the proposed schedule enables a day return to be undertaken from Newquay and Stansted. 19

3.6 Proposed New Plymouth Airport (South Hams)

Sutton Harbour Holdings plc, which has the leasehold and operates Plymouth airport, has submitted a proposal to re-provide the airport to South Hams on a site that they consider has greater potential for long term development. The location of the airport, with its proposed 2,500m runway and parallel taxiway, is near Sherford, to the East of Plymouth alongside the A38. Figure 7 shows the location of the new Plymouth Airport (referred to in this report as South Hams airport).

Figure 7 - Proposed Location for New Plymouth Airport

The new airport – indicated by the dashed black line - would be designed to overcome the limitations of the existing Plymouth airport, allowing it to handle a variety of aircraft types supporting services to a variety of destinations.

Also indicated in Figure 7 is a possible site for the development of 3,500 new homes, which has been identified within the Devon Structure Plan – indicated by the solid blue line. Sutton Harbour Holdings has stated that with a higher density of housing, these homes could be built upon the current Plymouth airport site.

Sutton Harbour Holdings also state that the closure of Exeter airport, with provision of all air services in the Exeter and Plymouth area being focused around South Hams, would release further land that could be used for the housing development that is also proposed in the Exeter area. It also states that the new airport could be built within a five-year time frame. This would allow for the long-term development of air services serving the region. A review of their proposals is contained within chapter 5 of this report.

In the next chapter the forecasts for future growth under the range of development options being considered are described.

19 STN – NQY: dep 0645 & 2005 / NQY – STN: dep 0815 & 2140


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4 Traffic Forecasts for Exeter, Newquay, Plymouth and South Hams

4.1 Summary • This chapter sets out the passenger forecasts for the three existing airports and the proposed new airport in South

Hams, under the three development options being considered.

• The key market segments considered under each option are:




• Long haul (for long haul we have assumed charter operations only as the market is insufficient to sustain scheduled services during the forecast period)

• The forecasts are presented by option and at two points in time; 2015 and 2030. A full data set is contained within Appendix A.

• The forecasts that have been developed for this report have been produced within the context of a considerable amount of forecasting work undertaken by the DfT. They produced forecasts to inform the Regional Consultation Documents based on a number of scenarios. These were based on assumptions regarding the level of forecast demand satisfied within the UK through the provision of infrastructure. The impact of future infrastructure provision on forecast passenger growth is a critical factor, particularly at those airports where demand is forecast to exceed “supply” such as those in the South East and Midlands

• The scenario upon which we have undertaken our forecasting is based upon the RASCO Reference Case scenario with three new runways in the South East assumed during the period up to 2030. We have assumed that Bristol airport is not constrained during this period (although based on DfT forecasts, it may become so towards the latter end of the forecasting period).

• Forecasting was approached from both a “top-down” and “bottom-up” perspective. Top down forecasts were based upon CAA Origin and Destination (O&D) survey data for the catchment areas of the airports being modelled, and an allocation of that traffic between airports. Bottom-up forecasts were also based upon CAA O&D survey data but were calculated on a route-by-route assessment of demand from each airport to build an overall level of potential demand. Both methodologies were used to enable each to “sense check” the other, and also to reflect the low traffic base upon which forecasts are based which makes “top-down” forecasting alone open to challenge.

• Under Option 1, it is assumed that the three existing airports continue to operate and develop. Total traffic in the far South West is forecast to grow from 605,000 in 2002 to 3.61 mppa by 2030. This comprises Exeter at 2.24 mppa (million passengers per annum), Newquay at 1.01 mppa and Plymouth at 0.355 mppa.

• Under Option 2 it is assumed that Plymouth Airport is closed, and that Exeter and Newquay serve the far South West only. Exeter is forecast to grow to around 2.44 mppa (around 120,000 more passengers than under Option 1) and Newquay is forecast to grow to around 1.12 mppa (around 100,000 more passengers that under Option 1). Under this scenario total traffic in the far South West is forecast to grow to 3.56 mppa by 2030. However this total is approximately 55,000 passengers less than under Option 1, given that Plymouth Airport closes and passengers are unwilling or unable to travel from the alternatives in the far South West and use airports outside the study area (either Bristol or London).

• Under Option 3 it is assumed that both Exeter and Plymouth airports close, and that the far South West is served by Newquay and a new airport close to Plymouth in South Hams. South Hams is forecast to grow to around 2.32 mppa (around 276,000 less than the combined total for Exeter and Plymouth under option 1) and Newquay is forecast to grow to around 1.04 mppa (around the same total as Option 1). Under this scenario total traffic in the far South West is forecast to grow to 3.4 mppa by 2030. However, compared to Option 2, South Hams attracts around 122,000 passengers less than Exeter. This is partly a function of the smaller catchment area and due to some passengers in the Exeter area using Bristol rather than South Hams.


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4.2 Introduction

This chapter sets out the passenger forecasts for the three existing airports and the proposed new airport in South Hams, under the three development options being considered. For completeness the three options considered are: -



• Option 3: A new airport is developed in South Hams borough replacing both the existing Plymouth and Exeter airports. Newquay remains operational.

The key market segments considered under each option are:




• Long Haul (for long haul we have assumed charter operations only as the market is insufficient to sustain scheduled services during the forecast period)

The forecasts are presented by option and at two points in time; 2015 and 2030. A full data set is contained within Appendix A.

Since the inception of this study, British Airways has announced their intention to withdraw the service between London Gatwick and Plymouth/Newquay on the 30th October 2003. Although this changes the traffic baseline, the material effect, in forecasting terms, for the far South West is relatively small. Over the 30-year time horizon, it is a prudent assumption that the route (or similar)

• When looking 30 years ahead, many factors may influence the number of passengers flying to and from the region, which may result in passenger traffic being higher than that forecast under our base case. Factors which could result in passenger numbers being greater than that forecasts include:-




• Growth of low frills airlines in the region

• Each of these factors has been considered within the context of “what if?” to enable consideration of the impacts of higher growth.

• This has resulted in a significantly more aggressive set of forecasts, which should be understood in the context of “what if”. We have found that the high forecasts for Plymouth have a small effect on the throughput at the airport (confirming the constraints of the runway length) whilst at Exeter and Newquay the throughput has more than doubled.


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will be re-instated. Indeed we have been informed that a number of airlines are seeking slots at Gatwick to operate the service.

4.3 Forecasting Context

The forecasts that have been developed for this report have been produced within the context of a considerable amount of forecasting work undertaken by the DfT. They produced forecasts to inform the Regional Consultation Documents based on a number of scenarios. These were based on assumptions regarding the level of forecast demand satisfied within the UK through the provision of infrastructure. The impact of future infrastructure provision on forecast passenger growth is a critical factor, particularly at those airports where demand is forecast to exceed “supply” such as those in the South East and Midlands.

They were:

• The RASCO Reference Case (RRC) - Broadly a “business as usual” scenario. Acts as a baseline for evaluation. Assumes around 300 mppa in the SE and 200mppa in the regions at 2030.

• South East Constrained (SEC) - Capacity in the South East is fixed at what is already catered for in the planning system or within GDPOs20. Assumes around 150 mppa in the SE.

• UK-Wide Constrained (UKC) - Growth is severely constrained in all parts of the UK and is only permitted where already in the planning system or within GPDO.

• Facilitating Growth (FG) - Development is permitted at all sites to meet demand. This includes possible new sites and/or new runways.

• Fly Local (FL) - Encourages growth at all regional airports to meet as much local demand as is possible.

• Concentrated Growth (CG) - Growth is focused on a limited number of airports within a region. Critical mass is developed, with potential for a wider range of destinations and increased frequency of services.

Fly Local and Concentrated Growth are spatial scenarios as they consider how demand may be met within a regional context. The proposed development of the new Plymouth airport at South Hams is similar to Concentrated Growth as it assumes the closure of Plymouth and Exeter.

The interrelationship between the far South West and airports in the South East, and with Bristol is important to understand. The RRC and SEC scenario forecasts for the South West are set out in the RCD21 and repeated below in Table 3. Under this scenario significant “over-spill” is experienced at the Bournemouth, Bristol and Exeter. Indeed it is likely that as Bristol itself becomes constrained, traffic could spill to the far South West, with Exeter being the primary point to capture a greater share of the market. Conversely it is assumed that air links to London would be lost from Plymouth and Newquay due to slot constraints.

20 GDPO – General Development Planning Order

21 The Future of Air Transport in the United Kingdom: South West Table 4.4


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2000 (mppa) 2015 (mppa) RRC

2015 (mppa) SEC

2030 (mppa) RRC

2030 (mppa) SEC

Bournemouth 0.3 1.8 3.9 4.4 8.4 Bristol 2.1 4.8 7.3 8.6 13.4 Exeter 0.3 1.1 1.0 2.0 4.5 Newquay 0.1 0.2 0.2 0.4 0.3 Plymouth 0.1 0.4 0.7 0.5 1.3

Table 3 - DfT RRC and SEC Forecasts

Under the SEC the South West’s airports are forecast to handle 12 million more passengers in 2030 than under the RASCO Reference Case (RRC). The effect is most pronounced at airports that are closest to the South East, such as Bournemouth and Bristol. However Exeter also is forecast to grow to around 4.5 mppa and Plymouth to 1.3 mppa.

At Newquay, traffic is forecast to be lower than under the RRC scenario, as air links to London are likely to be lost due to slot constraints at its airports.

The scenario upon which we have undertaken our forecasting is based upon the RRC scenario with three new runways in the South East assumed during the period up to 2030. We have assumed that Bristol airport is not constrained during this period (although based on DfT forecasts, it may become so towards the latter end of the forecasting period).

Since the DfT produced its forecasts, there have been a number of changes in the market, which have informed the production of our forecasts. For instance the DfT forecasts for Newquay were produced before Ryanair introduced its service to Stansted, resulting in them being lower than AviaSolutions’ forecasts for the airport. In addition our forecasts have been produced within the context of the recently undertaken survey of business users and also reflect South West Tourism’s strategic objective to encourage inbound visits to Devon and Cornwall by air. The differences between AviaSolutions’ forecasts and the DfT’s are highlighted within this chapter.

4.4 Passenger Forecasting

Forecasting of passenger numbers for the far South West was undertaken over a relatively short time period to enable the completion of the overall study by 6th June 2003.

Inevitably, our methodology was tailored to the time-scale allowed and the availability of data. However, the resultant forecasts represent a reasonable estimate of the airports’ potential subject to the comments made in this section.

It should be noted that the forecasts are critically dependent on the assumptions made. This is particularly true for a new airport and attention is drawn to the assumptions made in relation to South Hams. Other factors, such as airline policy, Government airport and planning policy, quality of management, and the policies of competing airports will all play their part. Forecasting of these factors will always prove difficult and must be left for subsequent analysis of the ‘what if’ variety.

Particularly important are assumptions made regarding the South East’s airports, which are used extensively by passengers from the South West. The assumption made is that in the forecasting period, capacity will be provided in the South East in line with the DfT reference case i.e. that runway capacity in the South East will be provided.

In addition a sensitivity analysis was carried out to allow for the possibility of the South West economy growing faster than the national average, that Newquay in particular attracts a greater number of inbound tourists by air, that there is an expansion in the housing stock and consequently an increase in population and other factors.


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A number of forecasting terms are used in the description of market potential at each airport that follows, and it is important that these are understood. This includes: -

• Market Stimulation – the impact on the market that a new service will have, enabling passengers to fly that would otherwise not have done so. Experience of other markets suggests that “Full-Service” airlines stimulate the market by around 20%. However low Frills airlines have a far greater impact, stimulating the market by, on average, around 75%.

• Market Penetration – the ability of airlines to attract passengers from a given market is not just a function of price. Frequency of service is also important. Our analysis indicates that if a daily service is offered, around 40% of the potential market will use the service. The remaining proportion of the market will still choose to travel to a more distant airport where greater daily frequency is offered. For example a passenger living close to Exeter airport can either fly on the single daily mid morning service to Dublin, or alternatively drive to Bristol where a choice of a number of daily departures across the day is available.

• Market Growth – this is the assumed annual growth rate.

• Route Threshold – this is the point at which a potential route could become commercially viable for an airline. There are a number of destinations for which demand is present, but at levels that are insufficient to enable an airline to make such a service commercially viable. We have assumed that services only commence at such time that the route could be operated at a profitable load-factor (the average number of seats sold per flight). In addition we have assumed that a full service carrier requires a lower load-factor than a low cost carrier, given the higher revenue per seat sold achieved.

4.5 Data

The data available was based on: -

• the definition of the study area which encompasses the catchment areas for Newquay, Plymouth, Exeter and South Hams airports in terms of Local Authority Districts. This was assumed to be the whole of the South West Region and whilst the effects on the west of this region are probably minimal, it was considered better to include this area rather than to exclude significant potential passenger numbers.

• airports assumed to be competitors for the study airports were Bristol, Bournemouth and the four major London airports. In the event, the number of passengers using the London airports from the far South West was found to be minimal for routes forecast to be served.

• the passengers within this catchment area for all routes derived from the CAA passenger surveys for 2000.

• the value of travel time per hour and travel resource costs for UK business, UK leisure, foreign business and foreign leisure passengers.

• forecasts of growth of passengers by UK business, UK leisure, foreign business and foreign leisure passengers up to 2020 from the Department for Transport (DfT) forecasts published in 2000. As a working assumption, a growth rate of 5.5% for the number of business passengers and 3% for leisure passengers over the whole of the study period was used, close to the DfT mid-point levels.

• the distances and times from each district in the catchment areas to the study and competing airports as derived from the AA Autoroute package.


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4.6 Forecasting Methodology

Forecasting was approached from both a “top-down” and “bottom-up” perspective. Top down forecasts were based upon CAA Origin and Destination (O&D) survey data for the catchment areas of the airports being modelled, and an allocation of that traffic between airports. Bottom-up forecasts were also based upon CAA O&D survey data but were calculated on a route-by-route assessment of demand from each airport to build an overall level of potential demand. Both methodologies were used to enable each to “sense check” the other, and also to reflect the low traffic base upon which forecasts are based which makes “top-down” forecasting alone open to challenge. Top down forecasting methodology was used to forecast full service international services and outbound charter. Bottom up forecasting was used for low-frills international and domestic and full service domestic.

Details of the methodology used are at Appendix A.

4.7 Results of Forecasting for the Far South West Airports

For each development option, passenger forecast demand in 2015 and 2030 at the far South West based upon the output of both the “top-down” and “bottom-up” analysis has been undertaken. Under each option we have assumed new runway capacity is built in the South East.

The forecasts presented in this section are considered the “base-line” forecasts and illustrate what we consider to be the most likely scenario of future growth at Exeter, Newquay and Plymouth or South Hams. In addition we have undertaken a series of sensitivities, which have sought to demonstrate the potential upper end of the forecasting range. The upper end forecasts are discussed in more detail at section 4.8.

The forecasts are presented by option, and also by airport, to enable each option to be compared with the other, and the implications by airport understood. The base line forecasts inform the appraisal of impacts described in Chapter 6, although we have also undertaken an appraisal of impacts at a high level based on the upper end forecasts. Detailed forecasts for each airport, under each scenario are attached at Appendix A.


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4.7.1 Option 1: (Base Case): The three existing airports (Exeter, Newquay, and Plymouth) are developed.

Under this option, it is assumed that the three existing airports continue to operate and develop. Figure 8 illustrates the forecast growth at each of the airports. Under this scenario total traffic in the far South West is forecast to grow from 605,000 in 2002 to 3.61 mppa by 2030. This comprises Exeter at 2.24 mppa (million passengers per annum), Newquay at 1.01 mppa and Plymouth at 0.355 mppa.

Option 1

0 500,000 1,000,000 1,500,000 2,000,000 2,500,000

Exeter 2002

Exeter 2015

Exeter 2030

Plymouth 2002

Plymouth 2015

Plymouth 2030

New quay 2002

New quay 2015

New quay 2030

LF Dom + Intl

FS Int'l

FS Dom

OUT Chart

IN Chart

Longhaul

Figure 8 – Traffic Forecasts under Option 1 by Sector at Exeter, Newquay and Plymouth


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4.7.2 Option 2: Exeter and Newquay only, Plymouth assumed to close

Under this option, it is assumed that Plymouth Airport is closed, and that Exeter and Newquay serve the far South West only. Figure 9 illustrates the forecast growth at each airport by sector. Exeter is forecast to grow to around 2.44 mppa (around 120,000 more passengers than under Option 1) and Newquay is forecast to grow to around 1.12 mppa (around 100,000 more passengers that under Option1). Under this scenario total traffic in the far South West is forecast to grow to 3.55 mppa by 2030. However this total is approximately 55,000 passengers less than under Option 1, given that Plymouth Airport closes and passengers are unwilling or unable to travel from the alternatives in the far South West and use airports outside the study area (either Bristol or London).

Option 2

0 500,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000

Exeter 2002

Exeter 2015

Exeter 2030

New quay 2002

New quay 2015

New quay 2030

LF Dom + Intl

FS Int'l

FS Dom

OUT Chart

IN Chart

Longhaul

Figure 9 - Traffic Forecasts under Option 2 by Sector at Exeter and Newquay


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4.7.3 Option 3: Exeter and Plymouth close, replaced by new airport at South Hams, plus Newquay.

Under this option, it is assumed that both Exeter and Plymouth airports close and that the far South West is served by Newquay and a new airport close to Plymouth in South Hams. Figure 10 illustrates the forecast growth at each airport by sector. South Hams is forecast to grow to around 2.32 mppa (around 276,000 less than the combined total for Exeter and Plymouth under option 1) and Newquay is forecast to grow to around 1.04 mppa (around the same total as Option 1). Under this scenario total traffic in the far South West is forecast to grow to 3.4 mppa by 2030. However, compared to Option 2, South Hams attracts around 122,000 passengers less than Exeter. This is partly a function of the smaller catchment area and due to some passengers in the Exeter area using Bristol rather than South Hams.

Option 3

0 500,000 1,000,000 1,500,000 2,000,000 2,500,000

New quay 2002

New quay 2015

New quay 2030

South Hams 2015

South Hams 2030LF Dom + Intl

FS Int'l

FS Dom

OUT Chart

IN Chart

Longhaul

Figure 10 - Traffic Forecasts under Option 3 by Sector at South Hams and Newquay


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4.8 Exeter

Exeter is forecast to grow from 348,600 passengers per annum in 2002 to between 2.2 million passengers (Option 1) and 2.4 million passengers per annum (Option 2). Under Option 3 the airport is assumed to close. Forecasts by market sector, by option, are set out in Table 4 below. Each market is discussed in turn.

Option 1 Option 2 Option 3 Exeter 2002 2015 2030 2015 2030 2015 2030 Low Frills Domestic & International

0 169,035 775,085 355,251 912,635 x x

Full Service International 15,000 15,883 60,183 42,498 85,723 x x Full Service Domestic 95,000 251,288 485,496 281,234 523,157 x x Outbound Charter 232,600 464,999 846,999 464,999 846,999 x x Inbound Charter 0 0 0 0 0 x x Longhaul Charter 6,000 45,000 75,000 45,000 75,000 x x

Totals 348,600 946,205 2,242,763 1,188,982 2,443,514 Table 4 – Exeter Airport Forecasts

Low Frills Domestic and International

It has been assumed that Low Frills operations (currently not a feature of the Exeter market) are attracted to the airport and provide a range of services to both domestic and international destinations. Indeed there is a likelihood that one carrier will start such services to three destinations in 2004 from Exeter. Potential services could operate to a range of European and key domestic destinations. Forecasting precisely which destinations are served is difficult, as different low cost carriers often serve different markets, and where possible seek to avoid “head to head” competition. However based upon our assumption that low cost services would stimulate the underlying market by 75%, and a market penetration of 40% is achieved, forecasts suggest that destinations such as Amsterdam, Dublin, Frankfurt, Brussels, Glasgow, Edinburgh, Copenhagen, Paris, Munich, Barcelona and Zurich could be viable over the period. In addition it is likely that low cost services to southern European destinations such as Malaga, Murcia and Alicante could be viable over time, given the strong existing charter market to these destinations. Under Option 2, Exeter is expected to handle around 137,000 more passengers in this sector than under Option 1.

Full Service International

The range of full service international services achievable from Exeter is forecast to be limited under all options. This is due to the dominance of Bristol and the wide range and frequency of service available from that airport, together with the tendency for full service airlines to, where possible, concentrate services at a single airport serving a given market. Our forecasts suggest that the existing full service operation to Dublin will continue, although would probably be at risk if a Low Frills airline entered the market, whilst a service could be sustained to one or two European hub airports (say Amsterdam or Paris) to provide connections to global destinations. However we do not forecast the development of a major network of full service international services from Exeter. Under option 2 the airport is expected to handle around 25,000 more passengers, primarily attracting some of the (67,000) passengers that would have otherwise have used Plymouth.


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Full Service Domestic

Under this scenario, we have assumed new services will stimulate the market by 20% and that with double daily services, 60% of the market is penetrated. A growth rate of 4% per annum is assumed. The existing services to Jersey and Guernsey continue and develop. Our forecasts suggest that full service services could be viable to Edinburgh and Glasgow by 2005, to Manchester by 2010, Belfast by 2025 and Aberdeen by 2030. Under Option 2, the airport is expected to handle around 38,000 more passengers that under Option 1. A service to London has been discounted in our analysis, given anecdotal evidence that carriers serving Plymouth would not divert services to Exeter, given its closer proximity to London and better road and rail links. However we are aware that one carrier is actively considering a service from Newquay, via Exeter to London City. This has not been factored into our forecasts.

Outbound Charter

Our forecasts suggest that Exeter will continue to be the primary departure point for outbound charter services from the far South West. The airport attracts passengers from its own catchment area, extending into west Devon and the whole of Cornwall. The airport competes with Bristol (and Gatwick) for this market and it assumed that it would continue to grow as an increasing range of charter destinations becomes viable. At present no tour operators base aircraft at Exeter, however over time, it is reasonable to assume that one or possibly two aircraft will be based at the airport. By 2030 it is forecast that outbound charter traffic will grow from around 233,000 passengers in 2002 to 846,000 passengers by 2030. This is still less than Bristol handles today. In 2002 some 1.3 million charter passengers, primarily on outbound services, used that airport. Outbound charter forecasts are the same for options 1 and 2, given Plymouth cannot handle such traffic under any scenario.

Inbound Charter

We have not assumed inbound charter services at Exeter. However there may be opportunities for the development of such services over time. This assumption is made for both Options 1 and 2

Long-Haul

Exeter already offers a weekly long haul charter service to Toronto (via Birmingham) and “one-off” services to New York and Florida (to connect with cruise liners). It is forecast that this market will grow to serve possibly Orlando over time. However the existing runway length precludes non-stop services to long haul destinations without weight restrictions. This is likely to impede some services, though it is unlikely that a runway extension could be justified given the level of incremental traffic such a development would bring. This assumption is made for both Options 1 and 2.


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4.9 Newquay

Under all options, Newquay is forecast to grow from its current 180,000 passengers per annum to between 1.0 million passengers at 2030 under Option 1 and 3 and 1.1 million passengers under Option 2. Forecasts by market sector are set out in Table 5 below. Each market is discussed in turn.

Option 1 Option 2 Option 3 Newquay 2002 2015 2030 2015 2030 2015 2030 Low Frills Domestic & International

100,000 270,142 527,806 270,142 527,806 270,142 527,806

Full Service International 0 44,940 76,112 49,145 100,456 42,031 85,024

Full Service Domestic 75,000 176,023 333,534 216,612 409,192 196,479 353,848

Outbound Charter 0 15,000 30,000 15,000 30,000 15,000 30,000

Inbound Charter 5,000 27,000 45,000 27,000 45,000 27,000 45,000

Longhaul Charter 0 0 0 0 0 0 0

Totals 180,000 533,105 1,012,452 577,899 1,112,454 550,652 1,041,678Table 5 – Newquay Airport Forecast


It has been assumed that Low Frills operations, which commenced from Newquay in 2002, will continue to develop. However the primary destination served would continue to be London Stansted, and we have assumed that it is likely to grow to a four times daily service by 2030. Based upon our assumption that Low Frills services would stimulate the underlying market by 75%, and a market penetration of 40% is achieved, our forecasts suggest that a European destination could be viable. Our modelling suggests Paris, but other potential destinations could include Dublin, Frankfurt or Brussels, depending upon decisions made by the airline.


The range of full service international services achievable from Newquay is forecast to be limited. This is due primarily to the small catchment area. However our model suggests that the demand for this sector could be greater than that from Exeter due to its more discrete catchment area and that Bristol (being further away from Newquay than from Exeter) is less attractive as an alternative. Our forecasts suggest that a full service operation to Dublin and a European hub (Amsterdam) could be possible by 2015, although would probably be at risk if a Low Frills airline entered the market. However we do not forecast the development of a major network of full service international services from Newquay.


Under this scenario, we have assumed new services will stimulate the market by 20% and that with double daily services, 60% of the market is penetrated. A growth rate of 4% per annum is assumed. The existing services to London Gatwick and the Isle of Scilly are assumed to develop with potentially greater frequency and larger aircraft types to Gatwick (although the opportunity to increase aircraft size would be limited if services continue to route through Plymouth). We have assumed that over time services to either Glasgow or Edinburgh would become viable.


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Outbound Charter

Our forecasts suggest that there could be a viable market for a limited series of outbound charter services, primarily to “winter-sun” destinations such as Tenerife, Las Palmas and Alicante. A similar programme of services, aimed primarily at those who currently work in the tourism sector and are unable to take their holidays during the summer, currently operates from Blackpool Airport. Based on an “off-model” assessment of potential demand, we have forecast around 15,000 passengers by 2015 and 30,000 passengers by 2030 (as a benchmark, Blackpool handled 56,000 passengers in this market in 2002).

Inbound Charter Services

Analysis undertaken by Close Focus Tourism Consultancy for Restormel District Council has been considered as part of our analysis. Their analysis suggests there is the potential to develop an inbound charter market at Newquay, focusing on the existing and potential attractions of the area. This is dependant on a variety of factors, such as suitable accommodation, marketing of the region, identification of market segments and development of the airport at Newquay.

Currently Falcon Holidays operate a programme from Zurich to Newquay weekly during the summer. This service is estimated to generate around 5,000 passengers per annum. Furthermore a new service from Vienna (via Bournemouth) has commenced this summer by Austrian Airlines. Our analysis suggests that there are opportunities to develop the inbound charter market at Newquay airport and we have forecasts around 45,000 passengers per annum (the equivalent of 6 or 7 flights per week) by 2030.

Long-Haul

Although the runway at Newquay is sufficient length to enable long haul charter services, the airport’s catchment area is insufficient to sustain regular long haul charter service. There may be opportunities for “one-off” services, but these are not included in our forecasts.

4.10 Plymouth

Under Option 1 only, Plymouth is forecast to grow from 76,000 passengers in 2002 to 335,000 passengers by 2030. Forecasts by market sector are set out in Table 6 below. Each market is discussed in turn.

Option 1 Option 2 Option 3 Plymouth 2002 2015 2030 2015 2030 2015 2030 Low Frills Domestic & International

0 0 0 x x x X

Full Service International 11,000 29,391 66,773 x x x X Full Service Domestic 65,000 151,980 288,321 x x x X Outbound Charter 0 0 0 x x x X Inbound Charter 0 0 0 x x x X Longhaul Charter 0 0 0 x x x X

Totals 76,000 181,371 355,094 Table 6 – Plymouth Airport Forecast


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Low Frills carriers are not expected to operate at Plymouth. The runway is not long enough to support the typical aircraft equipment that are employed – B737 and A320 series aircraft or the Dash 8 Q400 series used by flyBe.


The range of full service international services achievable from Plymouth is forecast to be limited, mainly due to runway constraints. Our forecasts suggest that the existing full service operation to Dublin will continue, whilst a service could be sustained to one or two European hub airports (say Brussels or Paris) to provide connections to global destinations. However we do not forecast the development of a major network of full service international services from Plymouth.


Under this scenario, we have assumed new services will stimulate the market by 20% and that with double daily services, 60% of the market is penetrated. A growth rate of 4% per annum is assumed. The existing services to London Gatwick / Newquay and Jersey are assumed to develop with potentially greater frequency. We have assumed that over time services to Glasgow and Edinburgh and possibly Belfast could become viable.

Charter and Longhaul (Inbound and Outbound)

Charter carriers are not expected to operate at Plymouth. The runway is not long enough to support the typical aircraft equipment employed on these services.

4.11 South Hams

South Hams is forecast to handle 1.1 million passengers by 2015 and 2.3 million passengers by 2030. Forecasts by market sector are set out in Table 7 below. Each market is discussed in turn.

Option 1 Option 2 Option 3 South Hams 2002 2015 2030 2015 2030 2015 2030

Low Frills Domestic & International

x X x x x 138,358 644,920

Full Service International x X x x x 53,455 106,927

Full Service Domestic x X x x x 274,827 548,388

Outbound Charter x X x x x 576,845 946,534

Inbound Charter x X x x x 0 0

Longhaul Charter x X x x x 45,000 75,000

Totals 1,088,485 2,321,769Table 7 – South Hams Airport Forecasts


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It has been assumed that Low Frills operations are attracted to the airport and provide a range of services to both domestic and international destinations. However, due to a smaller catchment area, the Low Frills market would be less developed than Exeter, with fewer destinations served and lower frequency / capacity on the route network.

However based upon our assumption that low cost services would stimulate the underlying market by 75%, and a market penetration of 40% is achieved, forecasts suggest that destinations such as Amsterdam, Dublin, Frankfurt, Brussels, Glasgow, Edinburgh, Copenhagen, Paris, Munich could be viable over the period. The model predicts that growth in Low Frills services would be “end – loaded”, with only three services predicted to be viable in 2015.


The range of full service international services achievable from South Hams is forecast to be limited under all options. The catchment area has an impact on the passenger forecasts. Our forecasts suggest that full service operations to Dublin, Amsterdam, Paris and Brussels could be viable over the long term, although, like Exeter, would probably be at risk if a Low Frills airline entered the market. The forecast demand in this sector is some 20,000 passengers more than Exeter and Plymouth combined under Option 2, reflecting some claw back from Bristol. However we do not forecast the development of a major network of full service international services from South Hams.


Under this scenario, we have assumed new services will stimulate the market by 20% and that with double daily services, 60% of the market is penetrated. A growth rate of 4% per annum is assumed. Our forecasts suggest that the network would be similar to that forecast at Exeter, although passenger numbers are expected to be lower. A range of destinations would be viable by 2015 such as Belfast, Edinburgh, Glasgow, Jersey and Manchester. We have also assumed that the London Gatwick service would transfer to South Hams, representing around 40% of the full service (domestic) traffic at the new airport.

Outbound Charter

Our forecasts suggest that South Hams would become primary departure point for outbound charter services from the far South West, replacing the role currently performed by Exeter. The airport attracts passengers from its own catchment area, extending into west Devon and the whole of Cornwall. The airport competes with Bristol (and Gatwick) for this market but to a lesser extent than Exeter and we have assumed that a range of services could develop over time. It is reasonable to assume that aircraft would be based in South Hams by 2030, with a forecast charter throughput of 946,534 passengers, some 100,000 higher than Exeter than under Option 1 and 2.

Inbound Charter

We have not assumed inbound charter services at South Hams However there may be opportunities for the development of such services over time.

Long-Haul

We have assumed an Exeter ‘type’ of operation could be supported at South Hams. We would anticipate weekly seasonal charters to the Eastern Seaboard of the USA and possibly holiday destinations like Orlando and the Caribbean. Under the Sutton Harbour Holdings master plan for the airport, a runway length of 2,500m ensures that the development of longer range charters is not constrained in the same way as is experienced on some routes from Exeter.


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4.12 Impacts of Options on Bristol and Bournemouth

This study has focused primarily on airports in the far South West. However options pursued in this part of the region could have an impact on the development of airports elsewhere in the South West, particularly Bournemouth and Bristol. As part of our analysis we have undertaken a high-level assessment of the potential impact of different options.

4.12.1 Bournemouth

Under each of the options considered, there are only marginal differences on traffic levels at Bournemouth. This is primarily a function of the distance between Bournemouth and the airports under consideration. CAA surveys indicate that Bournemouth attracts comparatively little of its traffic from the far South West (although in the event of a major low cost operation from the airport, this may change).

The greatest impact on passenger numbers is under Option 3 where we have forecast that around 80,000 passengers are forecast to use to Bournemouth in 2030 compared with the other two options. This reflects the fact that passengers living in the east of Exeter’s catchment area, may decide that Bournemouth is a more convenient departure airport than South Hams (given drive times will be around 45 minutes longer to South Hams than Exeter for these passengers).

In overall terms, the impact of any of the options on Bournemouth is likely to be marginal.

4.12.2 Bristol

Under all of the options assessed, the impact on passenger numbers at Bristol is relatively marginal. Bristol has a wider range of services, at a higher frequency across all segments of the market and will continue to attract passengers from the far South West. .

Option 1 has least impact on Bristol. Under this option, both Exeter and Plymouth are expected to expand their network, but they will still be significantly less developed than Bristol.

Option 2 is expected to result in a greater volume of services from Exeter, potentially enabling it to develop higher frequencies, which will enable it to attract passengers from Plymouth and potentially claw back (marginally) some of traffic back from Bristol. However the network of services will not be as great as available from Bristol.

Under Option 3, South Hams’ greater distance from Bristol (than Exeter) and concentration of services at one location is likely to make this option more attractive to business users in the far South West. However this will be off set by part of Exeter’s existing catchment area diverting to Bristol, as this will become a more attractive airport (in terms of drive time, frequency of service and destinations served). In overall terms Bristol is expected to handle around 200,000 passengers more passengers than under Option 1

In overall terms, whichever option is pursued, it is unlikely to have a material impact on Bristol, given its larger catchment area, critical mass and range of services.

4.13 Sensitivity Analysis - High Forecasts

When looking 30 years ahead, many factors may influence the number of passengers flying to and from the region, which may result in passenger traffic being higher than that forecast under our base case. Factors that could result in passenger numbers being greater than that forecast include:-


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• Growth of low frills airlines serving the region

Each of these factors has been considered within the context of “what if” to enable consideration of the impacts of higher growth and are discussed in turn.

GDP Growth

Under our high growth scenario, we have assumed that GDP grows by 0.75% over and above trend growth rates. This is equivalent to a GDP some 25% higher by 2030 than assumed in our base case.

There is a correlation between GDP growth and passenger growth. We have assumed an elasticity of 1.3, which translates into a 1% increase in passenger growth per annum over and above growth rates assumed in our base forecasts.

The higher growth in GDP would be dependant on a number of factors, which have not been investigated in detail as part of this analysis. However it should be remembered that the far South West’s GVA (Gross Value Added per head) is 75% of the UK average, whilst average household incomes are 93% of the UK average. In addition Cornwall (and Isles of Scilly) are eligible for Objective 1 financial support, given they have a GDP less than 75% of the EU average.

Over the past five years the position of the far South West relative to the rest of the UK (in GVA and household income terms) has not changed. However the high forecasts assume that the SW RDA is successful in narrowing this gap.

Inbound Tourism Growth/Mode Shift

The far South West has traditionally been very successful in attracting tourism. However the majority arrive by surface access, either from other parts of the UK or from abroad via airports outside the region. The baseline forecasts assume that the proportion of visitors arriving by air does increase and is reflected in the growth in leisure passengers per annum assumed of 4%. We have also assumed that the attractions such as the Eden project stimulate the market. In our high forecasts we have assumed a more aggressive growth rate. This reflects an assumption that South West Tourism is successful in the implementation of their strategy to attract more visitors to the region by air. For example, based upon current visitor numbers. Around 2-3% of overseas visitors to the far South West arrive by air at the regions airports. In Scotland around 80% of overseas visitors arrive at its airports by air. In addition around 10% of domestic visitors arrive by air. If say 50% of overseas visitors to the far South West arrived by air this would equate to an additional 250,000 passengers per year. Similarly if the availability of air services from other parts of the UK resulted in “mode shift” of just 5% of visitors to air (some 10% of domestic visitors to Scotland currently arrive by air) this would generate around 600,000 additional passengers. Furthermore the availability of air services is likely to have a generative effect, in that the perception (and reality in the market) would be that the far South West would be easier to access. We have not provided a detailed analysis of the potential to switch mode, however given there were around 13 million visitors to the far South West, even if a small percentage switched mode, the implications for growth of demand for air services could be significant.


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Trips (m) Nights (m) Spend (m) UK residents 12.4 51.5 £2,161

Overseas residents 0.59 5 £169

Far SW Total 12.99 56.2 £2,330

Table 8 – Tourism Statistics for Devon and Cornwall 2001

Demographic Changes

The South West’s population grew by 5.5% between 1991 and 2000 compared to 3.7% for England as a whole22. This placed the region fourth highest in terms of population growth in the UK. The baseline forecasts make no assumptions regarding population growth other than it is assumed to remain constant over the period. It is likely that migration will continue, though quantifying precisely the additional population in the far South West by 2030 is difficult without detailed analysis. However for our high forecasts, we have assumed population grows by 0.5% per annum, equivalent to 16% over 30 years.

The impact of the type of population growth on passenger volumes is also critical. The level of disposable income by outbound leisure passengers is more important than GDP and although these two factors are related, a disproportionate increase in disposable income for residents of the South West could see an increased demand for outbound holiday services.

Impact of Low Frills

The availability of inexpensive fares and services such as offered by Low Frills airlines will also lead to increased demand for short stay holidays. Whereas, the surface journey to the far South West from many parts of the UK make a trip of less than a week impracticable, cheap air travel could have a generative effect on breaks for one or two days. A parallel for this is the huge growth in demand for services from Stansted to France, driven largely by second homeowners who make five or six visits per year, rather than once or twice. Perhaps the same could occur in the South West if services were available.

Implications for Forecasts

As a consequence of the above, enhanced passenger growth rates of 6.5% per annum (compared to 5.5% growth assumed in the base forecasts) for business passengers and 4.5% leisure passengers (compared to 3% growth rates assumed in the base forecasts) were used in the sensitivity analysis.

Additionally, more optimistic assumptions were made about incoming tourists to the region from the UK and abroad. We have also applied these sets of increased growth assumptions for our bottom – up analysis, although the increase growth rate of 5.5% has been applied.

This has resulted in a significantly more aggressive set of forecasts, which should be understood in the context of “what if”? We have found that the high forecasts for Plymouth have a small effect on the throughput at the airport (confirming the constraints of the runway length) whilst at Exeter and Newquay the throughput has more than doubled.

22 Source: ONS Regional trends


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We have used this figure as a basis to calculate high forecasts for the various airport options (although in reality we believe that if there is an increase in passengers over and above the base forecasts, the demand for the far South West is likely to be somewhere between the Baseline and High forecasts). The baseline and high forecasts for Option1 are compared at Table 9. The three options are compared at Figure 11.

Exet

er

2015

Exet

er

2030

Plym

outh

20

15

Plym

outh

20

30

New

quay

20

15

New

quay

20

30

LF Dom + Intl 391,033 1,676,759 0 0 334,871 1,344,590

FS Int'l 35,491 140,722 36,446 87,592 44,940 76,112 FS Dom 324,605 746,035 195,102 443,047 222,359 539,948 OUT Chart 581,357 1,322,832 0 0 15,000 30,000 IN Chart 0 0 0 0 27,000 45,000 Longhaul 45,000 75,000 0 0 0 0 Totals 1,377,486 3,961,348 231,548 530,639 644,170 2,035,650 Base Line Forecast 946,205 2,242,763 181,371 355,094 533,105 1,012,452

Table 9 - Comparison of High Forecasts and Base Forecasts – Option 1

Option 1 - Exeter, Plymouth & Newquay

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

EXT PLY NQY

2030

Pass

enge

r num

bers

High

Base


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Option 2 - Exeter & Newquay

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

EXT NQY

2030

Pass

enge

r num

bers

High

Base

Option 3 - South Hams & Newquay

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

S HAM NQY

2030

Pass

enge

r num

bers

High

Base

Figure 11 - Comparison between Baseline and High forecasts

4.14 Conclusion

Under all of the scenarios modelled, passenger volumes at the far South West’s airports are forecasts to grow. The overall number of passengers at Exeter, Newquay and Plymouth (under Option1) is forecast to grow from 605,000 in 2002 to 3.61 mppa by 2030. Under the high forecasts traffic is forecast to grow to 6.52 mppa.

Based on the forecasts, an assessment of the infrastructure requirements is detailed for each option in Chapter 5 and appraisal of their impacts is detailed in Chapter 6.


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5 Infrastructure Requirements 5.1 Summary

• This chapter describes the existing infrastructure and considers the additional infrastructure requirements that could

arise as a consequence of the baseline forecasts for the different options being considered. This summary describes only the new infrastructure required.

• Exeter and Devon Airport Ltd submitted an outline planning application in January 2000 for a new North Side Terminal Area Development. This planning application was based upon studies undertaken by Halcrow Transport Infrastructure Group, which sets out the airports development strategy to 2016. The planning application was accompanied by a detailed assessment of airborne and ground operational aircraft noise and supporting documentation including an Environmental Statement, Transportation Impact Assessment and a Historic Airport Survey.

• The planning application envisages that the existing terminal is replaced with a new terminal with a capacity of circa 2 million passengers. The proposed facilities have been sized “based upon accepted industry practise relating to floor space, busy hour rates and other parameters to provide a level of passenger services commensurate with an airport of this sort (Halcrow).” On the basis of discussions with Exeter Airport’s Managing Director, our review of the planning application, and not having undertaken a detailed airfield planning study of our own, we have no reason to conclude otherwise in this report.

• The new terminal would be built in a single phase, although the fit out of key areas (such as check-in) would be phased within the structural envelope. Apron areas, car parking and support facilities would be phased in line with demand. The planning application submitted in 2000 was based upon a development strategy, which assumed an opening date for the new terminal in 2008. The planning application has not been determined (although it was indicated in our discussions with Exeter Airport that a decision was expected during Summer 2003).

• At Plymouth Sutton Harbour Holdings, which operates the airport, are required by the CAA to increase the Runway End Safety Area (RESA) from 30 m to 90 m. As part of this project the A386 will need to be re-routed to provide the necessary additional land without reducing runway length. In 2003 this work will commence, and will also comprise the installation of runway centre line lights and the laying of a porous friction course on the runway to improve drainage. The overall cost of the works is approximately £4.2 million, of which £1.5 million will be spent on upgrading the runway and extending the RESA and a further £2.7 million will be spent on diverting the A386 over and above the expenditure necessary simply to upgrade the road on its existing alignment.

• Sutton Harbour Holdings do not have any significant capital expenditure plans at Plymouth over and above the work on the runway identified above. However a study was undertaken by Scott Wilson and The Aviation and Travel Consultancy Ltd in August 1999 for the then DETR and Government Office South West that investigated the possibility of extending the runway by around 100m.

• The study was based upon an extension of the runway some 60 m to the North West (adjacent to the A386) and 25.5 metres to the South East. However since this study was undertaken the CAA has instructed Plymouth Airport to extend the runway end safety area (RESA) by 60m. This work has resulted in the land that had been earmarked for the extension to the North West becoming unavailable. Thus any extension would most probably have to be at the South East end of the runway.

• An extension to 1,199 metres would provide the ability to operate services with a wider range of aircraft and at a greater payload (at this length, the runway is similar to that at London City).

• AviaSolutions has not undertaken a detailed technical evaluation of the practicality of such an extension. However, we are aware, based upon the site visit and discussions with a number of stakeholders, that such an extension would necessitate the infilling of land which currently drops away from the south east end of the runway, and the demolition of a number of industrial units in the nearby business park. It is stressed that accurate cost estimates have not been undertaken, but it is assumed that the cost of extending the runway entirely to the South East would be in the region of £15million to £20 million. A cost of £18 million has been assumed in the financial appraisal.

• Given the restrictions currently placed on aircraft using the runway, without a runway extension, the long-term viability of the airport may be at risk.


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• Newquay airport has identified a long term need to grow the facilities at the airport to cater for the forecast passenger numbers that they believe can be attracted to the airport. The current terminal site could be extended by adding additional bays at either end of the building, providing a small (un-assessed) incremental increase in capacity. Beyond say 500,000 passengers per annum, the terminal facilities may need to be relocated to an alternative site on the airfield.

• The MoD has indicated that there is an opportunity to develop commercial operations at the airfield at an alternative location to the current terminal. An area of land to the south east of the airfield may become available following the MoD’s ‘Tri Airfields’ review that is due for completion by July 2003. Located on the south side of the airport, the site is more suitable for long-term development than the location of the current terminal, particularly in the event that the upper end forecasts are achieved.

• AviaSolutions was retained to develop a master plan for Newquay based upon projected levels of growth described in Chapter 4. A key assumption is that the results of the MoD Tri-field study are finalised, thus enabling long term planning at Newquay to proceed with confidence. This will be a key factor in any investment decisions taken in the future. For master planning purposes two development plans are shown:

o Baseline forecast plan: designed to handle up to 1 million passengers per annum (mppa)

o High forecast plan: designed to handle up to 2 million passengers per annum (mppa)

• The development would comprise a new 5,000 sq m terminal, new aircraft parking stands, new car parking and ancillary facilities and designed such that it could be extended to handle traffic up to 2 mppa over time. Details of the master planning study are contained within this chapter.

• Sutton Harbour Holdings plc (who has the leasehold and operate Plymouth airport) has submitted a proposal to re-provide the airport in South Hams near Sherford, east of Plymouth adjacent to the A38. This site, it is proposed, has potential for long-term development. The airport could be developed in phases to handle 3 mppa, and would be built with a 2,500m runway and parallel taxiway, providing unrestricted operational capability for the majority of aircraft expected to use the airport. The site is currently identified in the Devon Structure Plan for a new settlement, providing additional housing for the Plymouth area. It is proposed that the existing Plymouth Airport could be used as an alternative site for housing development.

• Our analysis of the master planning work undertaken indicates that the infrastructure proposed would be more that sufficient for the forecast level of passenger demand.

• A key assumption is that the traffic currently using Exeter and Plymouth diverts to the new site. Forecasts suggest that South Hams could grow to around 2.32 mppa (around 276,000 less than the combined total for Exeter and Plymouth under option 1) and Newquay is forecast to grow to around 1.04 mppa (around the same total as Option 1). Under this scenario total traffic in the far South West is forecast to grow to 3.4 mppa by 2030. However, compared to Option 2, South Hams attracts around 122,000 passengers less than Exeter. This is partly a function of the smaller catchment area and due to some passengers in the Exeter area using Bristol rather than South Hams.


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5.2 Introduction

This chapter considers the infrastructure requirements that could arise as a consequence of the baseline forecasts for the different options being considered. In producing this report, we have sought to avoid duplication with the Department for Transport’s SW RCD. The existing airports are described in detail in Chapter 5 of that document. However in considering potential infrastructure requirements it is important to summarise the existing infrastructure. From this base the potential development options are considered and appraised.

AviaSolutions has undertaken site visits of Exeter, Plymouth and Newquay airports and has met the management teams at each. In addition airport operators have provided development plans for Exeter and Plymouth, together with details of the proposed airport in the South Hams. This information has been invaluable in our consideration of infrastructure requirements.

In relation to Newquay, AviaSolutions has undertaken a high level master planning exercise to illustrate the development potential of the site under the range of options being considered. This work has been carried out in the absence of any master planning work being undertaken by the airport operator / owner to date.

5.3 Exeter

5.3.1 Existing Infrastructure

Exeter airport is located around 5 miles east of the city centre. It has one active runway, which is around 2,100m. The runway has the potential to handle 160,000 ATMs per year. However it lacks a fully developed parallel taxiway system, which results in aircraft having to enter the runway and backtrack when departing towards the west. Given its current level of air transport movements, the existing runway infrastructure is considered sufficient for current and future operations. However under certain conditions larger aircraft have to operate with weight restrictions or need to make a

re-fuelling stop on services to longer-range destinations (such as the weekly charter service to Toronto which operates via Birmingham). The runway length therefore restricts the ability of the airport to attract some longer distance charter services (such as to Florida, the Caribbean or West Africa).

The apron area adjacent to the terminal has 8 stands and can accommodate on its larger stands, aircraft up to Boeing 767 and Airbus A330. The apron was recently extended (completed in May 2001) to enable larger aircraft to use the airport.

Figure 12 - Existing Layout of Exeter


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The passenger terminal has been extended twice in recent years with a new arrivals facility opening in 1999 and a new departure lounge with sufficient seating for around 400 passengers opening in this spring. Both developments, together with the recently upgraded catering area provide passengers with modern, comfortable facilities.

The check-in area (which has 10 desks) can at times become congested when larger aircraft are being processed. This is due, in part, to the area being the primary circulation area at the entrance to the terminal. At present the airport can process around three departing flights (charter aircraft with a capacity of circa 180 seats) simultaneously. Consideration has been given to enlarging this area, but in doing so the terminal’s forecourts would have to be displaced. The capacity of the terminal is estimated to be around 900,000 passengers per year23. However the terminal’s capacity is more a function of the hourly passenger flow rate and based upon operational experience24 is estimated to be around 500 to 600 passengers per hour or around 500,000 to 600,000 passengers per annum.

The airport also has significant engineering and maintenance activities. FlyBe is based at the airport and although the majority of its operations are conducted elsewhere (in particular Birmingham, Southampton, Gatwick and Belfast) its fleet of around 35 aircraft are maintained at Exeter. FlyBe currently occupies three hangars and work on a fourth; capable of handling two A320 sized aircraft will commence this summer. FlyBe also offers third party maintenance to a number of airlines, particularly on BAe 146 and Bombardier Dash 8 aircraft, and has contracts with a number of airlines in Europe such as Scandinavian Airlines. FlyBe has been appointed by Bombardier as a European maintenance centre for the Dash 8 Q400 aircraft.

Finally there is a considerable amount of General Aviation (GA) activity at Exeter, dominated by pilot training at one of four flying schools based at the airport, together with corporate, private charter, air ambulance and other services. GA traffic accounted for the majority of movements in 2002 comprising 34,363 out of the total of 41,544. Air transport movements in 2002 were 7,28625.

Table 10 details the key throughputs and capacities at Exeter in 2002. Capacities are defined in terms of annual passenger throughput.26

Passengers 2002

Total Aircraft Movements (Air

Transport Movements)

Runway Capacity

Movements

Terminal Capacity

(pax)

Stand Capacity

(pax) 348,063 41,544 (7,286) Up to 160,000 900,000 1,300,000

Table 10 - Exeter Airport Key Statistics

23 Based upon analysis undertaken to inform the SW Regional Consultation Document (Table 5.3)

24 Exeter Airport considered annual capacity to be around 500,000 to 600,000 passengers per annum.

25 Source Exeter Airport – note this statistic differs from CAA stats.

26 Source The Future Development of Air Transport in the United Kingdom: South West Table 5.3


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5.3.2 Development Plans

Exeter and Devon Airport Ltd has submitted an outline planning application in January 2000 for a new North Side Terminal Area Development. This planning application was based upon studies undertaken by Halcrow Transport Infrastructure Group, which sets out the airports development strategy to 201627. The planning application was accompanied by a detailed assessment of airborne and ground operational aircraft noise28 and supporting documentation including an Environmental Statement, Transportation Impact Assessment and a Historic Airport Survey.

The primary driver for the proposed relocation of the terminal to the north side of the airport is that the existing south side location cannot be significantly expanded due to constraints associated with the runway protected surfaces (the side slopes preclude further development of the south side

area) road infrastructure and the Business Park.

The Halcrow studies stated that the “balance of advantage was found to lie clearly with the development of a new terminal and supporting facilities to the north of the main runway”29.

On the basis of discussions with Exeter Airport’s Managing Director, our review of the planning application, and not having undertaken a detailed airfield planning study of our own, we have no reason to conclude otherwise in this report.

Figure 13 - Impression of New Northside Development

The planning application was based upon “upper level” forecasts generated in 1997, with a base year of 1996 and are shown in Table 11. The actual traffic figures for 200130 are listed in brackets and are some 40,000 less than forecast in 1997.

It should also be noted that traffic in 2002 increased by just 2.3% over 2001. Unless the airport achieves growth of 93% between 2002 and 2006, it seems unlikely that the 667,000 passengers forecast by 2006 will be achieved. The loss of the flyBe service to Birmingham, the overall downturn in charter traffic following September 11th and the Iraqi conflict would all have been major

27 Development Proposals by Exeter Airport – Outline Planning Application, Development Strategy and Design Report – January 2000. Lacey Hickie Caley

28 Exeter Airport Environmental Assessment – Michael E. House Noise and Vibration Consultant 31st October1999.

29 Para 3.5 - North-side Terminal Area Development, Planning Application Development Statement January 2000 Halcrow Transportation Infrastructure Group

30 Source of all statistics – Civil Aviation Authority


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factors in reducing traffic growth. However if new services are launched in 2004, this growth rate could still be attainable.

1996 2001 2006 2011 2016 Annual Passengers ‘000 205 384 (333) 667 859 1080 Air Transport Movements ‘000 7.8 13.1 (9.0) 18 21 25.7 Other Movements ‘000 34.1 41.2 48.7 56.7 70.9 Busy Hour Passengers 1 way 250 250 440 440 570 Busy Hour aircraft movements 7 12 16 19 24 Aircraft Stand Demand 6 8 9 11 14

Table 11 – Exeter Airport Forecasts (1997)31

The forecasts generated by Exeter Airport, the Department for Transport and AviaSolutions are compared at Figure 14. Exeter Airport produced forecasts in 1997 and were to 2016 only. We

have extrapolated these forward to 2030.

DfT and AviaSolutions forecasts are presented for 2015 and 2030.

Our analysis suggests that all three organisations have produced forecasts (independently) that are broadly consistent. DfT forecasts suggest traffic of 2 million passengers per year by 2030 (under the RASCO Reference Case).

Figure 14 - Exeter Airport Forecast Comparisons

AviaSolutions forecasts are slightly higher at 2.3 mppa by 2030. However given the size of the traffic base and margin for error over the period, this difference is insignificant.

The planning application envisages that the existing terminal is replaced with a new terminal with a capacity of circa 2 million passengers. The proposed facilities have been sized “based upon accepted industry practise relating to floor space, busy hour rates and other parameters to provide a level of passenger services commensurate with an airport of this sort”32.

31 Source – Exeter Airport


Comparison of Exeter Airport Ltd, DfT and AviaSolutions Forecasts

0500

1000150020002500

1996(Actual)

2001 2015 2030

Year

Pas

sege

rs (0

00s

Exeter AirportDfTAviaSolutions


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The new terminal would be built in a single phase, although the fit out of key areas (such as check-in) would be phased within the structural envelope. Apron areas, car parking and support facilities would be phased in line with demand. The planning application submitted in 2000 was based upon

a development strategy, which assumed an opening date for the new terminal in 2008. The planning application has not been determined (although it was indicated in our discussions with Exeter Airport that a decision was expected during Summer 2003). Table 12 summarises the key components of the proposed development. .

Table 12 – Summary of Main Facility Requirements33

Figure 15 illustrates the development in relation to the main runway.

Figure 15 – Master Plan for Exeter 'Northside' Development

5.4 Plymouth


Plymouth airport is located close to the city centre, on a constrained site surrounded by residential housing and business units. The short length of the operational runway (1,075m) means that it


Facility At Opening Ultimate

New Terminal 6,560 sq m 6,560 sq m

Aircraft Stands 12 Around 15

Support Zone 2.0ha 2.6ha

Car Parking 7.2ha 13.4ha


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difficult for the airport to serve aircraft much larger than 50 seat turboprops at commercial payloads. In theory the runway could handle around 145,000 – 160,000 movements per year, although the effective capacity is significantly lower due to lack of a parallel taxiway system.

In 2002 the airport handled 75,707 passengers34. This represents a 36% reduction on the 2001 total when 103,044 passengers were handled, reflecting the loss of services by BA CitiExpress to Dublin, Cork, Paris, Jersey. However in 2003 these services were partially replaced by Air Wales services to Dublin and Cork.

In 2002 the airport handled 29,315 movements of which by far the largest component was 12,748 military movements. The airport handled some 4,902 air transport movements. The remainder comprised general aviation and training flights.

The terminal size is approximately 1,000m2, with an assessed capacity of 0.4mppa. During 2000, at peak times, the airport was considered to be at capacity in terms of hourly throughput and car parking demand. (Although, with BA CitiExpress having reduced their network and capacity at the airport, this is unlikely to re-occur for sometime).

Figure 16 – Existing Layout of Plymouth Airport

34 Source of all statistics – Civil Aviation Authority


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Table 13 details the key statistics and capacities at Plymouth. Capacities are defined in terms of annual passenger throughput35

Passengers 2002

Total Aircraft

Movements

Runway Capacity

Movements

Terminal Capacity

(Pax)

Stand Capacity

(Pax) 75,707 29,315 145,000 –

160,000 400,000 600,000

Table 13 – Plymouth Airport Characteristics

The area around the airport is not only constrained by housing and business units but also by the topography of the land. Towards the eastern end of the runway, the land falls away, making development at that end of the airfield difficult.

5.4.2 Current Development Plans

Sutton Harbour Holdings, which operates the airport, are required by the CAA to increase the Runway End Safety Area (RESA) from 30 m to 90 m. As part of this project the A386 will need to be re-routed to provide the necessary additional land without reducing runway length. In 2003 this work will commence, and will also comprise the installation of runway centre line lights and the laying of a porous friction course on the runway to improve drainage. The overall cost of the works is approximately £4.2 million, of which £1.5 million will be spent on upgrading the runway and extending the RESA and a further £2.7 million will be spent on diverting the A386 over and above the expenditure necessary simply to upgrade the road on its existing alignment.

Sutton Harbour Holdings has indicated that there is the possibility of extending the runway towards the east but that this would require the acquisition of adjacent land from the industrial estate. It is estimated that the increase in runway would be limited to around 100 to 120m. Any extension beyond 1,200m would necessitate a widening of the runway clearance zone from 75m to 150m. This would require the purchase of housing adjacent to the airport.36

A runway extension to 1,199m would improve the operational capability of the airport, allowing aircraft up to Avro RJ100 size to use the runway. Such an extension would still preclude operations by aircraft such as the Boeing 737 or Airbus 320 operations.

5.4.3 Development Plans

Sutton Harbour Holdings do not have any significant capital expenditure plans at Plymouth over and above the work on the runway identified above. However a study was undertaken by Scott Wilson and The Aviation and Travel Consultancy Ltd in August 1999 for the then DETR and Government Office South West (as part a number of studies to inform the South West of England Air Services Study37) which investigated the possibility of extending the runway by around 100m. This study has been made available to AviaSolutions.

The study appraised previous work undertaken by Don Butler Associates (DBA) to extend Plymouth’s runway to 1,175 metres Take-off Runway available (TORA) and Landing Distance

35 Source The Future Development of Air Transport in the United Kingdom: South West Table 5.3

36 Information based upon advise given by Sutton Harbour at a meeting on 17th April 2003

37 Review of Plymouth City Airport – Final Report August 1999 (Scott Wilson/Aviation Travel and Consultancy Ltd)


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Available (LDA) of 1,115 metres. The study also examined the types of aircraft that could operate from such a runway length.

The study’s main conclusions were that:-

• The cost to Plymouth City Airport of an extension to 1,175 m was just over £6 million, assuming a contribution of £2 million to enable the diversion of the A386.

• The cost of extending the runway to 1,199 metres was estimated to be £10 million, based upon the need to cover the A386 diversion in a bridge (carrying the runway extension) over the width of the extended runway strip.

• Their assessment was undertaken without a full risk assessment being undertaken by CAA Aerodrome Standards.

• A runway extension to 1,175 metres would be sufficient to enable operations by a wider range of regional aircraft up to and including the Avro RJ70 aircraft.

• An extension to 1,199 metres would provide less operational constraint (allowing Avro RJ100 aircraft) with the ability to operate services with a wider range of aircraft and at a greater payload (at this length, the runway is similar to that at London City).

The study was based upon an extension of the runway some 60 m to the north west (adjacent to the A386) and 25.5 metres to the south east. However since this work was undertaken the CAA has instructed Plymouth Airport to extend the runway end safety area (RESA) by around 60m. This work has resulted in the land that had been earmarked for the extension to the north west becoming unavailable. Thus any extension would most probably have to be at the south east end of the runway.

AviaSolutions has not undertaken a detailed technical evaluation of the practicality of such an extension. However, we are aware, based upon a site visit and discussions with a number of stakeholders, that such an extension would necessitate the infilling of land which currently drops away from the south east end of the runway, and the demolition of a number of industrial units in the nearby business park. It is stressed that accurate cost estimates have not been undertaken, but is assumed that the cost of extending the runway entirely to the south east would be in the region of £15million to £20 million. A cost of £18 million has been assumed in the financial appraisal, which includes acquisition of the land in the adjacent business park, major engineering works to infill and raise the level of the land to that of the existing runway and extension of the runway itself.

Given the current runway length, and the intention by both British Airways and flyBe (which currently does not operate from Plymouth) to withdraw the Dash 8-300 aircraft, it is possible that in the next three years the major aircraft serving Plymouth could have been withdrawn from the British register. However the type is still in production and could be introduced by another UK based operator. (Air South West has indicated that it would procure the Dash 8 300 to serve Plymouth). The Dash 8 Q400 is too large to use the existing runway (though the type is certified to use London City). Thus without a runway extension, there is a risk regarding the long-term viability of the airport.


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For the purposes of our appraisal of impacts, we have modelled both with and without a runway extension. If the runway is extended and the existing terminal is also extended to accommodate the forecast traffic volumes by 2015 and 2030, the core assumptions are:-

• Runway extension costs approximately £18 million

• Terminal extended to provided an annual capacity of 500,000 passengers per year (approximately £1 million)

• Additional car parking (approximately £500k)

• We have not assumed expenditure on surface access upgrades.

5.5 Newquay


Newquay airport is located towards the north of the town on the coast near the village of St Mawgan. The airfield is owned by the Ministry of Defence, who use it primarily as a Rescue and Reconnaissance centre and a major training facility for the RAF. They provide and maintain the ‘airfield’ infrastructure, such as the taxiways, hangars, air traffic, fire services and the runway. The airport enjoys long opening hours, which are 0700 – 2359, Monday to Friday and 0700 – 2200 weekends.

Commercial operations are permitted by the MoD at the airfield and they are keen to explore how commercial use could be increased. However, the land that the terminal operates on is “non-military”, with the two local authorities Restormel Borough Council and Cornwall County council jointly owning the civilian airport complex. SERCO Ltd. has recently been awarded the contract to run the terminal. Table 14 details the key characteristics and capacities at Newquay.

Pax 2002/03

ATM – 2002/03

Runway Capacity -

ATMs

Terminal Capacity

(pax)

Stand Capacity –

(pax) Newquay 185,000 8,128 60,00038 250,000 300,00039

Table 14 – Newquay Airport Key Statistics

In 2002, the airport saw a dramatic increase in traffic with the introduction of a daily Ryanair service to Stansted. This has had the affect of increasing the throughput at the airport by around 100,000 passengers during the year.

38 MoD St Mawgan has indicated that they could sustain civilian movements up to 60,000 per year.

39 Dispensation given by RAF to park Ryanair B737 aircraft on taxiway, as current terminal stands are too small.


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Figure 17 - Existing Layout of Newquay Airport

Runway constraints are not a major issue at Newquay. Although commercial operations exist alongside RAF requirements, the taxiway system and runway length is sufficient to allow for 60,000 civilian movements per year. The existing apron, terminal and car parking facilities are a constraining factor on further development on the current site in the medium term, although the car park was recently extended, and there is sufficient land to provide further parking if required. Figure 17 shows the current layout at Newquay.

The apron has 2 stands (towards the north of the airfield marked in blue), which can handle the smaller turboprop aircraft using the airport. The Ryanair service gains dispensation from the MoD to park the (B737) aircraft on the northern taxiway. The terminal building, which was built in 1994, is estimated to have an annual capacity of around 250,00040 passengers per year. This is significantly below what the DfT projected in the SW RCD (900,000 passengers per annum) and reflects an assessment of terminal capacity made by Hyder Consulting41. Nevertheless, the building can experience significant congestion when handling around 200 passengers at any one time (as was the case when the Ryanair and a British Airways flight were scheduled to depart within 10 minutes of each other in Summer 2002). The car park was recently upgraded and extended by the airport operator; however, in peak conditions the demand on the car park exceeds the available supply, of 470 spaces.

40 Newquay Cornwall Airport, Development Director

41 Newquay Cornwall Airport, Development Director


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Current Development Plans

Newquay airport has identified a long term need to grow the facilities at the airport to cater for the revised forecast passenger numbers that they believe can be attracted to the airport. The current terminal site could be extended by adding additional bays at either end of the building, providing a small (un-assessed) incremental increase in capacity. This may result in areas of the existing car park needing to be re-provided. A field opposite the airport could provide additional space for car parking, however, the topography of the land close to the terminal is undulating which limits development options. Beyond, for example, 500,000 passengers per annum, the terminal facilities may need to be relocated to an alternative site on the airfield.

The timing of extensions to the existing terminal needs to be considered within the context of likely growth. An extension of the existing terminal to handle 500,000 passengers may provide sufficient capacity for around 10 years. Alternatively, there is a risk that the terminal may be extended and that growth is much stronger than forecast. For example if the SW Tourism strategy is successful in delivering a step change in the number of visitors arriving by air, the need for a new terminal may be brought forward significantly. Thus the costs associated with an extension to the existing terminal would have to be written off. Detailed consideration is therefore necessary of the maximum capacity that could be developed on the existing site, vis a vis forecast growth and the timing of any new terminal.

The MoD has indicated that there is an opportunity to develop commercial operations at the airfield at an alternative location to the current terminal. An area of land to the south east of the airfield may become available following the MoD’s ‘Tri Fields” review that is due for completion by July 2003. Located on the south side of the airport, the site is more suitable for long-term development than the location of the current terminal, particularly in the event that the upper end forecasts are achieved. The land is open, not undulating (until the perimeter is reached) and closer to the A3059, (the main access road the airport). Figure 18 illustrates the potential development area.

Figure 18 - RAF Preferred Commercial Development Area

Potential development Potential development

Existing Terminal Site


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This area is illustrated further in Figure 19, with the location of the existing and proposed new terminal highlighted. The existing boundary is also highlighted.

Figure 19 - Newquay Airport looking west (location of existing and proposed terminal – boundary shown in red)

5.5.2 Newquay Master Planning

As part of this study AviaSolutions was retained to develop a master plan for Newquay based upon projected levels of growth described in Chapter 4. A key assumption is that the results of the MoD Tri-field study are finalised, thus enabling long term planning at Newquay to proceed with confidence. This will be a key factor in any investment decisions taken in the future.

For master planning purposes two development plans are shown:

• Baseline forecast plan: designed to handle up to 1 million passengers per annum

• High forecast plan: designed to handle up to 2 million passengers per annum

Location of New Terminal Existing Terminal


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Indicative Future Infrastructure Requirements

In order to enable the commercial use of the airfield, a number of infrastructure improvements would be necessary. The forecasts for Newquay show that the airport is likely to develop a range of services with a mixture of domestic, Low Frills and possibly some charter. This assumption means that the airport will serve a mix of market segments. We have therefore developed plans for Newquay that can accommodate this mix of traffic. Other airports in the UK have been used as benchmarks, although no one airport has Newquay’s projected throughput or traffic mix.

Within the following infrastructure analysis, the assumptions used have been conservative i.e. it could be considered that the airport is overprovided in terms of infrastructure at the two throughput levels analysed. An example would be; we have used the standard assumption of a terminal requiring an area of 5,000m2 per 1 million of passengers per annum. Whilst this could be reduced, this would affect the internal configuration of the terminal and desired service level.

The runway

The runway has a usable take-off run of 2,745m in both directions. This runway length is sufficient for most types of aircraft operation at commercial payloads. The runway length is more than adequate for the Baseline and High forecasts and for the potential route network that could develop.

The taxiway system

The runway has a parallel taxiway system on both sides of the runway. The MoD has indicated that it would be most likely need upgrading to handle the weight of the larger commercial aircraft that are predicted to use the airport. This has not been costed in the financial appraisal of the airport, and it is likely that these improvements could be phased over a period of time.

We have shown an increase in width of the taxiway north of the new stands, which is costed as part of the financial appraisal. This is to provide adequate clearance between aircraft taxiing and those parked on the stands.

Apron and Stands

We anticipate an incremental build up of stand and apron capacity to serve the airport operation.

The assumed aircraft and stand categories are listed in Table 15:

Large = A300, A310, B767 Medium = B757, A321, A320, MD-80, B737-800 Small = A319, B737-400, BAE 146, Regional Jets and Commuter Aircraft

Table 15 – Stand Size Assumptions The stand demand forecasts generated are considered to be at the upper end of the forecasting range, as this gives flexibility for a daily schedule that contains a high degree of peaks. It may be possible to reduce stand numbers by one or two if the profile of the schedule was spread evenly across the day.

Based upon forecast busy hour analysis, stand demand is forecast to be 3 medium aircraft and 4 small aircraft under the “baseline” forecast (1 mppa) scenario. This mix of stands is anticipated to cater for a range of aircraft types that are projected to use the airport. Under the upper end forecast scenario (2 mppa) stand demand is forecast to be 1 large, 5 medium, 5 small. This mix of stands is anticipated to cater for a range of aircraft types projected to use the airport.


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Terminal

A new terminal would be necessary and would likely to be modular in design to enable the phased expansion of the building. It is suggested that the terminal would be placed at the south - eastern end of the current airfield site. Under the baseline forecasts, the terminal has been sized at approximately 5,000m2. Under the upper end forecasting scenario we have assumed the terminal size would be increased to approx 10,000m2.

Car Parking

Car parking assumptions have not included a split between short term and long term. Within the confines of the development area and in order to keep the development within the existing boundary it may be necessary to deck the car park for throughput of 2 million passengers per annum under the upper end forecast scenario. However there would probably be an alternative site to provide “over-flow” parking to cater for peak periods, thus avoiding the need to deck the car park.

Car parking demand has been benchmarked against airports of similar size and are forecast to be 2000 spaces under the baseline forecast scenario and 3,800 spaces under the upper end forecast scenario.

Ancillary Areas and Access

Provision for a coach park and an ancillary area has been made; the allotted area is doubled in the High throughput plan. A new access road is shown with a roundabout linking onto the A3059.

Figures 20 and 21 detail the master plan layouts at 1 and 2 million passenger per annum respectively.

Figure 20 - Newquay Baseline Master Plan


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Figure 21 - Newquay High Master Plan

5.6 South Hams Proposed Development

5.6.1 Proposed Airport Adjacent to A38 (South Hams)

Sutton Harbour Holdings plc (who has the leasehold and operates Plymouth airport) has submitted a proposal to re-provide the airport in South Hams near Sherford, east of Plymouth adjacent to the A38. This site, it is proposed, has potential for long-term development. The location of the proposed airport, with its 2,500m runway and parallel taxiway, is illustrated at Figure 22.

Figure 22 - Proposed Location of New Plymouth airport


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The new airport – indicated by the dashed black line - would be designed to overcome the limitations of the existing Plymouth airport, mainly its short runway and constrained site, and allow the new airport to be able to handle a variety of aircraft types.

Also indicated in Figure 22, is a possible site for the development of 3,500 new homes that South Hams District Council has identified – indicated by the solid blue line. Sutton Harbour Holdings state that with a higher density of housing, these homes could be built upon the current Plymouth airport site. Sutton Harbour Holdings also state that with the closure of Exeter airport, this would release further land that could be used for housing development serving the Exeter area.

It is proposed that the new airport could be built within a five-year time frame. Sutton Harbour Holding commissioned Arups to develop a master plan for the airport. The key capacities are indicated in Table 16.

Runway Capacity - ATMs

Terminal Capacity (pax)

Stand Capacity – number

45,000 3,000,000 20

Table 16 – South Hams proposed Plymouth airport replacement

The runway, in its east – west configuration42, is designed with a full parallel taxiway to optimise ATM capacity on the airfield and is 2,500m in length. Terminal and apron facilities are located towards the north of the airfield, with room for other airport activities also being catered for as part of the master plan. A new link road is proposed that connects the airport to the terminal and the ancillary areas from the A38. Figure 23 shows the layout plan for the new Plymouth airport.

Figure 23 - Proposed new Plymouth Airport Layout in South Hams

42 Designated 09/27


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5.6.2 Comments on the Sutton Harbour Development Plan

As part of our brief, AviaSolutions was asked to comment on the plans put forward by Sutton Harbour Holdings to develop a new airport at South Hams.

Capacity and Phasing

The plans developed are based around an airport of circa 3.0mppa size. Their justification for such throughput is centred on the DfT’s own traffic forecasts in Regional Consultation Documents and is based upon forecasting work undertaken by their consultants. It is essentially the combination of RRC forecasts for (existing) Plymouth and Exeter combined onto the new site. There is no detailed indication of phasing in the Arups report, other than the opening capacity was assessed at 0.4 mppa.

Our analysis of their proposals is based on an assessment of the airport at 3.0 mppa.

Airside

Passengers per Movement

Arups stated that the airport will handle 46,100 movements per year. Based on a passenger throughput of 3.0 mppa, the average number of passengers per movement is 65. Table 17 compares this figure to other UK airports with a range in throughout levels up to 3.5mpa at Bristol.

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002Bournemouth 25.73 27.43 20.32 12.83 19.18 35.16 45.43 48.54 42.10 48.16 51.34 51.52Bristol 35.69 42.35 42.98 53.38 54.81 53.38 53.36 57.10 59.61 61.70 65.29 74.52Cardiff Wales 45.70 46.73 55.65 63.59 65.85 61.20 64.19 72.96 76.54 77.10 70.04 75.58Exeter 23.74 25.95 24.16 23.36 25.46 33.18 35.20 35.03 38.06 43.04 46.60 63.69Humberside 9.79 12.54 16.47 23.04 29.92 33.83 37.57 36.43 32.30 31.28 30.38 33.05Norwich 19.35 22.08 24.47 32.50 24.41 20.46 20.21 22.96 25.21 22.99 24.94 30.34Plymouth 16.73 12.42 11.81 13.89 14.44 15.81 13.92 14.93 14.81 15.99 17.47 15.98Southampton 23.24 21.21 19.56 20.87 22.75 22.96 24.45 27.45 30.13 30.82 30.44 28.50

Table 17 – Passenger per atm at Selected Regional Airports

Benchmarking against other similar sized UK airports, we consider this to be a reasonable passenger per air transport movement assumption, although this can vary significantly depending on traffic mix at the airport.

Runway Length and Orientation

The master plan illustrates the new runway (09/27) with a length of 2,500m. The length of runway proposed is longer than most regional airports within the UK. Only Manchester and Birmingham have longer runways. It is unlikely that a runway of this length would be necessary for the traffic that is forecast to use the new airport. Similar sized regional airports have runways around 2,000m (Exeter has a length of 2,100m). This length is adequate for majority of operations envisaged, although there may be some weight load restrictions on some long haul services.43

43 London Luton, with a runway length of 2,160m can provide non-stop services to Orlando using wide-bodied A330 aircraft.


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The orientation of the runway is likely to be satisfactory for operations envisaged, although this results in aircraft approaching the airport over Plymouth, when landing from the west (approximately 30% of the time).

Taxiway

The plans show that the runway is built with a full-length parallel taxiway to maximise the movement capacity of the airfield. Arups indicate that this level of infrastructure is probably not necessary. This is supported by our analysis of forecast passenger forecasts and indicative route schedules which indicate a peak hourly movement rate of around 8 per hour. Compared to other UK airports of similar size and movement throughput, it is unlikely that a full parallel taxiway system would be needed (for instance Edinburgh handles nearly 7 mppa without a parallel taxiway). To facilitate movements at 8 per hour, turning points on the runway and adequate entry and exit points off the runway would be all that is necessary.

Stands

Arups indicate that 20 stands are required to facilitate this operation. They have also broken this down into 15 contact stands and 5 hardstands. For contact stands, this assumes that the stands are adjacent to the terminal and for hardstands they are remote from the terminal. They have assumed an annual utilisation rate of 2,250 movements per stand per year. This has been benchmarked against other UK regional airports of similar size and represents a fair assessment of the number of stands required.

The mix of stands identified by Arups is assumed to be 12 stands for code C44 aircraft. 4 smaller sized stands and 4 large stands are also assumed.

Other airside facilities

Current activities of cargo, maintenance and support areas at Plymouth are limited in scope. Although the existing facilities are required to be re-provided at South Hams, an assessment of the likely further land take required is difficult to assess. As an example, the requirements for maintenance provision depend on a carrier basing maintenance activities at the airport. Arups have benchmarked these requirements against Edinburgh and Glasgow, although it is not clear why these airports have been used. They have provided the new airport site with an ability to handle some cargo, allow modest maintenance activities and allow for adequate space for air traffic, fuel storage, fire cover and RAF (FOST) search and rescue.

5.6.3 Terminal and Landside

Terminal

The size of terminal that Arups has assumed is 15,000m2. Being based on a benchmark of 5,000m2 per 1 mppa, this represents a reasonable assumption for master planning purposes.

Car Parking

Arups have used a realistic approach in terms of modal split for the new airport. They assume that 70% of passengers will arrive by private vehicle with 20% by taxi and 10% by bus / coach. There is

44 A code C aircraft stand is capable of handling A320, Boeing 737 sized aircraft


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no rail transport assumption for access to the airport. However, for an airport of around this size, a public transport modal split of around 15% - 20% could be achievable.45

Airports of this size with similar ‘road only’ access have around 1.5 car parking spaces per 1000 passengers. Based on a throughput of 3 mppa, a total of 4,500 car parking spaces would be required. Arups have stated that 3,300 spaces are necessary. This may be an underestimate of car parking demand. However overall demand – volume and length of stay - depend largely on the traffic mix as well as throughput.

The assumption of the airport providing 600 jobs / mppa and that the airport provides 0.9 car parks per employee, 1,620 spaces is a reasonable assumption.

5.6.4 Timescales

Our estimate is that the new airport could be delivered by 2011 at the earliest. This is based upon the following assumptions:-

• White Paper published late 2003.

• Preparation of and submission of Planning Application mid 2004.

• Application called in during late 2004.

• Public Inquiry mid 2005, decision mid 2006.

• Detailed design and procurement late 2006/early 2007.

• Construction from late 2007 to early 2011 (around three and a half years).

• Completion and opening spring 2011.

5.6.5 Conclusion

Based upon the projected level of growth, the proposals put forward by Sutton Harbour Holding plc would appear to be reasonable. A key assumption is that the traffic currently using Exeter and Plymouth diverts to the new site and our forecasts suggest that South Hams could grow to around 2.32 mppa (around 276,000 less than the combined total for Exeter and Plymouth under option 1) and Newquay is forecast to grow to around 1.04 mppa (around the same total as Option 1). Under this scenario total traffic in the far South West is forecast to grow to 3.4 mppa by 2030. However, compared to Option 2, South Hams attracts around 122,000 passengers less than Exeter. This is partly a function of the smaller catchment area and due to some passengers in the Exeter area using Bristol rather than South Hams.

What is not reflected in their plans is the future of the considerable flyBe maintenance facilities currently located at Exeter. There is no guarantee that flyBe would relocate its facilities to South Hams, as the new airport would have to compete with other airports outside the South West. This was discussed with Sara Randall Johnson at FlyBe who stated that: -

“FlyBe welcomes the appraisal of different airport options in the far SW. However we believe that Exeter International Airport can be developed and has the potential to support new schedule routes,

45 The Future Development of Air Transport in the United Kingdom: South West Table 6.25


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because it has an excellent weather record and is well situated at the confluence of the two major trunk roads into the region, A30 and M5. FlyBe also believes that Newquay Airport has a larger role to play, particularly in the leisure market with inward traffic to Cornwall. FlyBe sees no case for a new Plymouth Airport and does not support any relocation. The issue is one of a property play. Furthermore if there is a threat to the future of Exeter International Airport it will put at risk 800 jobs at flyBe’s headquarters and aviation services facility”.

Therefore there would be risk that if South Hams were to proceed, the flyBe facilities might be relocated outside the region, with a consequential loss of economic activity and employment.


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6 Appraisal of Airport Development Options 6.1 Summary

6.1.1 Option 1: Summary of Appraisal - Base Case (Exeter, Newquay and existing Plymouth)

Exeter Newquay Plymouth Forecast Growth 2030

2.2mppa 1.0mppa 0.36mppa

Financial Appraisal

Exeter Airport is expected to achieve a strong financial performance in spite of a large expansion programme totalling £19.8m. The operating margin excluding capital depreciation (EBIDTA) is forecast to be in the region of 19% by 2015 gradually improving to 30% by 2030. Operating profits (EBIT) are forecast to be around 8% and 25% respectively. The airport is expected to post net profits throughout the next 27 years with average net profit margins gradually improving from current 4% to 17% by 2030.

Under Option 1, Exeter is the only airport that produces a positive NPV. It is worth at today’s values about £10.4m and produces an IRR of 25%. Furthermore, the airport would require financial loans of £10m in order to fully finance its capex programme as well as working capital requirements.

Newquay Airport has comparably lower traffic charges than other UK small airports. This is expected to deteriorate even further with the growth of low-cost traffic. Therefore the airport is forecast to post operational losses of around £1m p.a. This negative trend is further impacted when depreciation charges as result of a heavy capital expenditure programme of £13.9m are included, estimated to reach -7% by 2015 but improve to -2% by 2030.

Under on-going trading conditions, Newquay Airport is expected to show a large funding deficit even at an operational level with accumulated cash flows of £2.3m up to 2030. This is well below the cash levels required to finance the capex programme of £13.9m. Therefore it is assumed that public sector funding of up to £24m is required to fund the new terminal development (based upon capex to deliver capacity of around 2 mppa). The airport would also require borrowing of about £2.9m in order to cover the remaining operational gap.

Plymouth Airport is forecast to record a sustainable operational performance. It is expected to achieve EBITDA margins of 32%, with a strong contribution from traffic charges. Operating margins would be impacted by a large capital expenditure of £19.5m, which we have assumed takes place between 2005 and 2008. Interest charges due to financing of capex would have a negative impact upon net profit margins which would fall to an average of 3% per year from an existing level of 7%.

Although Plymouth Airport generates enough cash to cover its capital expenditure programme (available cash-flow of £26.9m) up to 2030, it would require a combination of public sector funding and commercial borrowings to fully cover capex (assuming a runway extension) and working capital requirements. In order for this airport to produce an IRR of 9.7%, it would be necessary to secure £9m and £7.7m in public sector and commercial loans respectively. The NPV for this airport is £145,000.

Economic Impact

Relative to the option assessed with the highest economic benefit (Option 2) Option 1 has the advantage that the dislocation effects at Plymouth would be avoided. And the passenger forecasts suggest it might generate slightly more passengers overall. But the flights available are expected to be less popular with business passengers, but provide greater opportunities for leisure passengers. There is a potential for a negative impact on the competitiveness of the far South West’s economy as a whole. However this “potential” impact needs to be considered advantages of retaining Plymouth Airport, and the crucial role it plays in serving businesses based in the city.


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Exeter and Newquay are best placed to absorb growth because of their rural setting and the existing low operational base and associated noise and emissions impacts. (No local residents fall within the Newquay 57 Leq contour in the present case or in the RASCO Case (broadly equivalent to Option One in this study) at 2030 and at Exeter there is moderate growth to include between 700 and 900 local residents within the contour at 2030 from base of zero.) Plymouth is the most sensitive site for noise and emissions because of the larger population affected by overflying (1,400 at present with between approximately 2,400 (RASCO) to 4,900 (Avia) by 2030 and urban background levels of pollution respectively. Nevertheless, at Plymouth, the growth is experienced from a very small base and the aircraft fleet is assumed to remain dominated by small turboprops, which prevents the much larger expansion of the contours and emissions inventory that would be expected with the introduction of jet aircraft. Airport related emissions at Plymouth are unlikely to have a significant impact on the local ambient air quality background.

The development of a new terminal and associated facilities at Exeter would involve some small scale but significant ecological losses but creates an opportunity to see a significant improvement to the quality of the River Clyst.

In broad terms, the available data indicates that the predicted growth in operations at all three airports can be absorbed into the carrying capacity of their local environments with the appropriate investment in environmental protection infrastructure (e.g. noise bunds, aircraft run pens, provision of interceptors/foul drainage etc) and the introduction of systematic environmental management and controls and community relations programmes.


Public transport mode share of both passengers and staff is likely to be small (10-15%). There would be no key road links operating at more than 60% capacity (considered to be ‘no congestion’) and that airport traffic would be no more than 10% of total flows. If the airport develops as proposed, a new access road would be provided from the junction with the A30 (T).

A rail station one mile from the airport, associated with a new community development, connected by a shuttle bus to the airport, would improve public accessibility.

Road access is poor close to the airport. If the airport develops as proposed, a new access road would be provided to the A3059. At the forecast level of throughput, this unlikely to result in airport traffic being a major component of total trips (e.g. it would still be less than 5% on the A30).

The prospects for public transport in all scenarios are limited, but the numbers of inbound tourists could make a service linked to key hotels viable.

There could be around 1000 employees in 2030. Some will live in Newquay, although others may travel significant distances from the towns and villages throughout the region. A local bus service could attract some custom.


The RCD indicated that at the RRC level of throughput (0.5mppa in 2030) there would be 4 key road links operating at between 60 and 80% capacity (considered to be ‘minor congestion’) and one at 80 to 100% (‘intermediate congestion’) but that airport traffic would be less than 2% of total flows. The forecasts now considered are slightly below the RCD/RRC forecasts so the conclusions can stand.


A positive and integrated land-use and transportation strategy and set of land-use policies are being put in place to promote and encourage the long term development of Exeter Airport as a key component of the region’s economic and social progress. There are no land-use constraints or planning policy restrictions to limit this strategy.

The land-use planning policy framework provides encouragement to the gradual expansion of Newquay Airport. Proposed improvements to the local road system will gradually improve accessibility to the airport, not only from Newquay, but also from the wider sub-region.

In the light of the economic, social and transport policies contained in RPG10 there is a need for greater clarity to be given in the Development Plan to the role and functions of Plymouth Airport and the land-use and transportation strategies to underpin the future development of the airport, links to it and wider economic measures associated with it.

Table 18 – Option 1: Base Case Impact Summary


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6.1.2 Option 2: Summary of Appraisal - Newquay and Exeter (Plymouth closed)

Exeter Newquay Plymouth (closed) Forecast Growth 2030 2.4 mppa 1.1mppa N/A

Financial Appraisal

Traffic throughput at Exeter Airport is expected to be higher by an average of 9% compared to Option 1. With almost no significant increase in operational expenditure and capex requirements remaining constant, such traffic increases translate into an improved financial performance. It is forecast to achieve strong EBITDA margins of 25% and 31% by 2015 and 2030; while operating margins are estimated to improve from 11% to 26% during same period. In reality stronger growth may result in the need for marginal increases in capital, which will reduce overall returns. However these are not expected to be significant.

At Newquay Airport the financial picture slightly improves over Option 1. The airport is expected to achieve operational break even by 2030 (2% EBITDA margin). However, when depreciation charges due to future developments are brought into the equation, the airport is forecast to post an operating loss of -6%. Newquay remains financially non-viable in spite of traffic growth of 10% compared to Option 1.

Cost of closing airport likely to be significant. However this could be offset by revenues from alternative uses of the site which could be greater than that achieved by the airport. Alternative use revenue streams have not been modelled.

Economic Impact

Although there is little to choose between the three options in terms of passenger numbers, the benefits derived from bringing extra overseas business and leisure passengers into the region yields a slight preference for Option 2. Despite passenger numbers varying by as much as 250,000 across the three options by 2030, this difference is not large enough to generate significant differences in aviation related employment. Option 2 implies marginally fewer jobs will be created by the immediate impact of the aviation industry than in Option 1, but the loss in aviation related employment is slightly outweighed by the positive spill-over on the far South West economy of more overseas business and leisure passengers.


Option 2 would also bring in more overseas leisure visitors than either of the other options. Even though fewer domestic visitors would arrive than if all three airports remained open, this is more than offset by the fact that overseas visitors spend a lot more than those from the UK. This spending would create fractionally more jobs in tourism than the other options.

Taking the second option does assume the closure of Plymouth airport; this would undoubtedly hit the local economy as several firms could re-evaluate their location decisions. Potentially significant loss to local economy. However it is likely that some of the economic activity would be redistributed elsewhere in the South West. A high level estimate of jobs lost is circa 2000 to 5000. However on balance, our analysis suggests that the number of jobs lost in Plymouth would be slightly more than offset by those created elsewhere in the far South West.


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Under Option 2, Plymouth Airport closes and no new site is developed and the growth in passenger numbers (similar in scale as that under Option 1) is absorbed at Exeter and Newquay. Aircraft types and fleet mix are also consistent with the analysis for Option one and the conclusions for environmental impacts, including noise and air quality are similar at both sites with the added gain of the removal of up to 4,900 of population from the Plymouth 57 Leq contour and other associated environmental impacts of the airport. The closure of the site would further safeguard the two SSSIs which lie to the south of the airfield from aviation related impacts.


As option 1 – with only marginal additional traffic forecasts.

As Option 1 – with only marginal additional traffic forecast.

Site could become available for alternative uses (such as housing). Alternate uses potentially have greater surface access impacts than current use.

Land Use Planning Impact As Option 1 As Option 1

The closure of Plymouth Airport would provide the City with a major brownfield development site (53ha). Under Option 2, the airport could close at any time between now and say 2011. .

The agreement between the airport operator and Plymouth City Council makes provision for the two parties to enter into a property development business to redevelop the site for a mixed-use development scheme, if the airport did close.

Table 19 – Option 2: Newquay and Exeter


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6.1.3 Option 3: Summary of Appraisal - Newquay and South Hams only


Forecast Growth 2030

1.0mppa 2.3mppa N/A

Financial Appraisal


In the case of the proposed new South Hams Airport, it is foreseen to post strong operating margins of 32% and 20%, excluding and including depreciation charges respectively, by 2030. As it was assumed that this new airport would only become operational by 2010, it is expected to show a modest operating margin of 2% by 2015. If we assume the same traffic growth rates for another 10 years, the airport is projected to show a strong operating profit and net margins of 23% and 16% respectively by 2040, which is comparable to those achieved by similar size airports. It is assumed that no further capital investments would be required once the airport expands to a capacity of 3m passenger per annum.

Cost of closing airports likely to be significant. However this could be offset by revenues from alternative uses of the site which could be greater than that achieved by the airport. Alternative use revenue streams have not been modelled.

Economic Impact

The OEF regional aviation model suggests that Option 3 would provide the same level of employment by 2030 and a 0.1% rise in GDP compared to Option 1.

A net benefit likely to Plymouth sub region as economic activity re-located from Exeter. A comparison between the economic benefit of developing the airport, and disbenefits of not using the land for housing has not been factored into our assessment and would need to be considered. It is likely that some economic activity centred around Exeter would divert to Plymouth, but this has not been quantified in the study.

A potential loss of circa 600 jobs to the far South West (at Exeter airport) due to risk that flyBe may relocated head office and engineering outside region (rather than South Hams). The study has not assessed in the detail the implications specifically on Exeter of closing the airport, but there are likely to be significant to the city.


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Environmental Appraisal In Option 3, Plymouth and Exeter airfields close and it is assumed that the site at Exeter would be released for housing development. A new airport serving South Devon is developed in the South Hams area involving the take of a minimum 150 hectares of land plus new road links. Operations at Newquay remain within the scope of those predicted under Options 1 and 2 and are within the carrying capacity of the local area. The redevelopment of Exeter would remove up to 900 people from the 57 Leq contour, but in the worst case would result in the loss of the entire ecological value of the site, which is high in parts.

The development of a substantial regional airport in South Hams would represent a very significant environmental impact on an entirely rural landscape currently only disrupted by the new A38. Detailed ecological, archaeological, landscape and water quality analysis is required for the full evaluation of such impacts on the immediate site. Although only 100 of the local population is estimated to fall within the 57 Leq contour in the worst case, there is also the extended impact of arriving aircraft over flying a heavily built up area of south-east Plymouth on easterly operations as well as the potential for aircraft vortex strikes in this area. Air quality is unlikely to be a significant issue. However it should be borne in mind that a larger area than that identified for the airport has been designated for housing development. Thus either way the site is likely to be developed. In the timescales available, it has not been possible to compare the relative environmental disbenefits of an airport to the proposed housing development. However it could be argued that there would be net dis-benefit associated with building the airport, as the land earmarked for housing would have to be re-provided elsewhere.


The creation of a new airport at South Hams means that no journey patterns will be established, and there could be an opportunity to make the airport attractive from a public transport viewpoint. The numbers could not justify a rail link, but a network of quality bus and coach services could attract a reasonable market share for both passengers and staff. Perhaps the most potential would be in express routes to the city centres of Plymouth and Exeter, particularly the latter as the 35-mile journey would be expensive by taxi. It is understood that the Highways Agency consider that the levels of growth are unlikely to cause network difficulties on the A38, which would become the major surface access link to this development.


Low – no major impacts, although general ‘urbanisation’ pressures increase.

There is no land-use planning framework to consider such a proposal. It would represent a departure from the existing and emerging Development Plan policy framework. However, airport strategy in Devon is due to be debated at the Structure Plan Examination-in-Public on 13 June 2003.

It would conflict with the proposals for a new community. A key issue is the phasing of such development, given that the existing Plymouth airport site could not be developed for housing until such time the new airport was open. Under this scenario, alternative sites for housing might have to be identified to provide additional housing in the period up to the opening of the new airport.

Consideration required of future use of Exeter Airport site. Its closure would have major implications for the land – use policy framework set out RPG10, the Devon Structure Plan and the emerging East Devon Local Plan. Specifically, it would require an urgent review of proposals for the Skypark employment site and inter modal freight facility, the new community and associated transport infrastructure and also the proposed access road.

The closure would allow consideration to be given to siting the new community on the airport site. There would be enough land to accommodate a new community of 3,500 homes (173 ha would be available). On the other hand there would be phasing difficulties and therefore uncertainty.

Table 20 – Option 3: Newquay and South Hams


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6.2 Introduction

In this chapter, the appraisal of impacts of the forecast growth under the three development options is discussed.

The impacts appraised were:

• Financial – an assessment of capital requirements and funding over time; an assessment of revenue costs over time; an assessment of potential revenue streams; an appraisal of the potential return on capital. An assessment of funding vehicles and “attractiveness” of options to funding sources is described in Chapter 7.

• Economic – an appraisal of the economic benefits of each option, with comparison of the relative merits of one option over another; an assessment of employment generation, direct, indirect and induced; an assessment of overall contribution to SW GDP and productivity; economic linkages with trading partners; impact on different sectors, particularly tourism; and an assessment of different options on the competitiveness in the region.

• Environmental - a high level review of environmental impacts regarding ecology, water quality and air quality using the SW RCD as a base; forecast noise contours, based on busy day schedules for each airport; and identification of potential “show-stoppers” if any.

• Surface Access - a high level review of existing surface access impacts at each airport, using base data contained within the SW RCD; an appraisal of future surface access impacts at each airport; an identification of surface access enhancements necessary; and a high level appraisal of additional costs associated with surface access enhancements.

• Land Use Planning - a high level assessment of land use planning implications of each airport. In particular an assessment of urbanisation issues and implications for integration with Regional Planning Guidance, Devon Structure Plan and local plans.

6.3 Financial Appraisal

6.3.1 Introduction

It has been repeatedly demonstrated that strong passenger growth, good customer service, value for money, choice and better facilities are essential to meet customer expectations and maximize return on investment. The key areas of airport income generation are:

• Airport and traffic charges;

• Retail; and

• Property.

The balance between their relative importances, as airports grow and respond to increasing pressures from airlines, has changed with retail and property income now representing over 50% of total revenue for large successful operators. This demonstrates the opportunity for airport operators who provide customer centred facilities and services to grow their business in a profitable manner. Local conditions such as available airport land for development can have a key influence on the ability to generate increasing commercial revenue. Bringing these initiatives to fruition however does place additional substantial demands on an airport’s capital resources.

This section describes the high level financial appraisals undertaken of each airport, under the different options being considered. The appraisal provides an indicative assessment of potential


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operational revenue streams, operational costs and capital requirements. Funding mechanisms are discussed in greater detail in Chapter 7. However the financial context within which airports operate is important.

6.3.2 Industry Dynamics

In an increasingly competitive and mobile passenger market, the benefits of thriving airports to the local and national economies are significant, both in terms of direct and indirect employment.

The recognition in recent years that airports can be extremely profitable businesses has driven the world trend towards privatisation, led by the UK with the 1987 privatisation and flotation of BAA. Since then, the dynamics of the industry, again led by the UK, have seen significant shifts in the pattern of earnings and profit streams. Whereas in 1987, airport and traffic charges represented two thirds of BAA’s turnover, in 2002/03, this element represented less than 30% of total turnover.

The shift away from purely public service provision, and the new focus on running airports as commercial ventures has necessitated a re-examination of the dynamic forces affecting the industry. This shift in business focus has been replicated over most of the other UK major and regional airports, as has the diversity of ownership. Traditionally airports were national or regional assets owned and operated by national or local authorities. In the far South West, both Newquay and Exeter remain in public ownership, with only Plymouth being operated by a private operator.

Owners in the UK now come from diverse backgrounds including specialist airport operators, property companies, contractors and professional investors. The market for acquisition of equity or management concessions has realised significant value for public owners.

6.3.3 Airport Industry Profitability

The move to a more commercially oriented approach has delivered average operating profits of 29.2% of turnover for UK airports in 2001-2002. This figure is greatly weighted by the large players, with the top ten airports handling 90.1% of all passengers in 2001-2002. However indicators suggest that successful regional airports should be delivering operating profit margins in the region of 10% to 15% on their core airport operations, depending on local circumstances.

Local circumstances and environment can be significant factors in an airport’s development. Factors can include road and rail connections, public transport services, operational restrictions, local industry needs, freight opportunities, the available land bank for development and the planning environment.

The other clear market factor is that size, in terms of passenger and freight throughput, matters unless there are unique local factors that enable income generation not related to passenger numbers. The initial critical passenger threshold is in the 800,000 to 1,000,000 ranges to generate the demand for additional income generating facilities to grow non-operational income. This critical mass makes it cost effective and profitable for retailers to open and run facilities throughout the operational day and throughout the year.

Without the spread of customers across the operational day to make retail facilities viable, it is difficult to attract the range of quality retailers required to grow retail income. Similarly, additional retailers will stimulate property demand and the ancillary suppliers required to service increased passenger numbers.

Above these critical mass milestones, average costs fall as benefits of economy of scale are realised. Productivity of direct staff increases as the customer service level is not directly related to increase in passenger traffic until throughput thresholds are encountered. This puts smaller, growing regional airports at a competitive disadvantage until the passenger thresholds have been reached.


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6.3.4 Low Cost Airline Impact

The new commercialism at some regional airports has also been driven by the emergence of the low cost, low frills carriers such as Ryanair and easyJet. These carriers operate at significant cost advantages to the major carriers, around 25% on aircraft utilisation generating 30-40% operating cost advantage. Their approach is fiercely commercial reflected in the prices they are willing to pay for facilities at regional airports. Passenger demand for the new routes ‘created’ by these low cost carriers is generated by extremely attractive fare structures and the convenience of flying from their local airport.

Smaller airports are competing for the new business generated by these carriers. The proposition generally surrounds lower cost and ease of use compared to larger competitors. The bargaining position of the airlines has therefore increased significantly as they can play airports off against each other. The net effect is to drive down airport and traffic charges overall. The consequence is that only 12 of the 29 UK airports recorded a profit from airport charges in 2001-200246. This statistic has to be taken with some qualification as the ability to ‘cross subsidise’ the non-airport and traffic charge elements of the business are significant.

Airlines at regional airports are putting increased pressure on airport charges with further reductions expected in real terms in the near future. Unless other business income streams can replace this shrinking income, overall business profitability will deteriorate. This is an industry wide trend and is expected to continue as competition increases and pricing is driven towards a more competitive level.

6.3.5 Impact of Alliances and Hub Slot Trading

The rapid changes occurring in the aviation industry are accelerating with the emergence of consolidated airline alliances. The result will be for hub airports to be dominated by one alliance through the control of slots by alliance member airlines.

The future implications for regional airports include the reduction of scheduled services to hub airports such as Heathrow, Gatwick, Schiphol, Frankfurt and Paris CDG. Congestion at these hubs has generated an unofficial secondary market in slot trading. Slots controlled by smaller airlines at hub airports can now be worth more than the operational airline. These slots are used for more lucrative schedules that have reduced regional connections. The effects of this have been clearly seen in the far South West with British Airways having moved the London – Plymouth/Newquay service from its primary hub at Heathrow to Gatwick in spring 1997 and then announcing in May 2003 the withdrawal of the service from the end of October this year. Unless this service is replaced, this announcement will have a significant financial impact on Plymouth and Newquay airports.

6.3.6 Methodology

Business performance is closely correlated with growth in operational traffic. The components of business performance are the main drivers of business value therefore any changes to performance, both current and forecast, must be examined in detail to understand the likely impact on the value of the business.

Two approaches were followed when evaluating the development options under consideration:

46 Data extracted from The UK Airports Industry Airports Statistics 2001-2002, University of Bath, Centre for the Study of Regulated Industries (CRI), March 2002


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• The three existing airports (i.e. Exeter, Newquay and Plymouth) were assessed as on-going concerns. Their actual financial performance47 during the previous two financial years was reviewed and existing trends were sustained in the short-term whilst in the mid to long-term their performance was benchmarked against other UK commercial airports with passenger throughput not exceeding the 3.0 million per year.

• In the case of the proposed new green field airport at South Hams, industry benchmarks from a wide range of sources were the main input for the financial model.

Capital expenditure requirements for each airport were taken into consideration. For Exeter and South Hams airports the capital expenditure programmes included within the master plans produced by Halcrow and Arup respectively were used as the primary input. With regard to Newquay, a high-level estimate of capital investment requirements was produced by AviaSolutions based upon the master planning work described in Chapter 5, benchmarked against capital investment costs at other similar airports. At Plymouth, the runway extension study48 undertaken in August 1999 was used as a base, with a high level estimate of potential expenditure necessary to extend the runway generated by AviaSolutions.

In developing the financial appraisal, a high level appraisal of costs and revenues by airport, and by option has been carried out. This appraisal provides a reasonably robust appraisal of the likely financial performance and return on capital, based upon current performance, comparison with other airports and a reasonable assessment of likely capital expenditure requirements.

47Exeter and Devon Airport Ltd – Annual Report and Accounts for FY2000, 2001 and 2002. Plymouth City Airport Ltd (incorporates Newquay Airport) – Financial Statements for FY 2002

48 Preview of Plymouth City Airport – Scott Wilson/Aviation and Travel Consultancy Ltd August 1999


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6.3.7 Historic Performance

All three airports have reported modest profits in the last two financial years. Table 21 summarises the main revenue and cost drivers:

P&L EXETER PLYMOUTH+NEWQUAY FY2001 FY2002 <>01/02 FY2001 FY2002 <>01/02 £ '000 £ '000 % £ '000 £ '000 % Traffic (‘000 pax) 320 337 5% 256 - Income Airport charges 3,791 4,122 9% 1,967 2,014 2% Other income 4,533 4,800 6% 1,595 1,575 -1% Turnover 8,664 9,250 7% 3,562 3,590 -1% Operating costs Staff costs 3,206 3,671 15% 863 1,447 68% Depreciation 824 822 0% 63 71 12% Other ops costs 4,091 3,929 -4% 2,223 1,731 -22% Total 8,121 8,422 4% 3,149 3,249 3% EBITDA 1,367 1,650 21% 476 412 -14% margin 16% 18% 13% 12% Operating profit (EBIT) 542 828 53% 413 341 -17% Margin 6% 9% 12% 10%

Table 21 – Summary of Airport Profit and Loss

Sutton Harbour Plc, the operator of both Plymouth and Newquay airports, reports the financial figures for both airports on a consolidated basis. However, we obtained some disaggregated revenue and cost figures for analytical purposes.

All airports recorded similar operating margins in 2002 (about 9-10%), broadly in line with other small regional UK airports. Exeter Airport’s operating margin in 2002 grew significantly compared to the previous year; while, both Plymouth and Newquay airports experienced a decrease on operating margins of 17%. This is mainly a consequence of a significant rise in labour costs due to an increase in staffing levels at both airports. Staffing levels at Plymouth and Newquay airports increased by 13 and 10 employees over 2002 respectively.


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P&L EXETER PLYMOUTH + NEWQUAY

FY2001 FY2002 <>01/02 FY2001 FY2002 <>01/02 £ '000 £ '000 % £ '000 £ '000 % Airport charges Turnover 3,791 4,122 9% 1,967 2,015 2% Costs 4,266 4,273 0% - 1,877 - 1,809 -4% (Loss)/Profit - 475 - 151 -68% 90 206 129% margin -13% -4% 5% 10% Other ops activities Turnover 4,533 4,800 6% 1,595 1,575 -1% Costs 3,973 4,006 1% - 1,274 - 1,440 13% (Loss)/Profit 561 794 42% 321 135 -58% margin 12% 17% 20% 9% Non-operational activities Property income 340 328 -3% Costs 169 143 -16% (Loss)/Profit 170 185 9% margin 50% 56% (Loss)/Profit before taxes 256 828 223% 411 341 -17%

Table 22 - Summary of Airport Profit and Loss

When assessing the profitability of each activity, we have identified different trends for all three airports. Based on the UK CAA definition of operational activities, Exeter airport shows a loss on airport activities as traffic charges levied upon users do not cover operating costs (-3.7% margin in 2002); however, it achieves strong contribution from other income streams such as other operational (e.g. passenger and aircraft handling and limited retail activities) and non-operational activities (e.g. property). These activities recorded profit margins of 16.5% and 56.4% during 2002 respectively.

On the other hand, although Plymouth and Newquay airport activities show a profit (10.2% in 2002) comparable to similar regional airports, other activities such as handling, fuelling and retailing achieve low contributions. For example, other operational activities recorded a margin of 8.6% in 2002, which is comparatively lower than at other airports, and even lower than traffic charges contribution. Undoubtedly the contribution of these activities should improve considerably as traffic develops.


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6.3.8 Revenue Streams

Airports revenues are normally generated through three main sources:

• airport charges,

• other aviation income associated to aviation activities such as passenger and aircraft handling, aircraft fuelling, retailing, catering, etc and

• through non-operational activities such as property income.

Generally speaking, small airports tend to rely heavily upon traffic charges as their main revenue stream. This revenue groups comprises all aeronautical charges levied by the airport operator upon airlines and passengers and normally includes landing fees, passenger facility charge and aircraft parking charges. In the case of the three airports in the far SW region, traffic charges account for just over 50% of turnover; while the remaining 50% came from other aviation activities.

For all three airports, traffic charges and other operating income were projected separately. From historic financial figures, average traffic charges per unit basis (i.e. passenger and freight) were calculated. Where information was available, the average unit charge was disaggregated, based on type of traffic: low-frills scheduled airlines, full service scheduled airlines and charter airlines. As the traffic forecast provides individual inputs for each of these groups, the revenues were estimated by multiplying the traffic (i.e. passengers) with the corresponding unit charge (i.e. revenue per passenger). Moreover, current market conditions (such as comparison of charges with other airports) and trends for each of the above traffic segments were taken into account when projecting average charges.

Within “other operating income”, the main revenue generating activities are ground handling and aircraft refuelling. These two activities account for as much as 67% of this revenue group. The airport operators at all three far South West airports provide passenger and aircraft handling activities, which is a common practice for similar size airports. At other airports, this revenue group predominately comprises retail and catering activities.

Average income per passenger for other operating activities was estimated. Historic trends were analysed versus current market trends in order to correct any potential distortions. For example, increases in average handling income per passenger were capped to reflect the willingness of airlines to pay for these services. Furthermore, over time there may be changes in the provision of these services, particularly as the airports grow, such that “in-house” handling is spun off to a third party (removing both the revenues and costs associated with this activity). An EU Directive enforced by EC Commission in late 1990s grants self-handling rights to any airline wishing to do so at all EU airports with annual traffic above 1m passengers. Similarly, for all EU airports with throughputs above 2m passengers per annum, there must be at least two providers of handling services in order to ensure competition and choice of suppliers.

Exeter was the only airport to report property income; however, it is a modest revenue stream accounting only for 4% of airport’s turnover in 2002 based on lack of detailed information. No property income for Plymouth and Newquay airports were assumed. Plymouth does not record any property income within it accounts. This is likely to be an underestimate of future income potential, particularly at Newquay as the site has large areas available, which could be developed for property related activities.

In the case of the proposed South Hams airport, potential development of property income was based on trends experienced at other regional UK airports.


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6.3.9 Operating Expenditure

There are three key drivers for airport costs:

• Labour costs,

• depreciation of assets and

• other operating expenses, including utilities, maintenance, consumed materials and overheads.

Labour costs were estimated by taking into consideration two components: staffing levels and average cost per employee including social security and pension charges.

Generally speaking staffing requirements at airports are related to traffic throughputs. However, for small airports there are minimal operational staffing levels required to maintain the aerodrome licence. In these cases, the costs could be deemed to be fixed.

Figure 24, which includes all UK commercial airports with throughputs under 3.5m passengers in 2002, clearly shows such a correlation.

-

500

1,000

1,500

2,000

2,500

3,000

3,500

- 100 200 300 400 500 600

Terminal passengers ('000)

Hea

dcou

nt

EMAHUY

BOH

Figure 24 - Staffing levels versus traffic development49

49 Data extracted from The UK Airports Industry Airports Statistics 2001-02, University of Bath, Centre for the Study of Regulated Industries (CRI), March 2003


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Manpower requirements were estimated for each airport as their traffic developed based on comparison with other small regional airports. These estimates were then compared with existing staffing levels and adjusted accordingly to reflect future manpower requirements. Future labour costs were then estimated by taking into consideration current average labour cost per employee and future manpower requirements.

Where disaggregated data was available, each component of the other operating expenditure was grown in proportion to a key driver. For example:

• Utility costs were driven by the increase of terminal space;

• Overheads were projected based on headcount increases.

The other main operating cost component is depreciation, which is addressed in the next section.

6.3.10 Capital Expenditure Requirements

Airports are asset-based businesses where increased passenger numbers invariably mean that, eventually, additional facilities will be required. What is also clear is that both overall and operating income should increase as operational assets are put in place. The key skill is to match investment with demand as far as is practicable. This is difficult as forecasting in the industry is impacted by many exogenous factors, and the time required to put capital assets in place can be considerable.

Customers, both airline and passenger, demand continuous improvement in the services and facilities provided by modern airports. The relatively high frequency of air travel today enables customers to make comparisons between airports which informs their decision making process as to which airport to use.

The trend is for airports to continue to invest for growth. Evidence of this is the unprecedented level of investment currently underway in the UK. Funding is required to:

• Maintain operational capability with increased capacity;

• Provide for capital replacement; and

• Exploit commercial opportunities.

Commercial airport operators generally fund capital projects from operating profits and debt. Publicly owned airports have in the past been restrained by government borrowing restrictions which have prevented them sourcing capital from the commercial markets. Development has therefore been funded from operating profits, available grants and restricted government borrowing approvals.

In the far South West, all airports are expected to grow, (assuming they remain open) under the various options considered. In order to accommodate this growth, capital investment requirements have been identified, and considered as part of the overall financial appraisal

The master development programmes50 for Exeter and new South Hams include detailed capital requirements. For Plymouth and Newquay, AviaSolutions produced estimates of the capital expenditure requirements necessary to accommodate future traffic growth up to 2030. As part of this appraisal, it was assumed that the runway at Plymouth Airport would be extended to accommodate the range of aircraft necessary to sustain its long-term viability. A sensitivity was run which assumed

50 Provided by Exeter and Devon Airport Ltd and Sutton Harbour Holdings Ltd respectively


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no runway extension, which resulted in a high IRR. The level of capital expenditure for each airport is shown in Table 23:

£'000 EXETER PLYMOUTH NEWQUAY SOUTH HAMS

Land 132 3,000

Ground Works 90,662

Runways and Pavements 6,096 15,000 3,800 20,870

Terminal 6,652 1,000 7,500 4,000

Other bldgs 3,192 2,344

Roads 870 3,950

Car parks 2,708 500 2,000 660

Fencing 121 1,500

Services 31 550 550

Navigation 6,950

Miscellaneous 6,574

Total 19,802 19,500 13,850 138,060

Table 23 - Capital requirements for each airport

It should be also noted that the cost associated with the closure of Exeter and Plymouth (both in terms of write-offs and relocation costs) have not been included in the appraisal of South Hams. In addition the capital value of any land through closure of existing airport sites that could realise proceeds thereby contributing to the overall financial appraisal for the proposed new airport has not been included.

Given the scale of investments envisaged, depreciation and charges to account for such large investment programmes in each airports’ asset bases, represent an important expenditure cost.

Capital expenditure was depreciated based upon current depreciation policies at each airport. These policies have been compared against industry standards. For modelling purposes, it was assumed that all assets would be fully depreciated over time (i.e. zero residual value). The terms for depreciation are summarised in Table 24.

Item Policy (years) Taken (years) Ground works 40 Pavements 20-60 40 Terminal 10-20 20 Other buildings 10-20 20 Navigation 20 Car parks 5-10 10 Fencing 5-10 10 Fencing 5-10 10 Roads 5-10 10 Services 5-10 5

Table 24 - Depreciation terms 51

51 Source: Airport accounts, CRI


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6.3.11 Financial Results and Operating Margins

In this section we analyse the key financial outputs under each of the three options. A detailed profit & loss statement for each airport under each option is provided at Appendix C.

Option 1: Exeter, Plymouth and Newquay airports (Base Case)

The following table summarises the financial projections for each of the three SW airports as on-going concerns.

OPTION 1 Exeter, Plymouth and Newquay (Base Case) 2002 2003 2015 2030 achieved estimate projection projection £'000 £'000 £'000 £'000 EXETER Traffic ('000 pax) 349 370 946 2,243 Turnover 9,250 9,939 18,272 38,836 EBITDA 1,650 1,916 3,432 11,570 margin 17.8% 19.3% 18.8% 29.8% Ops profit (EBIT) 828 866 1,512 9,550 margin 9.0% 8.7% 8.3% 24.6% Net profit/(loss) 428 362 792 6,669 margin 4.6% 3.6% 4.3% 17.2% Accumulated profits 790 1,443 12,745 PLYMOUTH Traffic ('000 pax) 76 81 181 355 Turnover 2,539 2,630 3,856 7,219 EBITDA 1,003 1,232 2,250 margin 38.1% 31.9% 31.2% Ops profit (EBIT) 932 561 1,679 margin 35.4% 14.5% 23.3% Net profit/(loss) 652 315 1,156 margin 6.6% 1.7% 3.0% Accumulated profits 652 612 2,244 NEWQUAY Traffic ('000 pax) 180 194 533 1,012 Turnover 1,050 1,117 3,144 7,743 EBITDA - 227 - 346 - 110 margin -8.6% -9.0% -1.5% Ops profit (EBIT) - 290 - 1,111 - 784 margin -26.0% -35.3% -10.1% Net profit/(loss) - 290 - 1,222 - 812 margin -2.9% -6.7% -2.1% Accumulated profits - 290 - 2,150 - 1,747

Table 25 – Option 1: Profitability Summary

Exeter Airport is expected to achieve a strong financial performance in spite of a large expansion programme totalling £19.8m, which is assumed would run between 2004 and 2011. The operating


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margin excluding capital depreciation (EBIDTA) is forecast to be in the region of 19% by 2015 gradually improving to 30% by 2030. Operating profits (EBIT) are forecast to be around 8% and 25% respectively. These margins are comparable to those achieved by other UK small airports. The airport is expected to post net profits throughout next 27 years with average net profit margins gradually improving from current 4% to 17% by 2030.

Plymouth Airport is forecast to record a sustainable operational performance. It is expected to achieve EBITDA margins of 32%, with a strong contribution from traffic charges. Operating margins would be impacted by a large capital expenditure of £19.5m, which we have assumed takes place between 2005 and 2008. Interest charges due to financing of capex would have a negative impact upon net profit margins which would fall to an average of 3% per year from existing level of 7%.

Newquay Airport has comparably lower traffic charges than other UK small airports. This is expected to deteriorate even further with the growth of low-cost traffic as the revenue yield associated with this traffic segment is expected to remain low through the next 10-15 years. Therefore the airport is forecast to post operational losses of around -£1m p.a. This negative trend is further impacted when depreciation charges as result of a heavy capital expenditure programme of £13.9m are included. Operating margins are estimated to reach -7% by 2015 but improve to -2% by 2030. The airport may need to re-assess its pricing strategy, particularly traffic charges levied upon low-cost airlines, to narrow the financial gap.

Option 2: Exeter and Newquay airports only

The following table summarises the financial projections for both Exeter and Newquay airports under the assumption that Plymouth airport closes.

OPTION 2 Exeter and Newquay only 2002 2003 2015 2030 achieved estimate projection projection £'000 £'000 £'000 £'000 EXETER Traffic ('000 pax) 349 372 1,188 2,444 Turnover 9,250 9,993 20,391 40,701 EBITDA 1,650 1,952 4,200 12,591 margin 17.8% 19.5% 20.6% 30.9% Ops profit (EBIT) 828 902 2,281 10,572 margin 9.0% 9.0% 11.2% 26.0% Net profit/(loss) 422 491 1,073 1,397 margin 4.6% 4.9% 5.9% 3.6% Accumulated profits 913 2,123 2,822 NEWQUAY Traffic ('000 pax) 180 195 578 1,112 Turnover 1,050 1,130 3,513 8,697 EBITDA - 224 - 312 163 margin -19.8% -8.9% 1.9% Ops profit (EBIT) - 287 - 1,077 - 512 margin -25.4% -30.6% -5.9% Net profit/(loss) - 287 - 1,165 - 534 margin -2.9% -6.4% -1.4% Accumulated profits - 287 - 2,042 - 1,221

Table 26 - Option 2: Profitability Summary

Traffic throughput at Exeter Airport is expected to be higher by an average of 9% compared to Option 1. With almost no significant increase in operational expenditure and capex requirements remaining


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constant; such traffic increases translate into an improved financial performance. It is forecasted to achieve strong EBITDA margins of 25% and 31% by 2015 and 2030; while operating margins are estimated to improve from 11% to 26% during the same period. In reality stronger growth may result in the need for marginal increases in capital expenditure which will reduce overall returns. However these are not expected to be significant.

For Newquay Airport the financial picture slightly improves over Option 1. The airport is expected to achieve operational break even by 2030 (2% EBITDA margin). However, when depreciation charges due to future developments are brought into the equation, the airport is forecasted to post an operating loss of -6%. Newquay remains financially non-viable in spite of traffic growth of 10% compared to Option 1.

Option 3: Newquay and proposed new South Hams airports

Under this option, a new green field airport in South Hams would substitute Exeter and Plymouth airports while Newquay remains operational. The following table summarises the financial projections for both Newquay and new South Hams airports.

OPTION 3 Newquay plus New South Hams 2002 2003 2015 2030 2040 achieved estimate projection projection projection £'000 £'000 £'000 £'000 £'000 NEWQUAY Traffic ('000 pax) 180 194 551 1,042 Turnover 1,050 1,126 3,381 7,990 EBITDA - 223 - 251 - 12 margin -19.8% -1.2% 0.0% Ops profit (EBIT) - 286 - 1,015 - 687 margin -2.9% -5.0% -1.7% Net profit/(loss) - 286 - 1,101 - 709 margin -2.9% -6.0% -1.8% Accumulated profits - 286 - 1,923 - 1,453 SOUTH HAMS Traffic ('000 pax) 1,088 2,322 3,408 Turnover 17,906 35,574 50,151 EBITDA 5,680 11,332 14,823 margin 31.7% 31.9% 29.6% Ops profit (EBIT) 358 6,906 11,542 margin 2.0% 19.4% 23.0% Net profit/(loss) - 2,209 4,238 7,794 margin -12.3% 11.9% 15.5% Accumulated profits - 4,809 7,684 15,298

Table 27 - Option 3: Profitability Summary



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In the case of the proposed new South Hams Airport, it is foreseen to post strong operating margins of 32% and 20%, excluding and including depreciation charges respectively, by 2030. As it was assumed that this new airport would only become operational by 2010, it is expected to show a modest operating margin of 2% by 2015. If we assume the same traffic growth rates for another 10 years, the airport is projected to show a strong operating and net margins of 23% and 16% respectively by 2040 which is comparable to those achieved by similar size airports. It is assumed that no further capital investments would be required once the airport expands to a capacity of 3m passenger per annum.

6.3.12 Funding Mechanism

For modelling purposes, it was assumed that all airports would be funded with a combination of their own operational cash flows (operating profits), debt and government funding.

It is also assumed that no dividends are paid to shareholders thus all profits are available for financing of capital expenditure requirements.

For Plymouth, Newquay and new South Hams airports it has been assumed that public funding is provided to fund part of the capital expenditure to enable their development. In the current market, it is highly unlikely that private equity investors would invest in the capital projects identified, given the level of traffic and/or revenues forecast. Furthermore, in the case of Newquay airport it is also assumed that the public sector would provide some additional financial aid aimed at narrowing the extent of the operational losses posted by the airport. The potential levels of funding are developed in Section 6.1.13.

Any operational cash shortfall is assumed to be funded through commercial borrowings with financial institutions. Financial terms for financing of such borrowing is assumed to be repaid in 20 years with a fixed annual interest rate of 6%. This is based on Exeter airports existing long-term debt conditions. Plymouth and Newquay airports have no long-term creditors (no liabilities due over one year according to its latest financial statements).

Finally, it is also assumed that airports would require having a minimum cash balance of as much as 3 months worth of operating expenditure in any given financial year in order to be able to operate for several months without any revenue stream (working capital). Any cash shortfalls are assumed to be covered through additional debt.


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6.3.13 Return on Capital

Under each option the Net Present Value (NPV) and Internal Rate of Return (IRR) for each airport was calculated. In order to estimate the NPV for each airport, the airport’s net cashflows (or cash left after financing the capital investment requirements) are discounted at a rate of 10% p.a, which has an allowance for the degree of risk associated with the development of regional airports. This is based on assumed borrowing rate plus a risk factor of approximately 66%.

The total operational and net cashflows plus funding requirements (i.e. public sector aid and commercial borrowings) and NPV and IRR values for each airport are summarised in the following tables.

Option 1: Exeter, Plymouth and Newquay airports (Base Case)

2003-30 NPV IRR Accumulated 10% discount % £'000 £'000 EXETER Operating cash-flows 142,605 Cash available 142,605 Public funding - Cash before Capex 142,605 Capex 19,802 Net cashflows 86,867 10,357 25.0% Total borrowings 10,038 PLYMOUTH Operating cash-flows 40,228 Cash available 26,854 Public funding 9,000 Cash before Capex 35,854 Capex - 19,500 Net cash-flows 16,354 -145 9.7% Total borrowings 7,657 NEWQUAY Operating cash-flows 2,263 Cash available - 10,386 Public funding 24,000 Cash before Capex 13,614 Capex - 13,850 Net cash-flows - 236 -1,017 -0.8% Total borrowings 2,947

Table 28 – Option 1: Return on Capital

Under Option 1, the only airport that produces a positive NPV is Exeter Airport. It is worth at today’s values about £10.4m and produces an IRR of 25%. Furthermore, the airport would require financial loans of £10m in order to fully finance its capex programme as well as working capital requirements.

Although Plymouth Airport generates enough cash to cover its capital expenditure programme (available cash-flow of £26.9m) up to 2030, it would require a combination of public sector funding


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and commercial borrowings to fully cover capex (assuming a runway extension) and working capital requirements. In order for this airport to produce an IRR of 9.7%, it would be necessary to secure £9m and £7.7m in public sector and commercial loans respectively. The NPV for this airport is £145,000.

Under on-going trading conditions, Newquay Airport is expected to show a large funding deficit even at an operational level with accumulated cash flows of £2.3m up to 2030. This is well below the cash levels required to financing the capex programme of £13.9m. Therefore it is assumed that public sector funding of up to £24m is required to fund the new terminal development (based upon capex to deliver capacity of around 2 mppa). The airport would also require borrowing of about £2.9m in order to cover the remaining operational gap. Under these funding assumptions, this venture produces a NPV of -£1m and an IRR of -0.8%.

Option 2: Exeter and Newquay airports only

2003-30 NPV IRR

Accumulated 10%

discount % £'000 £'000 EXETER Operating cash-flows 161,578 Cash available 133,666 Public funding - Cash before Capex 133,666 Capex 19,802 Net cash-flows 113,865 14,126 29.3% Total borrowings 10,196 NEWQUAY Operating cashflows - 5,220 Cash available - 7,764 Public funding 24,000 Cash before Capex 16,236 Capex - 13,850 Net cashflows 2,386 581 5.4% Total borrowings 2,947


Under option 2, Exeter Airport achieves an even stronger cash-flow performance. The Airport generates £161.5m in accumulative operational cashflows by 2030 of which £133.7m would become available for funding capex requirements. The airport’s net cashflow reaches £113.9m after deducting capital investment requirements. Total borrowing requirements are slighter higher than previous scenario totalling £10.2m. It produces a NPV of £14m and an IRR of 29.3%.

On the other hand, Newquay Airport cash position deteriorates further. Deficit on operating cashflows reaches -£5.2m by 2030. The total cash deficit including capital expenditure requirements reaches a level of -£21.6m. Assuming public funding of around £24m is granted to this airport, the net cashflow is adjusted to £2.4m. This produces a NPV of £581,000 and an IRR of 5.4%.


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Option 3: Newquay and proposed new South Hams airports

2003-30 NPV IRR 2003-40 NPV IRR Accumulated 10% discount % Accumulated 10% discount % £'000 £'000 £'000 £'000 NEWQUAY Operating cash-flows - 5,220 Cash available - 7,480 Public funding 24,000 Cash before Capex 16,520 Capex - 13,850 Net cash-flows 2,670 -435 6.4% Total borrowings 2,808 SOUTH HAMS Operating cash-flows 156,160 288,043 Cash available 101,218 123,646 Public funding 65,000 65,000 Cash before Capex 166,218 188,646 Capex - 138,060 - 138,060 Net cash-flows 28,157 -20,373 2.4% 50,585 -13,932 6.6% Total borrowings 70,755 70,755


Under option 3, Newquay Airport’s cash position is similar to that shown on Option 2. The airport is projected to show an operational cash deficit of -£5.2m, which further deteriorates when capital investment requirements are added. The cash gap reaches £21.3m by 2030. Assuming public funding of around £24m is granted to this airport, the net cash-flow deficit is narrowed to -£2.6m. It would still require borrowing additional £2.8m on commercial loans to cover operational and treasury deficits. The airport has a negative NPV of £435,000 and an IRR of 6.4%.

The proposed new South Hams Airport cash-flow position changes dramatically if we appraise it under two different time scales: 2010-2030 and 2010-2040. The Airport would generate £156m and £288m in cash respectively. Although it is enough to cover the capital requirements of £138m, the cash pressures experienced in early stages of development (negative cash-flow generation during first 5 years) lead to a large funding gap. If such a gap were covered on a commercial loan basis only, it would become financially unviable. However, if we assume that almost half of capital expenditure requirements are supported through public funding (around £65m), the project becomes viable financially. The venture generates a NPV of -£20.3m with an IRR of 2.4% for period 2003-2030; while in a longer time scale (2003-2040), it shows a NPV of -£13.9m and an IRR of 6.6%.


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6.3.14 Conclusions

Of the three options, Option 2 (i.e. Exeter and Newquay airports only) would appear to be the most attractive proposition from a purely financial point of view. This option requires less public funding, with total funding standing at £24m.

Newquay Airport is loss making on all of the options appraised.

Option 1 ranks as the second best alternative financially. Under this option, Plymouth and Newquay airports negative NPV are somehow offset by Exeter airport’s strong financial performance. However, this option would require a larger government funding of £33m (£9m and £24m for Plymouth and Newquay respectively).

Option 3 is the worst-case scenario with both airports, Newquay and the proposed new South Hams, generating large cash shortfalls. NPVs for both airports are negative and this option would require at least £89m in public funding to become financially viable.

Other general recommendations can be drawn from this financial appraisal. These are summarised under the followings issues:

• Development of alternative revenue streams for all airports. As traffic develops, airports should be capable of maximising income generation from other sources such as car parking, retailing and catering. These activities increasingly represent the bulk of non-aeronautical income for a large number of UK airports.

• Another important income stream for many airports comes from property development related activities such as MROs and office developments. Obviously, potential for property development depends in great measure to internal and external factors such as land availability, location, surface access, etc.

• Finally, when establishing traffic charges, particularly those aimed at attracting low-frill operators, these should take into consideration potential infrastructure developments that airports would face in order to accommodate these incremental traffic levels.

• Alternative funding vehicles are discussed in Chapter 7.


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6.4 Economic Appraisal

6.4.1 Introduction

This chapter describes our appraisal of the economic impact of alternative options for air transport in the far South West. It is divided into three main sections:

• Section 6.4.2 sets out the economic context against which the options are assessed, in particular highlighting the impact that the far South West’s remoteness has had on its industrial structure and hence its prosperity (an expanded discussion of the region’s economy is provided in an Annex to this section of the report);

• Section 6.4.3 analyses the existing contribution of aviation to the South West economy, both in terms of its direct, indirect and induced contributions to employment and in terms of its role in facilitating inward investment, tourism and trade; and

• Section 6.4.4 assesses the economic impact of the three development options for air transport in the far South West, using Oxford Economic Forecasting’s (OEF) regional aviation model. This section ends with some additional comments on how the appraisal might be affected by a higher underlying demand forecast for aviation in the far South West, and by a summary of the implications of the analysis for assessing the impact of closing Plymouth airport.

6.4.2 An Overview of the South West Economy

While the economy of the far South West has expanded strongly since the early 1990s, living standards remain much lower than in both the South West Government Office Region (GOR) as a whole and the UK. As Figure 25 illustrates, Gross Value Added (GVA) per head in the far South West was only around 75% of the UK average in 1998 (the latest available data) – a differential that hasn’t narrowed over the previous five years. More details on how this varies across the region and more information supporting other points made in this section are contained in the references noted at Appendix C.

Figure 25 - Gross Value Added per head in the far South West

Moreover, while labour market conditions in the far South West have improved in recent years, they remain significantly worse than across the South West GOR as a whole. Unemployment rates are

7000

8000

9000

10000

11000

12000

13000

14000

1993 1994 1995 1996 1997 1998 19997000

8000

9000

10000

11000

12000

13000

14000£ per head £ per head

UK

South West

Source: ONS

Far South West

South West: GDP per head


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over 6% in Plymouth and Cornwall/Isles of Scilly compared with 3.8% for the South West GOR, while employment rates are well below 75% in Plymouth, Cornwall/Isles of Scilly and Torbay compared with over 79% across the whole GOR.

The need to promote activity in the far South West is recognised both by the UK government and the European Union. A third of the European Commission’s overall budget is spent on supporting social and economic restructuring in those EU regions that have relatively low living standards. The highest level of support – Objective One status - is only available to areas that have less than 75% of EU average GDP. Cornwall and the Scilly Isles is one of those areas, which in UK terms makes it comparable to Merseyside, South Yorkshire and West Wales and the Valleys. Other parts of the South West, including Plymouth, North Devon, South Hams, Torquay, Torridge, West Devon, West Somerset and parts of Bristol have Objective 2 status, which gives access to EU funds to aid structural redevelopment under four different headings: industrial, rural, urban and fisheries.

The underperformance of the far South West economy primarily reflects the nature of economic activity in the region. In particular, activity in the far South West tends to be concentrated in relatively low productivity sectors. For example, 2.1% of employment is in agriculture, hunting, forestry and fishing, compared to 1.0% for the UK as a whole; 30.9% is in the public/education/health sectors compared with 24% for the UK; and 27.9% is in distribution, hotels and catering compared with 23.9% for the UK. The far South West is particularly under-represented in the higher productivity financial and business services sector, even though these sectors are flourishing in other parts of the South West GOR (e.g. Swindon, Bristol).

The sectoral mix of the far South West economy – in particular, its relative reliance on agriculture and public services – in significant part reflects its remoteness from key markets in the rest of the UK and Europe and the difficulties of transporting people and goods to/from the area. As a consequence, the far South West economy is very insular (‘closed’), trading relatively little with the rest of the world, when compared to other regions of the UK. For the South West GOR as a whole, exports overseas account for just 11% of GDP, the lowest export share of any region in the UK, with Germany the key export market. But exports overseas account for only about 7% of GVA for Devon and less than 4% for Cornwall/Isles of Scilly. Similarly, imports into the region are very low.

Similarly, the region’s remoteness and poor transport links contribute to its relative lack of success in attracting foreign direct investment (FDI). While the South West GOR as a whole has attracted 7.5% of the jobs created in the UK by FDI in recent years – in line with its share in UK GDP – the majority of this has gone to the large towns/cities in the east of the region. Plymouth attracted just 9% of inward investment between 1998 and 2001, while Exeter received just 1%.

Its remoteness and transport problems have not, however, prevented the far South West from developing as one of the UK’s most important tourist destinations (although they have restricted its ability to expand this business). The far South West received 6.9% of the total number of visits (both overseas and domestic) in the UK in 2001 and 7.9% of the nights spent by travellers. However, visitors to the far South West typically spend rather less than to other UK destinations. As a result, holiday visitor spending in the far South West was only 6.2% of the UK total in 2001. Thanks mainly to the success of the Eden Project; there is evidence that more of the region’s visitors are being drawn to the far south west. In 2000, when the Eden project was under construction, but still attracting some visitors, Cornwall attracted 22.1% of all visitors to the South West. In March 2001 the project was fully opened and during the year, there were 1.7 million visitors, nearly twice as many as the Roman Baths in Bath (the second most popular charging attraction). Consequently, the share of Cornwall in overall overnight visits to the South West increased to 27.7% in the course of one year. And while there is no information on day-trippers at a county level, a similar pattern is no doubt present there.

Looking purely at overseas visitors suggests the far South West is under-performing compared with the region as a whole. This is crucial; as these are the visitors that tend to have the highest spend.


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Overseas visitors

Total Holiday Business

Visits Nights Spending Visits Visits

(000s) (000s) £million (000s) (000s)

UK 22835 189516 11167 7590 6772

South West 1927 15044 635 822 346

% of total UK 8.4 7.9 5.7 10.8 5.1

Far South West 591 4993 186 300 62

% of total UK 2.6 2.6 1.7

Bristol UA 317 2642 109 96 108

Cornwall 200 1475 55 116 12

Devon 391 3518 131 184 50

Dorset 261 2840 134 98 31

Gloucestershire 179 1048 50 76 33

Somerset 419 2618 108 195 70

Wiltshire 160 903 48 57 42

Source: ONS Travel trends

Table 31 -Number of Visits, Nights and Spending by UK Region of Visit 2001

6.4.3 The Economic Role of the Aviation Industry in the Far South West

CAA estimates show that South West residents have one of the lowest propensities to fly in the UK (ranked 9 out of the 12 GORs). This measure – defined as the total number of return air journeys made by South West residents and visitors per head of South West population – is illustrative of the rather limited links by air that currently prevail. The CAA also estimates that over 65% of those who do travel by air leave the region to do so, a rate of “leakage” only exceeded by Yorkshire and Humberside in the UK.

One result of this is the rather limited number of direct jobs created by the aviation industry in the region at the moment, and a correspondingly limited contribution to GDP. In the UK as a whole, aviation adds over £10 billion to GDP (around 1.4% of the total) according to OEF’s earlier study on the contribution of aviation to the UK economy (based on figures for 1998). But the importance of the industry varies widely across different parts of the UK, ranging from an estimated 3.2% of London’s GDP and 1.8% of the South East’s, down to 0.3% in the South West and 0.2% in Yorkshire & Humberside.

The direct contribution to the far South West economy is comparable to the lowest share of aviation in regional GDP in the UK, at 0.2%. This is below the share for the South West GOR as a whole because the region’s biggest airport, Bristol, lies outside the far South West. In employment terms, direct aviation-related employment at a national level accounts for around 0.8% of the workforce – in the South West it is just 0.2% and in the far South West it is only 0.15%.

In addition to direct employment in aviation, there are significant numbers of jobs supported by the purchases made by the aviation industry, referred to as indirect employment. These jobs, which are


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up the supply-chain from the aviation industry, include employment in the energy sector associated with purchases of fuel, the aerospace sector, providers of IT equipment, construction workers and the producers of goods sold in the shops in terminal buildings. Our analysis shows that in general for every direct job created by the industry, another 1.3 indirect jobs are created, some of which are in the local economy but some of which depend on aviation services provided in other parts of the country. We estimate 0.5% of jobs in the South West GOR, and 0.35% of jobs in the far South West, are indirectly dependent on the aviation industry, compared with 0.8% for the UK as a whole.

An additional contribution of aviation to employment in the region comes from induced employment. Direct and indirect employees in the aviation sector create induced employment through their spending on goods and services. Nationally, the amount of induced employment resulting from this spending was 25% of all the direct and indirect jobs in the industry, this figure being based on results from OEF’s Macroeconomic Model of the UK economy. The regional distribution of this impact will depend primarily on where employees live; most of their spending will remain within the South West.

We assume that 50% of induced jobs remain within the region, while 50% is in the rest of the UK; the regional split depending on the importance of the tradeable sectors in each area. Consequently, some of the induced jobs in the South West will actually reflect activity in the aviation industry in other regions. All-in-all, induced employment accounts for 0.4% of total UK employment, 0.3% of total South West employment and 0.2% of employment in the far South West.

So in total, the aviation industry accounts for only 0.9% of all jobs within the South West, reflecting the relatively small number of passengers that use the region’s airports. For the far South West, the industry’s contribution is even lower – just 0.7% of employment.

(% of area total employment or GDP)

Far SW South West UK

GDP 0.2% 0.3% 1.4%

Employment

Direct 0.15% 0.2% 0.8%

Indirect 0.35% 0.5% 0.8%

Induced 0.2% 0.3% 0.4%

Total of above 0.7% 0.9% 2.0%

Source: OEF estimates, based on figures for 1998

Table 32 – The Economic Contribution of the Aviation Industry in the far South West

Moreover, the far South West does not have a large concentration of industries that are particularly dependent on air services. As already noted, the region has a relatively low share of its economy in the high value-added sectors such as financial and business services, communications services and high-tech parts of manufacturing that tend to be among the industries most reliant on good air services, either for meeting with clients or transporting goods to and from their production facilities. In addition it is these sectors that are growing most rapidly. Table 33 ranks industrial sectors by rates of growth between 1991 and 2001, and also ranks them by spend per employee on air transport. Regions, which have a combination of sectors with high growth and a high spend per employee on air transport, will result in a higher overall propensity to fly.


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1991-2001 average growth (i) (ii) (iii) Spend per employee (1999) Rank % year Rank Insurance 2912.44 15 1.39 1 Banking & finance 1578.74 9 3.83 2 Transport 1435.5 10 3.64 3 Extraction 1027.38 11 2.96 4 Communication 904.01 3 14.3 5 Coke, petroleum & nuclear fuel 664.07 27 -0.35 6 Real estate & renting 375.61 7 4.88 7 Basic metals 369.84 34 -1.17 8 Other chemicals 360.63 13 1.83 9 Other business activities 299.92 4 8.54 10 Printing & publishing 284.2 18 0.99 11 Non-mineral extraction 278.15 26 -0.21 12 Motor vehicles, parts & accessories

269.51 14 1.59 13

Computer activities 203.19 2 18 14 Computers & office equipment 188.08 1 31.85 15 Electronic equipment 164.8 5 7.79 16 Other means of transport 161.56 22 0.49 17 Distribution 156.45 8 3.98 18 Paper & pulp 155.47 31 -0.88 19 Precision & optical instruments 147.22 20 0.77 20 Electrical engineering 135.72 25 -0.14 21 R & D 134.88 19 0.98 22 Other manufacturing 100.07 21 0.5 23 Food, beverages & tobacco 89.11 23 0.36 24 Hotels & catering 75.6 24 -0.06 25 Non-market services 67.51 32 -0.89 26 Rubber & plastics 66.92 16 1.36 27 Pharmaceuticals 63.63 6 7.32 28 Mechanical engineering 57.45 29 -0.75 29 Construction 55.54 17 1.04 30 Textiles, leather &clothing 51.09 35 -2.88 31 Metal products n.e.c 50.75 28 -0.58 32 Agriculture, forestry & fishing 23.98 33 -1.05 33 Electricity, gas & water 17.9 12 2.27 34 Wood & wood products 11.7 30 -0.8 35 Spearman's Rank Correlation 0.46 Source: OEF & OEF calculation based on input-output supply and use balances, 1999

Table 33 - Sectoral Growth and Spend per Employee

But this does not mean that air services are unimportant to the economic performance of the far South West.


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For one thing, they provide a key mode by which tourists arrive in the region. Table 34 shows that most overseas visitors to the South West arrive by air, and this tendency is increasing slightly over time. Most of these people however do not arrive at the region’s airports, which illustrates a possible opportunity to expand tourism entry via the far South West’s airport.

Table 34 - Model of Travel of Visitors to the South West

More generally, there is evidence that changes to the provision of air services have had significant impacts on companies in the far South West. For example, the Plymouth Manufacturers’ Group – which represents large engineering companies in the area employing around 7,000 workers, and which form a network of skills and knowledge, supporting the presence of many smaller firms in the supply chain – reports major adverse effects from the shift of the Newquay/Plymouth – London link from Heathrow to Gatwick in 1997. In particular, the loss of the Heathrow link removed many of the options of those wishing to fly to London and then continue their journeys overseas. Around 75% of the Group’s members are foreign owned companies and for them links to headquarters are vital. Those who are part of a Japanese group have suffered more than most, as there is no Gatwick-Japan service, and the inconvenience of transferring to Heathrow is a major deterrent. Although clearly there may be other issues involved, two out of the three firms leaving the Group in the last year have relocated elsewhere in Europe.

The experiences of the Plymouth manufacturers – who emphasise the importance of face-to-face discussion in making business contacts and the need to give suppliers access to customers – is echoed by the findings of the Thin Routes Study, which surveyed five companies on the consequence of the loss of the Plymouth-Heathrow link. Most of these companies were big users of aviation and regarded air travel as very important, indeed crucial in one case, to their business activities. These firms all emphasised the difficulties faced in getting to meetings overseas and the increased isolation from other parts of their business. Perhaps the strongest statement came from one MD, of a firm with a £60 million turnover in 1999, who said that if making a location decision now, Plymouth would not be chosen given the deterioration in air links. Another company stated that if Plymouth airport were to close, many businesses might leave the area.

Some of the difficulties faced by firms in the South West who rely on air travel to sustain and grow their relationships with overseas colleagues and customers is clear from a recent survey of 55 South West firms. The results show 25 out of 51 respondents reporting air travel as essential to their business, in order to develop market opportunities and encourage inward investment. Heathrow is by far the most important airport for business in the region and Bristol is a clear leader in the region itself. Meanwhile, the airports in the far South West are used fairly infrequently; indeed few of those surveyed seemed to be using the Gatwick-Plymouth link, with most driving to Heathrow to pick up direct flights there. This reflects the sheer inconvenience of travelling to Gatwick and Heathrow to get the right flight for an onward journey. The survey reveals that travellers would like to use their local airport, provided there were more destinations served, more direct flights and greater frequency. Not many of the respondents stressed the need for better direct links to London. This may be because they are mainly interested in the possibility of taking onward flights and would prefer better links to Europe.

(% of total visits)

Air Sea Tunnel

1999 64 26 9

2000 68 24 8

2001 67 25 7

2002 70 23 7

Source: VisitBritain


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This evidence clearly suggests that the poor quality of air services in the far South West is an important factor contributing to the region’s underperformance in trade and inward investment highlighted in Section 6.3.2, and hence to its relatively low living standards. In the next section, we consider the impact that three different options for the future development of the airports in the region would have on its economic performance over the next 30 years.

6.4.4 The Macroeconomic Implications of the Three Scenarios for the South West Economy

In quantitative terms we have focused on three main avenues through which different scenarios for the future of aviation in the far South West would impact on the economy, the first two of which were analysed using OEF’s regional aviation model, while the third is analysed separately since it is not covered in the model:

• Different numbers of passengers using the region’s airports would have implications for the level of direct aviation jobs supported, with similar impacts on indirect and induced jobs.

• Different numbers of business passengers flying to or from the region would have implications for the overall competitiveness of the area, with potential effects on Foreign Direct Investment, trade and productivity growth.

• Different numbers of leisure passengers flying to or from the region would have implications for the development of tourism in the area and the number of jobs supported in the tourism-related sectors.

The different aviation options for the far South West will bring different patterns of business and leisure passengers into the region. An estimate of the implications for the far South West economy of the three different scenarios outlined for the aviation industry is gained by feeding the different projections on passenger numbers into the OEF regional aviation model. This is an econometric model based on OEF’s established UK Regional Model, which examines the connection between aviation and overall economic activity in each of the government office regions.

The equations in the model create a link between passenger numbers and, in the first instance, employment. For the purpose of this exercise, four different types of passenger are distinguished, that is (i) UK terminating business passengers, (ii) UK terminating leisure passengers, (iii) overseas terminating business passengers, and (iv), overseas terminating leisure passengers. (We have assumed there is a negligible difference between the options in terms of passengers using the region’s airports to transfer between flights – the fifth type of passenger identified in the OEF model).

Not only can passenger numbers split by type of flight, but also by type of passenger for each airport in the different scenarios. Whether passengers are arriving for business and leisure, and whether they are coming from the UK and overseas has a different implication for economic activity in the region. The split fully reflects the composition of the flights and destinations specified under the three alternatives. For example, flights from Brussels tend to have high concentrations of business passengers, while outbound charter flights are exclusively associated with UK leisure passengers.

We regard the first option, implying continued activity at Exeter, Plymouth and Newquay, as broadly consistent with the results in OEF’s report, The Economic Contribution of Aviation to the UK: Part 2 – Assessment of the Regional Impact52. The other options, confining activity to Exeter and Newquay, or closing Exeter and Plymouth and retaining Newquay and a new airport in the South Hams, are therefore evaluated by looking at the change in passenger numbers in each of the categories from Option 1, as shown in Table 35.

52 The Economic Contribution of Aviation to the UK: Part 2 – Assessment of the Regional Impact. May 2002


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In both options 2 and 3, there are fewer passengers in 2030 than in the base case scenario: by 2030, there are 54,000 less in Option 2 and 250,000 fewer in Option 3. With employment directly linked to passenger numbers, this leads to fewer direct, indirect and induced jobs created by the industry. But there are also shifts in the split of passengers between business and leisure passengers, and between UK and overseas passengers, reflecting the splits of the different routes expected at the different airports under each option.

Table 35 - Origin of Passengers by Type

The overall impact of the different aviation options, shown in Table 36 is relatively small, reflecting the relatively minor changes in passenger numbers. Looking at the differences between Option 2 and Option 1, there is a small boost to aviation-related jobs in 2015 when passenger numbers arriving in the region are higher, but by 2030, little change is seen. Option 3 (Newquay and South Hams) has a bigger impact on aviation-related employment. The 7% drop in overall passenger numbers in 2030 between Option 3 and Option 1 leads to an estimated 300 reduction jobs directly and indirectly.

dependent on aviation.

Table 36 - Forecast Employment and Output

Employment and Output

2015 2030 2015 2030 2015 2030(000s)Direct employment 4.8 7.2 4.8 7.1 4.8 7.0Indirect employment 14.1 17.1 14.1 17.1 14.0 17.0Induced employment 7.8 9.1 7.8 9.1 7.8 9.1

Contribution of aviation 26.6 33.4 26.7 33.3 26.6 33.1to employment

Total SW employment 2606.6 3050.5 2608.7 3053.9 2607.3 3051.5

SW GDP (£mn 1995 prices) 84393 133803 84543 134175 84454 133941

Option 1 Option 2 Option 3

Origin of passenger by type Option 1: Exeter, Plymouth and Newquay

Exeter Plymouth Newquay Total Exeter Plymouth Newquay TotalInternational Business 34,994 18,451 18,064 71,509 103,557 35,888 53,102 192,547International Leisure 45,496 8,765 54,831 109,092 270,267 18,869 47,593 336,729Domestic Business 140,357 55,707 180,191 376,255 345,391 110,395 370,190 825,975Domestic Leisure 725,358 98,448 280,018 1,103,824 1,523,549 189,942 541,567 2,255,058Total 946,205 181,371 533,105 1,660,681 2,242,763 355,094 1,012,452 3,610,309

Option 2: Exeter and Newquay Exeter Newquay Total Exeter Newquay Total

International Business 72,330 27,653 99,983 159,062 56,904 215,966International Leisure 110,506 24,606 135,113 287,754 74,842 362,596Domestic Business 233,839 207,867 441,706 454,350 395,668 850,018Domestic Leisure 772,307 317,772 1,090,079 1,542,348 585,040 2,127,387Total 1,188,982 577,899 1,766,881 2,443,514 1,112,454 3,555,968

Option 3: South Hams and Newquay South Hams Newquay Total South Hams Newquay Total

International Business 104,083 26,748 130,831 220,123 54,186 274,309International Leisure 87,307 35,166 122,472 252,944 76,308 329,252Domestic Business 154,820 200,403 355,222 399,123 374,691 773,814Domestic Leisure 742,276 288,335 1,030,611 1,449,580 536,492 1,986,072Total 1,088,485 550,652 1,639,137 2,321,769 1,041,678 3,363,447

2015 2030


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But there is a bigger impact on the overall level of employment in the region from the number of business passengers expected in each option. This is a reflection of the impact on the area’s competitiveness this is expected to have, with the number of business connections affecting the cost of doing business for sectors that make significant use of aviation, and affecting how attractive it is for such companies to locate in the area. The numbers of business passengers also potentially affect the long-run rate of productivity growth in the region through a number of avenues discussed in OEF’s earlier report on the Contribution of Aviation to the UK Economy – for example by affecting the degree of competition local firms are subject to or the rate of diffusion of new technology.

Options 2 and 3 are expected to lead to greater use of air services in the far South West by foreign businesses. This is particularly true for option 3, but here some of the effect is offset by a forecast reduction in the number of UK business passengers. So option 2 is expected to see the greatest business use of far South West air services, and this is reflected in an increase in overall regional employment of 3,400 (0.1%) modelled under this option by 2030 compared with Option 1. And the potential impact on productivity from increased business use means the modelled increase in GDP compared with option 1 is greater than the modelled increase in employment, at 0.3%.

The development of sufficiently attractive air services for businesses is a real issue for the far South West if policies to encourage economic growth are to succeed. Many of the newer industries that the RDA is keen to encourage in the region make relatively high use of air services, and clusters of activity in biotechnology, environmental services or creative industries are in danger of locating elsewhere if the peripherality of the far South West is not countered by sufficiently attractive air services. If companies in sectors such as these are discouraged from locating in the far South West, both employment and productivity are likely to suffer as illustrated by our model.

Table 37 - Impacts of Options 2 and 3 – Difference from Option 1

But in addition to changes in the number of business passengers expected under the different options, there are also significant differences forecast in the number of leisure passengers, which is likely to impact on the local tourism industry. Option 2 is projected to see an increase in the number of overseas leisure passengers compared with Option 1, but a bigger reduction in the number of UK leisure passengers. Option 3 is projected to show a similar pattern in 2015, but by 2030 the projections show a reduction in the numbers of both overseas and UK leisure passengers.

Some of these visits might have occurred anyway via other UK airports or road, but we believe it is reasonable to assume that most of any changes in overseas leisure passenger numbers reflect net additional trips by foreigners to the UK (with half the number of additional trips as there are additional passenger movements). For UK leisure passengers, translating additional passengers into additional trips is more complicated, since those on charter flights will typically represent people from the South

Impact of options 2 and 3Differences from Option 1

2015(000s) (%) (000s) (%) (000s) (%) (000s) (%)

Direct employment 0.1 1.6 0.0 -0.4 0.0 -0.3 -0.1 -1.8Indirect employment 0.0 0.3 0.0 -0.1 0.0 -0.1 -0.1 -0.5Induced employment 0.0 0.0 0.0 -0.2 0.0 -0.3 0.0 -0.5

Contribution of aviation 0.1 0.4 -0.1 -0.2 -0.1 -0.2 -0.3 -0.8to employment

Total SW employment 2.1 0.1 3.4 0.1 0.7 0.0 1.0 0.0

(£mn (£mn (£mn (£mn 1995 prices) (%)1995 prices) (%) 1995 prices) (%) 1995 prices) (%)

SW GDP 149.6 0.2 372.0 0.3 61.2 0.1 138.0 0.1

Option 22030

Option 32015 2030


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West travelling away for a holiday and returning, rather than an additional inbound trip, while other UK leisure passengers include both inbound and outbound trips between UK regions. The analysis below assumes 10% of additional UK leisure passengers represent additional trips into the region.

In 2001, each UK trip generated £166 and every visit from abroad £317. More up to date international figures for 2002 show that spend per trip by overseas visitors rose to £368. Underlying that headline figure, there are differences between nationalities. The most important single country in terms of visits is the USA with a 16% share, and spend per visit around the average. The figures also show that French and Irish trippers spend less per visit than German and Italians.

Figures from the Eden Project hint at some of the opportunities. The project attracted 1.285 million visitors in April-September 2001, 1.18 million of whom were on holiday. Internal research suggests 518,600 of these people came to the county primarily because of Eden, and their spend amounted to £129,606,510, of which £113,636,211 was outside the Eden Project in the local economy.

Getting more ‘up-market’ tourists into the South West of the sort already attracted to the Eden Project could more than offset the impact of fewer overall leisure passengers. VisitBritain calculates holidays in the UK – by UK residents and those from overseas, together with visits by day-trippers - generated spending of £73 bn in 2002, supporting around 2.1 million jobs in the economy. Consequently, every £34,619 of spending supports one job. Potentially, the number of extra tourists assumed in Option 2 could increase spending (in today’s prices) by around £5 million a year in 2015, and by half this in 2030, as shown in Table 38. This assumes that extra UK and overseas visitors spend the same per trip in real terms as they did in 2002 – if the visitors attracted are more ‘high-value’ the figures could be more. Assuming the relationship between spending and jobs remains the same, around 100 extra jobs would be created in Option 2 in 2030, but the drop in UK leisure arrivals implies a fall in employment in Option 3 in 2030.

Table 38 - Potential extra spending (£m)

These calculations, based on spending per visitor trip, could underestimate the impact of changes in tourism if future visitors attracted are more likely to fall into the ‘up-market’, higher-spending bracket. This is an important element of plans for re-vitalising some of the tourism-dependent parts of the far South West economy, and air services are a significant factor in this since more up-market tourism tends to make more use of aviation.

There are also other potential spin-off effects for employment from tourism-related developments since making the far South West a place to attract high-spending tourists will also help make it an attractive place for high-quality staff to live, helping to encourage companies to locate in the area. Dynamic small companies in sectors where location is mobile may be particularly attracted to the

Potential extra spending (£m)

(difference from Option 1)2015 2030

Option 2 UK -0.3 -2.5Overseas 4.8 4.8Total 4.5 2.3

Option 3 UK -1.4 -5.2Overseas 2.5 -1.4Total 1.1 -6.6

Potential extra jobsOption 2 247 125Option 3 57 -359


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area since the choice of location can be made by a small number of people who might be attracted to an area after staying there on holiday.

6.4.5 Impact of High Forecasts

The report also discusses the potential consequences of significantly higher underlying demand for air transport services. In the high-growth scenario options, the stronger demand for air services in the far South West generates more jobs in aviation itself. And it also reinforces the economy’s competitiveness through greater accessibility for businesses, and supports tourism through stronger visitor demand.

But the main drivers of the differences between the options being analysed remain similar. Direct employment depends primarily on the overall numbers of passengers. In the high growth scenario, Option 2 is expected to lead to as many passengers as Option 1, so there is no longer a small loss of aviation jobs in this option in 2030 compared with Option 1. The knock-on effects of changes in the numbers of business passengers are still likely to arise, albeit from higher levels of business passenger usage – so the impact of this on improving the competitiveness of the far South West economy is still expected. For leisure passengers, the high growth scenario still suggests fewer UK leisure passengers in the far South West under Options 2 and 3 than under Option 1, albeit at higher overall passenger levels, so the potential for negative impacts on tourism from these options relative to Option 1 remains.

6.4.6 The Economic Impact of Closing Plymouth Airport

The economic appraisal of the three options covered in this report clearly has implications for assessing the economic impact of closing Plymouth airport, since two of the options covered include this happening. However, given the potential significance of such a step for the local economy, we have drawn together relevant parts of the analysis here.

Of the three options covered, only Option 1 retains Plymouth airport – Option 2 retains Exeter and Newquay as the far South West airports, while Option 3 includes the additional step of replacing Exeter airport with a new airport at South Hams. The model-based analysis of closing Plymouth airport, therefore, is reflected in the differences between Option 1 on the one hand, and either Option 2 or Option 3 on the other hand. Since differences have been expressed above relative to Option 1, this makes it easy to see the implied assessment of the impact of closing Plymouth:

• Aviation-related employment itself is not expected to be substantially affected, since the passenger forecasts show the majority of Plymouth passengers being replaced by passengers at other far South West airports;

• Business travel is potentially higher under the options that do not retain the use of Plymouth airport, primarily because of the limitations on the services that can be offered from Plymouth, and therefore these options generate higher spin-off benefits from business use;

• On the other hand, leisure passenger use of far South West airports is expected to be lower under the options that do not retain the use of Plymouth airport, particularly UK leisure passenger use. The net impact of this on the local tourism industry is difficult to assess, particularly since the largest part of UK leisure passenger use represents outgoing trips rather than incoming ones.

Clearly, the model-based analysis does not show the whole picture. It is clear from the comments of local Plymouth companies discussed previously that in individual cases there are clear risks of companies leaving the area if the airport closes. For example, the Plymouth Manufacturers’ Group (PMG) – which represents large engineering companies in the area employing around 7,000 workers, and which form a network of skills and knowledge, supporting the presence of many smaller firms in the supply chain – reports major adverse effects from the shift of the Newquay/Plymouth – London


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link from Heathrow to Gatwick in 1997. The experiences of the Plymouth manufacturers is echoed by the findings of the Thin Routes Study, which surveyed five companies on the consequence of the loss of the Plymouth-Heathrow link. Most of these companies were big users of aviation and regarded air travel as very important, indeed crucial in one case, to their business activities. These firms all emphasised the difficulties faced in getting to meetings overseas and the increased isolation from other parts of their business. Perhaps the strongest statement came from one MD, of a firm with a £60 million turnover in 1999, who said that if making a location decision now, Plymouth would not be chosen given the deterioration in air links. Another company stated that if Plymouth airport were to close, many businesses might leave the area.

The PMG state that there aspiration is for “ a fast, reliable and cost effective air service to London (preferably Heathrow) from an airport readily accessible to Plymouth – no more than 40 to 45 minutes journey time – and an airport capable of developing links to European cities”53

Furthermore the Wrigley Company stated that “it is impossible to overestimate the effects the loss of the Gatwick route on companies who, in the longer term, may need to consider drastic options such as relocation”54

It is very difficult to quantify the loss of jobs to the Plymouth area that might be involved if the airport were to close since there any many other factors affecting the location of companies and inward investment in addition to the availability of air services. Nevertheless, it is important to stress that on the basis of the passenger forecasts we have based our analysis on, the model analysis implies that in the medium term we might expect that jobs are lost as companies making significant use of the airport are forced to relocate to be replaced by other companies using services from other far South West airports.

If we are right in our assessment that the long-run potential for business use of air services is greater from the far South West airports under Options 2 and 3, then in the long run the jobs lost in the Plymouth area might be more than replaced elsewhere in the far South West. However, there would still undoubtedly be adjustment costs involved. And if there is an element of inertia in the current situation, this also casts doubt on whether all the jobs lost at Plymouth would be replaced elsewhere in the far South West. For instance companies currently located at Plymouth might not locate in the city if they were making the decision now, given the deterioration in the availability of air services. If they were forced to make the decision afresh by a switch of services from Plymouth to Newquay and or Exeter the decision might be made to relocate outside the far South West, even if the business air services on offer at the alternative airports were at least as good as those currently available.

The scale of effects estimated for the region as a whole in our modelling, suggests that a long-run effect from a loss of competitiveness for the area in the range 2,000-5,000 jobs might not be unreasonable.

6.4.7 Conclusion

Although there is little to choose between the three options in terms of passenger numbers, the benefits derived from bringing extra overseas business and leisure passengers into the region yields a slight preference for Option 2 – confining activity to Exeter and Newquay. Despite passenger numbers varying by as much as 250,000 across the three options by 2030, this difference is not large enough to generate significant differences in aviation related employment. Option 2 implies marginally fewer jobs will be created by the immediate impact of the aviation industry than in Option 1, where all three airports operate, but the loss in aviation related employment is slightly outweighed

53 Source – Letter from Mike Boxhall to AviaSolutions dated 26th May 2003.

54 Source – Letter from Dariusz Kucz, Managing Director UK & Ireland dated 30th May 2003


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by the positive spill-over on the far South West economy of more overseas business and leisure passengers


And Option 2 would also bring in more overseas leisure visitors than either of the other options. Even though fewer domestic visitors would arrive than if all three airports remained open, this is more than offset by the fact that overseas visitors spend a lot more than those from the UK. This spending would create fractionally more jobs in tourism than the other options.

Taking the second option does require the closure of Plymouth airport; this would undoubtedly hit the local economy as several firms could re-evaluate their location decisions. On balance, our analysis suggests that the number of jobs lost in Plymouth would be more than offset by those created elsewhere in the far South West, but there is inevitably uncertainty about this and clearly there would be short-term adjustment costs.

Relative to the option assessed with the highest economic benefit (Option 2), Option 1 has the advantage that the dislocation effects at Plymouth would be avoided. And the passenger forecasts suggest it might generate slightly more passengers overall. But the flights available are expected to be less popular with business passengers, with the potential for a negative impact on the competitiveness of the far South West’s economy. Option 3 also has the potential to generate more business passengers than Option 1, but compared with Option 2 it suffers from the same dislocation costs of closing Plymouth, while the expected competitiveness gains from business travel are lower. It may also produce a less favourable mix of leisure passengers, and therefore lead to fewer jobs being created from tourism.


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6.5 Environmental Issues

6.5.1 Introduction

Within this section an assessment of the current environmental impact of the airports (and South Hams airport) is assessed before an examination of the effects of airport development. The impact has been assessed by key environmental parameters, they are:

• Vocational aspects and relationship to sites of notable environmental importance, such as SSSI’s and AONBs.

• Air Quality

• Water Run Off

• Noise Modelling

For noise modelling we have developed contours based on the CAA dBA Leq noise contour technique. We have in all cases, examined the ‘worse case’ scenario for airport development, they are:

• Current Plymouth Airport at 2030 (Option 1)

• South Hams Airport at 2030 (Option 3)

• Newquay at 2030 (Highest forecast demand) (Option 2)

• Exeter at 2030 (Highest forecast demand) (Option 2)

Population counts within the 57 Leq contour area have been included to allow the comparison of the various options. These data and the contours have been developed in conjunction with the CAA’s Environmental Research and Consultancy department.

6.5.2 Exeter

The airport is located in a rural area with the small village of Clyst Honiton lying on the western side and Rockbeare approximately 2 km to the east. There are a small number of residences and farms in the local vicinity. The airport currently receives around 4 noise complaints a year from the local community and these relate to circuit flying by light aircraft. The airport has entered into a voluntary agreement with the local authority on the control of aircraft noise and this has seen a dramatic fall in the number of noise complaints from 300-400 a year.

Overall, the size and aspect of the site in relation to the level of activity is advantageous in environmental terms. The distance to the perimeter and local community beyond mitigates ground and air noise and a good proportion of the emissions to air and water from the airfield. Levels of air pollution and numbers of local residents affected by noise are limited.

The local background ambient air quality is good with NO2 (a key indicator for aircraft-related emissions) at an annual mean of <10 ppb and no exceedences of the National Air Quality Strategy targets. The site contains a sewage works, which treats effluent from the airport and the adjacent business park with a consented discharge into the River Clyst, which appears to be at carrying capacity. The use of aircraft and pavement de-icers is exceptional and surface water passes through a storm water lagoon before discharge and can be contained in the event of a major spillage incident.


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The site (in common with other airfields of this age) is potentially contaminated with hydrocarbons from fuel, oil and waste oil storage and disposal; and heavy metals and organic pollutants arising from the disposal of sewage sludge.

There is a Wildlife Site of Local Importance bordering the airfield’s eastern perimeter but it is not considered of high value. There is a network of hedgerows and grasslands of medium to high value within the airport perimeter at the north-eastern boundary.

6.5.3 Plymouth

The airfield is situated on made land in an elevated position in the northern suburbs of the city. Residential properties abut the perimeter and a significant population lies within the 57 dBA Leq noise contour. A substantial proportion of current movements are taken up by helicopters. Air quality in Plymouth is the poorest in the region as a whole (although within NAQS limits in the vicinity of the airfield), but the impact of airport emissions at the current rate of traffic is low.

The local authority has imposed operating restrictions on the airport at night and the relationship with the local community is generally good, although there are issues around engine testing in the early morning.

Surface water from the site soaks away (including run-off from the Fire Training Ground) giving rise to the likelihood of on-going contamination of the soil, underlying strata and groundwater. As an ex-military airfield there is also the possibility of historic contamination. A redevelopment of the Fire Training Ground is proposed and the relationship with the Environment Agency, including a recent inspection, is good. No pavement de-icers are used and aircraft de-icing is exceptional. There are two small SSSIs at Plymbridge Lane and Estover Road adjacent to the airfield.

6.5.4 Newquay

Newquay/RAF St Mawgan is an extensive airfield in an elevated position in a largely rural area. Large areas of the site are now disused owing to changes in the operational nature of the base. The closest settlements are the village of St Mawgan and small hamlets along the northern perimeter. Some residential housing abuts the site here. Aircraft do not overfly Newquay and there are no homes within the 57 dB contour. A small number of noise complaints relate to night operations of Tornado aircraft. No noise complaints have been received relating to commercial operations, but the relationship between the local community and the commercial operation is at times poor and there is an active opposition group (the Friends of Langherne Valley) who have objected to recent developments, with visual impact a particular sensitivity (e.g. high level security lighting in the car parks).

Surface water drains through interceptors into a number of adjacent watercourses and ultimately into Watergate Bay. The runway and taxiways, together with the commercial terminal apron, soak away to groundwater. Aircraft and pavement de-icing is exceptional. There is an RAF officer with responsibility for environmental management on base and he holds appropriate discharge consents from the EA. Background air quality is good and well within the NAQS objectives for key aviation-related pollutants. Because of the long and complex history of military and now commercial uses, there is a likelihood of ground contamination. The Vale of Mawgan Area of Outstanding Natural Beauty lies to the north. The A39 access road runs through an area of high value ancient woodland and the mown area of the airfield represents grassland of significance at County level, largely because of its size.

6.5.5 Proposed New Airport (South Hams)

The total site area covers approximately 170 hectares of largely Grade 3 agricultural land, the most significant ecological features of which is likely to be the hedgerow network. There are 20 dwellings within the proposed boundary area. Air quality in the area is good and reflects the rural background of


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the region. An Area of Outstanding Natural Beauty lies to the south. No detailed environmental analysis of the site has been undertaken as part of the initial planning work on the new site.

6.5.6 Future Environmental Impacts

Introduction

In each case some key assumptions underlie the analysis of the three options. It is assumed that the growth in passenger numbers will lead to a greater efficiency in aircraft loads than at present with the additional introduction of larger modern aircraft to serve the charter sector at Exeter and Newquay. It is not known whether there will be a significant increase in night movements and it is assumed that the existing hours of operation and noise restrictions remain unchanged.

For the construction of noise contours, we have developed maps (Figures 26 to 30) that are based on the highest forecast demand for each airport within the baseline forecasts. Busy day schedules have been generated to enable modelling of the impact of the number of air transport movements, with a range of representative aircraft types assumed. The contours produced are based upon the industry standard unit of dBA Leq55. 57dBa Leq represents the outer boundary of Noise Exceedance Category (NEC) B in Planning Policy Guidance Note 24 (PPG24) and marks the onset of significant community annoyance.

Figure 26 - Plymouth Airport 2030 Noise Contours

55 dBA – LEQ is an index of equivalent continuous noise measured in decibels (db) weighted to the appropriate frequency response of human hearing (A weighted)


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Contour Number of people affected

1999 Base 57dB 1,400

2030 RRC 57dB 2,400

2030 Avia 57dB 4,900

Table 39 – Plymouth Airport Noise Characteristics

Figure 27 - Exeter Airport Noise Contour 2030


1999 Base 57dB 0

2030 RRC 57dB 700

2030 Avia 57dB 900

Table 40 – Exeter Airport Noise Characteristics


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Figure 28 - Newquay Airport Noise Contour


1999 Base 57dB 0

2030 RRC 57dB 0

2030 Avia 57dB <100

Table 41 – Newquay Airport Noise Characteristics

As part of our assessment of noise impacts for South Hams, we developed standard departure routes for the proposed airport. They are designed to minimise the overflying of populated areas. These are shown in Figure 29.


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Figure 29 - Standard Departure Routes for South Hams

Figure 30 - South Hams Airport Noise Contour


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2030 57dB 100

Table 42 – South Hams Airport Noise Characteristics

Option 1

Option 1 represents a ‘status quo’ scenario (albeit with some further development of current facilities) in which the existing airports remain open and no new site is developed. Exeter sees a trebling of passenger throughput by 2015, with Plymouth doubling and Newquay seeing a three-fold increase. By 2030, these throughputs have approximately doubled again. However, an increased efficiency in passenger loads is assumed with the additional introduction of modern technology jets to serve the large growth in operations at Exeter and Newquay, mitigating a proportion of the increased noise and emissions potential.

In terms of environmental carrying capacity, Exeter and Newquay are best placed to absorb such growth because of their rural setting and the existing low operational base and associated noise and emissions impacts. (No local residents fall within the Newquay 57 Leq contour in the present case or in the RASCO Case (broadly equivalent to Option One in this study) at 2030 and at Exeter there is moderate growth to include between 700 and 900 local residents within the contour at 2030 from base of zero.) Plymouth is the most sensitive site for noise and emissions because of the larger population affected by overflying (1,400 at present with between approximately 2,400 (RASCO) to 4,900 (Avia) by 2030 under Option 1) and urban background levels of pollution respectively. Nevertheless, at Plymouth, the growth is experienced from a very small base and the aircraft fleet is assumed to remain dominated by small turboprops, which prevents the much larger expansion of the contours and emissions inventory that would be expected with the introduction of jet aircraft. Airport related emissions at Plymouth are unlikely to have a significant impact on the local ambient air quality background.

All three airports however, have issues in relation to the management and disposal of contaminated surface water and trade effluent discharges from fire training grounds, aprons and other areas and it is likely that the Environment Agency would require upgrading of these facilities before such growth could be accommodated. The development of a new terminal and associated facilities at Exeter would involve some small scale but significant ecological losses but creates an opportunity to see a significant improvement to the quality of the River Clyst.

In broad terms, the available data indicates that the predicted growth in operations at all three airports can be absorbed into the carrying capacity of their local environments with the appropriate investment in environmental protection infrastructure (e.g. noise bunds, aircraft engine run pens, provision of interceptors/foul drainage etc) and the introduction of systematic environmental management and controls and community relations programmes.

Option 2

Under Option 2, Plymouth Airport closes, no new site is developed and the growth in passenger numbers (similar in scale as that under Option 1) is absorbed at Exeter and Newquay. Aircraft types and fleet mix are also consistent with the analysis for Option 1 and the conclusions for environmental impacts, including noise and air quality are similar at both sites with the added gain of the removal of up to 4,900 of population from the Plymouth 57 Leq contour and other associated environmental impacts of the airport. Given that the long-term viability of Plymouth is called into question without


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further extension to the length of the runway strip, the closure of the site would further safeguard the two SSSIs which lie to the south of the airfield from aviation related impacts.

Option 3

In Option 3, Plymouth and Exeter airfields close and it is assumed that the site at Exeter would be released for housing development. A new airport serving South Devon is developed in the South Hams area involving the take of a minimum 150 hectares of land plus new road links. Operations at Newquay remain within the scope of those predicted under Options 1 and 2 and are within the carrying capacity of the local area. The redevelopment of Exeter would remove up to 900 people from the 57 Leq contour, but in the worst case would result in the loss of the entire ecological value of the site, which is high in parts.

The development of a substantial regional airport in South Hams would represent a very significant environmental impact on an entirely rural landscape currently only disrupted by the new A38. Detailed ecological, archaeological, landscape and water quality analysis is required for the full evaluation of such impacts on the immediate site. Although only 100 of the local population is estimated to fall within the 57 Leq contour in the worst case, there is also the extended impact of arriving aircraft overflying a heavily built up area of south-east Plymouth on easterly operations as well as the potential for aircraft vortex strikes in this area. Air quality is unlikely to be a significant issue. However it should be borne in mind that a larger area than that identified for the airport has been designated for housing development. Thus either way the site is likely to be developed. In the timescales available, it has not been possible to compare the relative environmental disbenefits of an airport with the proposed housing development. However it could be argued that there would be net disbenefit associated with building the airport, as the land earmarked for housing would have to be re-provided else where. This is discussed in more detail in section 6.6.

Conclusion

In terms of environmental impacts on the local areas surrounding each of the airports under the three development options, significance is related to the local carrying capacity of the area; the potential impact on its ecology, character and value; and, the potential health and nuisance effects of increased airport activity. It is therefore possible to rank the options in terms of impacts, taking into account the potential for mitigation at each site. In this case the best case is option 2, because of the closure of Plymouth, followed by Option 1. In both these cases the environmental impacts, while significant in some aspects, can be judged as acceptable, compared with current conditions. Option 3 presents major new impacts on a previously undeveloped site (although the site is likely to be developed for housing) and carries significant weight in the balancing of its environmental, economic and social sustainability.


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6.6 Surface Access

6.6.1 Introduction

Government is promoting airports as central to the movement towards integrated transport solutions. In the White Paper, “A New Deal for Transport,” the positive measures to encourage use of public transport were detailed. Airports have a specific role to play and must fulfil the following requirements:

• An Airport Local Transport Forum must exist to help the progression of issues;

• An Airport Surface Access Strategy must be produced to increase the number of journeys made to the site by public transport;

• A Green Transport Plan covering all employees must be produced.

Following this, the government has envisaged that local transport plans should be designed with regional strategies in mind. This, in effect, sets out Government expectations of the criteria that have to be addressed before significant future expansion of airport operations will be endorsed. In this section, the impact that the airport development options may have on surface access to the airports is discussed.

This assessment is based on both the baseline and high forecasts presented in Chapter 5. For the three options under consideration, the 2030 high forecast is unlikely to make a significant difference, other than making some public transport services more viable. Staff employed at the airport also has a surface access demand and the RCD gives an indication of the numbers of jobs at various passenger throughputs.

In comparison with many other UK airports, these passenger numbers are small and the surface access implications are limited. Table 6.25 of the South West RCD notes the generic options for surface access including junction access to a trunk road and public transport based on bus networks.

The surface access implications of any airport depend on the type of passenger (business/leisure, resident/non resident), the existing transport network, and on geography (the location of the airport in relation to its passenger and employee catchment area). This assessment therefore starts with a consideration of these characteristics under the proposed scenarios.

Contact has been made with the Strategic Rail Authority to confirm our understanding of their perspective regarding future rail provision to airports in the far South West.

6.6.2 Exeter

By 2030, Low Frills and outbound charter are the two largest groups accounting for around two thirds, with full service domestic a further one fifth of the total. Outbound charter passengers are predominantly local residents travelling for leisure purposes. They are most likely to use private car or taxi and the public transport mode share is likely to be effectively zero. Low Frills and full service passengers are more mixed, with some business, some leisure, some local and some inbound. Business passengers will be more likely to have origins and destinations in Exeter city centre, whereas inbound leisure passengers will be heading for the tourist resorts.

There could be around 2500 employees by 2030 that will live mainly in Exeter, although some may travel significant distances from the towns and villages throughout the region.


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The airport is connected to the A30 (T) and close to the M5 (J29). Exeter city centre is around 5 miles away.

In both scenarios, the public transport mode share of both passengers and staff is likely to be small (10-15%). Private cars, with their consequential car parking requirements, are likely to be the dominant mode for outbound local residents, with taxis being significant for inbound passengers.

The RCD indicated that at the RRC and SEC levels of throughput (2.0 and 4.5mppa in 2030 respectively) there would be no key road links operating at more than 60% capacity (considered to be ‘no congestion’) and that airport traffic would be no more than 10% of total flows. If the airport develops as proposed, a new access road would be provided from the junction with the A30 (T). It is understood that the Highways Agency would wish to consider the effect on the performance of Junction 29 on the M5 but does not consider this to be undeliverable.

There are two potential flows for which there could be sufficient public transport demand to make a service viable. For travel between the airport and the city centre, a frequent (15 minutes peak, 30 minutes off-peak) high quality bus service (non-or limited stop, bus priorities, staffed terminal stops with waiting rooms, low floor, air conditioned vehicles with good baggage space) with fares set at around one third to one half of the taxi fare, would attract custom. It would be possible to combine such a route with another service (such as a park and ride), but the quality must remain high. One possibility is to consider a route associated with the relocated Met Office, which will undoubtedly be seeking to establish new journey patterns, and could have a demand for air travel. The second area would be the inbound leisure passengers who could be attracted to an express coach to the Riviera, calling at key hotels. This would be a bookable, high quality service timed to meet particular flights, particularly those with non-UK based tourists.

There is a suggestion in the RCD that a rail station one mile from the airport, associated with a new community development, connected by a shuttle bus to the airport, would improve public accessibility. This rail line currently has infrequent services to a limited number of destinations. However an expanded airport, together with the new settlement proposed to the north of the airport, could generate sufficient demand to warrant additional frequency on this rail line. An interchange involving a shuttle bus to the airport could also be provided, although experience elsewhere suggests that this would not be attractive to outbound charter passengers (given the large numbers of bags per trip involved) but could be attractive to business and inbound leisure passengers.

6.6.3 Newquay

In 2030, Low Frills passengers are the largest group accounting for around one half, with full service domestic a further one third of the total. Low Frills and full service passengers are mixed, with some business, some leisure, some local and some inbound, although the basis of the forecasts is that the passengers would be predominantly inbound leisure. As such they would be heading for the tourist destinations, some of which are in Newquay, but others will be spread along the coast and throughout the County.

Given the diversity of origins and destinations and the relatively short distance (5 miles) to Newquay town (and hence the availability of cheap taxis), private car and taxi are likely to be the most used modes.

The RCD indicated that at the levels of throughput considered (0.3 to 0.4mppa) one key road link (the A30) would be operating at between 80 and 100% capacity (considered to be ‘intermediate congestion’) but that airport traffic would be no more than 1% of total trips on this link. The RCD also noted that road access is poor close to the airport. If the airport develops as proposed, a new access road would be provided to the A3059, thus avoiding the need to use the poor access to the existing terminal. The level of passengers now forecast is some two and a half times the RCD levels. However, even this level is unlikely to result in airport traffic being a major component of total trips (e.g. it would still be less than 5% on the A30).


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The prospects for public transport in all scenarios are limited, but the numbers of inbound tourists could make a service linked to key hotels viable. This could be a bookable, high quality service timed to meet particular flights, particularly those with non-UK based tourists.

There could be around 1000 employees in 2030. Some will live in Newquay, although others may travel significant distances from the towns and villages throughout the region. A local bus service could attract some custom, provided it fitted with employee start and finish times, including weekends.

6.6.4 Plymouth

The forecast is made up entirely of full service passengers. Business passengers are likely to be a significant proportion of these, although there may be some outbound leisure passengers connecting at other airports.


The RCD indicated that at the RRC level of throughput (0.5mppa in 2030) there would be 4 key road links operating at between 60 and 80% capacity (considered to be ‘minor congestion’) and one at 80 to 100% (‘intermediate congestion’) but that airport traffic would be less than 2% of total flows. The forecasts now considered are slightly below the RCD/RRC forecasts so the conclusions can stand. However, it is understood that the Highways Agency think that it is unlikely that airport traffic would affect the performance of the A38 and that the performance of the A38 / A368 junction would not be a major issue.

6.6.5 South Hams

The forecasts for a new airport at South Hams include outbound charter as the largest single group (40%), with full service (30%) and low frills (27%) being the other large groups.

Outbound charter passengers are predominantly local residents travelling for leisure purposes. This group is most likely to use private car or taxi to and from the airport, and the public transport mode share is likely to be effectively zero. Low Frills and full service passengers are more mixed, with some business, some leisure, some local and some inbound. Business passengers will be more likely to have origins and destinations in the city centres of Plymouth (10 miles) and Exeter (35 miles), whereas inbound leisure passengers are more likely to be heading for the tourist resorts.

There could be around 2000 employees, some of whom will live nearby, although others may travel significant distances from the towns and villages throughout the region. In the airport’s start up years, many existing employees would commute from the existing Plymouth and Exeter airports, so there could be significant demand from these locations.

The creation of a new airport means that no journey patterns will be established, and there could be an opportunity to make the new airport attractive from a public transport viewpoint. The passenger demand could not justify a rail link, but a network of quality bus and coach services could attract a reasonable market share for both passengers and staff. Perhaps the most potential would be in express routes to the city centres of Plymouth and Exeter, particularly the latter as the 35-mile journey would be expensive by taxi. This could be a 15-minute peak (30 minute off peak) service with limited stops and high quality vehicles. In addition, a coach service linked to tourist destinations (e.g. Torbay) and a local service to Plymouth for employees may be successful.

The RCD did not include a road access analysis of South Hams but it is understood that the Highways Agency consider that the levels of growth are unlikely to cause network difficulties on the A38, which would become the major surface access link to this development.


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6.6.6 Conclusion

Exeter and South Hams, because they would handle 2 to 2.5 million passengers a year, could support reasonable bus and coach based public transport networks, including city centre express, local service and tourist niche services. Newquay, with 1 mppa, could support a limited tourist niche service. Plymouth is unlikely to be able to support any public transport. No major difficulties are seen in terms of road access, although Plymouth is likely to be served by the most congested road network.


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6.7 Land Use Planning

6.7.1 Introduction

This section discusses the impact of land use by the airport development scenarios. It is divided into two parts:

• Firstly, it identifies the existing and emerging land-use planning policy framework affecting the growth and development of existing and potential airports in the South West (i.e. Newquay, Plymouth and Exeter airports together with the proposed South Hams airport near Plymouth). It also identifies any planning and environmental policy restrictions and designations, existing land-uses and proposed land-use allocations in and around the airports;

• Secondly, it appraises the potential land-use impacts associated with the three options for

airport development in the south west. For each airport and for each option the likely airside, non-airside and wider urbanisation developments have been determined and potential land-use issues and impacts identified. It concludes with a comparative assessment of the significance of land use issues for each airport option.

Our analysis is based upon a desk top assessment of Regional Planning Guidance for the South West (RPG10), the relevant Development Plan for each airport location, as well as background information on land-use planning issues contained in Department of Transport airport studies and previous Consultant’s reports including RASCO, the South West Air Services Study, studies relating to the New Devon Airport at Plymouth, and telephone discussions with the local planning authorities (LPAs).

6.7.2 Regional Planning Guidance for the South West

Regional Planning Guidance for the South West (RPG10) covers the period 2001 to 2016 and establishes the overall planning policy framework and strategies within which more detailed spatial development plans at the County and District levels should be prepared. The overall vision for the region is: “Developing the region, in a sustainable way, as a national and European region of quality and diversity, where the quality of life for residents, the business community and visitors will be maintained and enhanced” RPG10 sets out a number of key strategy objectives. Of relevance to this study is Objective g, which is to provide integrated, efficient and environmentally sustainable transport and communications systems to meet local, regional, national and international priorities. RPG10 sub-divides the Region into four sub-regions: the Northern, South East, Central and Western Sub Regions. The Northern Sub-Region, centred on Bristol, is seen as being the main focus for growth in the South West. Exeter falls in to the Central Sub Region. Key objectives of the strategy for this sub-region are to concentrate major development in Exeter, Taunton and Torbay and to improve transport links within and through the sub-region. Plymouth and Newquay are both in the Western Sub Region where there is a need for strong policies and action to tackle long term and deep-seated economic and social problems, which are particularly accentuated by its peripherality. Key objectives of the strategy for the Western Sub-Region are to concentrate development in a number of major urban centres including Plymouth and Newquay, to alleviate remoteness through investment in transport infrastructure and other communication networks, and to promote and encourage tourism. The South-East Sub Region is centred on Bournemouth/Poole, and outside the remit of this study.


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Policy Tran 9: Airports calls upon local authorities, developers, infrastructure and transport providers and other agencies to work together to encourage the sustainable development of the region’s airports and their associated facilities; to support the existing airports and airfields in the region to develop their respective roles to serve air travel needs; to improve surface links and public transport to airports, particularly at Bristol, Exeter and Bournemouth, taking into account the results of the surface access strategies prepared by the Air Transport Forums; and to protect land (including Public Safety Zones) around airports to secure operational integrity. Policy SS 17: Plymouth supports investment in infrastructure including supporting Plymouth Airport, the TENs rail network and the ferry port in order to reduce peripherality. The existing land use plans for the airports under consideration are described.

6.7.3 Exeter

The Development Plan for Exeter Airport comprises: • Devon Structure Plan First Review 1995 - 2011 (Adopted February 1999); • East Devon Local Plan (1995 -2011) First Deposit (January 2002). The Devon Structure Plan is currently being reviewed. A Deposit Draft Plan was prepared in July 2002 followed by pre-EIP Changes (January 2003). The Plan will cover the period 2001-2016. The Examination in Public will start on 10 June 2003, and a discussion of airport strategy is programmed to take place on 13 June 2003. The main objectives of the Development Plan focus on promoting a sustainable pattern of development, economic growth and employment, social progress and prudent use of natural resources. Key features of the Development Plan strategy are:

• Guiding new development to locations where there is a choice of transport modes; • Making provision for two new communities to meet the housing and employment needs of

Plymouth and Exeter;

• Concentrating major development in the Primary Urban Areas (PUA) of Plymouth, Exeter and Torbay;

• Encouraging further development and expansion of Exeter and Plymouth airports as part of

the strategic transport network and services in the SW and as Accessibility Points within the European Airport Network;

Specifically, the East Devon Local Plan:

• Identifies Exeter Airport as a development site within the Exeter Area of Economic Activity (AEA) (Policy AEA4);

• Allocates land for an Intermodal Freight Facility adjoining the airport (AEA2);

• Allocates land for a strategic employment site, known as the Skypark Strategic Development

Site, immediately to the north of the airport (policy AEA3);


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• Safeguards the route of the Clyst-Honiton Eastern By-Pass (Policy AEA5) which will improve access to the airport from the A30 (Policy AEA5);

• Safeguards land to the north of the airport for a new community of 3,000 dwellings to include

a new railway station on the Exeter-Waterloo railway line and in a location where it will not impact on airport operations (Policy AEA1);

• Makes provision for improved surface access links by public transport from Exeter to the

airport. The airport itself is strategically located to the east of the city along the A30 (a dual carriageway road) close to the A30 and M5 intersection and half a mile from the proposed new railway station planned to serve the new community. It is about 5 miles from Exeter City Centre. Access to the airport from the east could improve significantly when/if proposals to dual the A303 and A30 corridor in its entirety are implemented. To the west of the airport is the safeguarded route for the Clyst-Honiton by-pass and beyond that an indicative fluvial tidal floodplain (Policy EN26 refers); to the south is the existing and proposed strategic employment sites; land to the north is currently in agricultural use, but reserved for the new community; and about 1km from the eastern end of the runway is a designated Historic Park and Garden. Effectively, there are no planning and environmental policy restrictions to limit further expansion of the airport on the scale envisaged. In summary, a very positive and integrated land-use and transportation strategy and set of land-use policies are being put in place to promote and encourage the long term development of Exeter International Airport as a key component of the region’s economic and social progress. There are no land-use constraints or planning policy restrictions to limit this strategy. Any decision to close this airport as part of a strategy to develop a new airport for the SW outside Plymouth (as per Option 3) would seriously undermine this strategy, be contrary to the transport policies of RPG10 and require a radical rethink of the Development Plan and specifically the plans and policies for the Exeter Area of Economic Activity and the wider sub–region in and around Exeter.

6.7.4 Plymouth

The Development Plan for Plymouth Airport comprises:

• Devon Structure Plan First Review 1995 -2011 (Adopted February 1999); • City of Plymouth Local Plan Deposit Draft (December 2001).

The Devon Structure Plan is currently being reviewed. A Deposit Draft was prepared in July 2002 followed by a pre-EIP changes (January 2003). As noted earlier, there will be a discussion of Airport Strategy at the EIP on 13 June 2003. The Plan will cover the period 2001-2016. The main objectives and strategies of the Development Plan are the same as those for Exeter International Airport. Specific policies and land-use proposals relevant to Plymouth Airport are as follows:

• Focus of major housing and employment development in Plymouth as a Primary Urban Area; • Creation of a new community for Plymouth to be built to the east of the city in South Hams

District along the A379/A38 transport corridors for around 3,500 people, and served by high capacity public transport services to Plymouth, including an LRT;


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• Creation of an International Business Park at Langage on the A38 corridor to the east of Plymouth.

Unlike the Development Plan covering Exeter International Airport, the Development Plan for Plymouth Airport does not contain any specific policies for its expansion or any land-use and transportation policies to encourage an integrated approach to the development of the airport and the wider social and economic benefits this can bring. Policy TR14 (Devon Structure Plan) does however recognise its importance as an Accessibility Point in the European Airport Network. On the other hand, the Structure Plan also notes that the airport’s potential for expansion is limited (para 5.102). These comments are hardly surprising given its location in the midst of a built up urban area. Residential areas surround the airport to the north, northwest, northeast and along its western boundary; there is a mixed-use area to the south together with the Estover Industrial Estate. The hospital is also located immediately to the south of the airport. There are also a number of Airport Public Safety Zones around the airport, but located outside the airport boundary. The flight path is over built up areas: employment to the south/south-east and housing to the north/north-west. Over-flying of the hospital is avoided. The site is constrained with limited scope for expansion. Beyond the built up areas to the north/north-east/north-west is the Dartmoor National Park and an Area of Outstanding Natural Beauty. In summary, there is no clear land-use and transportation strategy in place to guide the future development of Plymouth Airport and the contribution that the airport can make to economic and social progress in the Plymouth Area – although it is recognised locally that the airport has an important business function serving the needs of key staff of foreign businesses which have located in the area over the past 20-30 years. Indeed, apart from promoting the status quo, there is little that can be done to enhance the airport’s capacity, without giving rise to increasing local concerns regarding loss of amenity. Indeed, many residents have taken up objections relating to airport activity with the local ombudsman. If one were starting with a blank sheet of paper this would not be a preferred location for an airport. In the light of the economic, social and transport policies contained in RPG10 there is a need for greater clarity to be given in the Development Plan to the role and functions of Plymouth Airport and the land-use and transportation strategies to underpin the future development of the airport, links to it and wider economic measures associated with it.

6.7.5 Newquay

The Development Plan for Newquay Airport comprises: • Cornwall Structure Plan (Adopted 1997) covering the period 1991-2011; and • Restormel Local Plan (As Agreed for Adoption) covering the period 2001-2011. The Cornwall Structure Plan is currently being reviewed and a Draft Plan covering the period 1996-2016 was placed on deposit in 2002. This will shortly be subject to an Examination in Public (EIP). The main objectives of the Development Plan focus on: promoting a sustainable pattern of development; ensuring the social and economic well-being of local people; protecting the environment; reducing the need to travel by car, and promoting the increased use of public transport; and ensuring that the population has access to a wide range of services. Specifically, the Development Plan will:

• Concentrate new housing development on the major urban centres including Newquay where 1600 new dwellings are to be built during the period 2001-2016;

• Promote the development of a major strategic employment site at Broadmoor Farm at

Saltash near Plymouth;


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• Encourage tourism by adopting and improving what assets already exist and only allowing

major proposals in locations with good transport access;

• Give priority to the planned expansion of Newquay and opportunities arising from the expansion of Newquay Airport.

The Restormel Local Plan specifically recognises the importance of the airport to the local economy and includes a number of transport proposals, which will enhance the importance of the airport. These include:

• Construction of the Newquay Growth Area Distributor Road, which will improve access between Newquay and Newquay airport. It is intended that the road will be funded from developer contributions and grants;

• Improvements to the A30 and improvements to the link road from the A30 to Newquay, which

will enhance Newquay’s longer term growth prospects and the increasing importance of the airport.

The airport itself is located outside the development area and is surrounded by agricultural land on all sides. There are no specific planning policy restrictions or designations extending across the airport site. However, immediately beyond the airport boundary along the coast are a raft of policy designations including: Area of Great Landscape Value, Area of Great Scientific Value; Area of Great Historic and Archaeological Value and Heritage Coast. In summary, the land-use planning policy framework provides encouragement to the gradual expansion of Newquay Airport. The airport is seen as having an important role to play in promoting and enhancing the local economy, which is heavily dependent on tourism. Proposed improvements to the local road system will gradually improve accessibility to the airport, not only from Newquay, but also from the wider sub-region.

6.7.6 South Hams

Proposals have been put forward by Sutton Holdings plc to relocate Plymouth Airport to the east of the City and to develop a new international airport serving the South West. This new airport would be located immediately to the south of the A38, about 5 miles east of Plymouth City Centre, and on part of the land identified for the new community. The proposed site, which extends to 170 ha, is in South Hams District. The existing and emerging Development Plan for the proposed New Devon Airport is:

• Devon Structure Plan First Review 1995-2011 (Adopted February 1999) and which is currently being rolled forward to 2016 (refer Deposit Draft, July 2002) the Pre-EIP changes (January 2003) and the EIP taking place from 10 June 2003;

• South Hams Local Plan 1989-2001 (Adopted April 1996). This Plan is now somewhat out of

date and a review is underway. A First Deposit Draft was issued for consultation in 2002 and a revised Deposit Draft is expected in November 2003.

The main objectives and strategies of the Development Plan are the same as those for Exeter International Airport and Plymouth Airport. This site falls within the Plymouth Area of Economic Activity (PAEA). Policies and land-use proposals relevant to the new Devon Airport include those relating to the concentration of major development at


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Plymouth and in the PAEA, a new community in South Hams District to the east of the city; and an International Business Park at Langage, also to the east of the city. The emerging South Hams Local Plan has concluded that the most sustainable location for a new community is at Sherford on land identified by the developers for the new Devon airport. In the adopted Local Plan the proposed new airport site falls within an area designated as countryside where agricultural related and small-scale development may be acceptable. At the eastern and western ends of the runway are Mineral Consultation Areas; there is an important area of woodland to the south; East Sherwood village also lies immediately to the south of the airport site. In summary, the proposal for the new airport is not consistent with the existing and emerging planning policy framework. The concept of a new airport is not alluded to in RPG10. It would conflict with proposals for a new community; on the other hand there are no national and regional planning policy and environmental designations affecting the site. There is however an opportunity to provide a mirror image of the land-use and transportation strategy encompassing Exeter Airport. The ingredients would include:

• New airport to replace Plymouth City Airport which could be redeveloped in the long term (as a brownfield site);

• New community near to the airport (and/or on the site of the existing airport to limit the loss of

greenfield land);

• International Business Park (Skypark) at Langage;

• New public transport services to Plymouth City Centre;

• New link road (off the A38). However, if this airport were to develop as the major airport serving the SW, it would undermine the land-use, transportation and economic strategies and policies for the Exeter Sub-Region, which are firmly established and supported by RPG10. 6.8 Appraisal of Land Use Impacts by Option

6.8.1 Introduction

This section appraises the potential land-use impacts associated with the three options for airport development in the south west. For each airport and for each option the likely airside, non-airside and wider urbanisation developments have been assessed and the potential land-use issues and impacts identified. It concludes with a comparative assessment of the significance of land use issues for each airport option. A summary of the land use appraisal at each airport is also presented in tabular form.


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6.8.2 Exeter

Table 43 summarises the existing and potential land use planning implications under the three options at Exeter Airport.

Existing

Option 1 (EXT/PLY/NQY)

Option 2 (EXT/NQY)

Option 3 SHAM/NQY)

Runway (m)

2047m 2047m 2047m Not Required

Apron Space

8 stands Reprovide on north side and increase (10+)

Reprovide on north side and increase (10+)

Not Required

Taxiways

Limited width and acts as capacity constraint

Consider new parallel taxiway

Consider new parallel taxiway

Not Required

Terminal Facilities

0.5 mppa to 0.6 mppa

Reprovide on north side and increase capacity

Reprovide on north side and increase capacity

Not Required

Car Parking

1674 2600-4000 (5-9 ha)

2600-4000 (5-9 ha)

Not Required

Other Airport Related Activities

Exeter Airport Business Park

Skypark Business Park

Skypark Business Park

None

Urbanisation Pressures

Not applicable

Limited inward migration to meet demand for jobs

Limited inward migration to meet demand for jobs

None

SURFACE ACCESS- PUBLIC TRANSPORT

Bus Bus – rail potential linked to new community, about 1km to N.

Bus – rail potential linked to new community, about 1km to N

Not Required

Surface Access - Road Good (via M5/ A30)

New Access Road from A30

New Access Road from A30

Not Required

Alternative Use No No No Potential to redevelop as a mixed use scheme, possibly as alternative site for new community

Table 43 - Exeter Airport Land Use Summary Exeter Airport - Options 1 and 2

Under Options 1 and 2 there would be a requirement to upgrade the airside infrastructure to include expanded terminal facilities, expansion of apron space and possibly a new parallel taxiway. Although the existing terminal has recently been expanded, plans are in hand to reprovide the terminal facility and aprons from the south side to the north side of the airport. There appear to be no land-use policy constraints or restrictions to achieving an expansion/upgrade of airside facilities to meet the 2030 estimated passenger throughput, although proposals to relocate the terminal and apron space to the northside will need to have regard to the proposals for the new community, which will be about 1400m from the airport’s northern boundary.

With respect to non-airside facilities the main requirement will be to provide a new access road and to significantly increase short and long stay car parking. The route of a new access road (Clyst-Honiton By-pass) is safeguarded in the East Devon Local Plan First Deposit Draft (Policy AEA5). There are a


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number of options for increasing the amount of car parking; particularly when the terminal facilities and apron area are relocated to the north side of the runway and the new access road is built. Again, we do not anticipate any land-use policy constraints or restrictions to achieving these requirements.

With regards to surface access improvements and urbanisation impacts, these are allowed for in the emerging Local Plan. Specifically, the new community to the north makes provision for a new railway station about 1-2 km from the airport on the Exeter-London line. In addition, Policy AEA2 allocates land for an Intermodal Freight facility adjoining the airport, whilst policy AEA3 allocates land for an employment site known as the Skypark Strategic Employment site. The development of a new community close to the airport will provide an opportunity airport employees to live close to their place of work, although sensitive siting of housing close to the airport will need to consider the provision noise mitigation measures.

In conclusion, the emerging planning policy framework facilitates the expansion of the airport, ancillary facilities and other urbanisation developments in a relatively sustainable manner. There are no significant land-use policy constraints or restrictions to the achievement of the expansion of the airport.

Exeter - Option 3 Under Option 3, Exeter Airport would close in 2011 or shortly thereafter. This would require consideration to be given to the future use of the airport site for alternative uses. The impending closure of the airport would have major implications for the land – use policy framework set out RPG10, the Devon Structure Plan and the emerging East Devon Local Plan. Specifically, it would require an urgent review of proposals for the Skypark employment site and intermodal freight facility, the new community and associated transport infrastructure and also the proposed access road. The closure would allow consideration to be given to siting the new community on the airport site, which effectively represents previously developed land (although there may be doubts as to whether the grassed areas either side of the runways can be strictly classified as brownfield land). Clearly, there would be enough land to accommodate a new community of 3,500 homes (173 ha would be available) which would otherwise be built on a greenfield site. On the other hand there would be phasing difficulties and therefore uncertainty. The Structure Plan requires the new community to be built by 2011, but under this scenario the new community could not commence until after 2011. Unless alternative housing sites can be brought forward, then the new community could still be built in its planned location with the airport site being considered as a long term land reserve for development in the period after 2011, possibly as an extension to the proposed new community. This would confirm Exeter’s long-term expansion to the east of the City along the M5/A30/London-Exeter road and rail corridors. Clearly, the land-use (economic) ramifications of this option on Exeter would need to be explored more fully at the strategic level (Structure Plan/Sub –regional level) as well as at the local level.


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6.8.3 Plymouth

Table 44 summarises the existing and potential land use planning implications under the three options at Plymouth Airport.

Existing


Option 2 (EXT/NQY)

Option 3 SHAM/NQY)

Runway

1050m Possible runway extension to @ 1200m

Not Required Not Required

Apron Space

2 Aircraft Extend apron area

Not Required

Not Required

Taxiways

3 Taxiways provide satisfactory access between apron and main runway

No Change Not Required Not Required

Terminal Facilities 1000m2 (0.4m pa)

Expansion of Terminal Facilities


Car Parking

140 (plans for a further 160)

600-1000 (1-2 ha)



Not Applicable Limited Not Required Not Required

Surface Access- Public Transport

Taxi – no buses Bus – no buses Not Required Not Required

Surface Access – Road

A386 Plymouth- Tavistock Road – highly congested at peak periods, then via local road through residential area

No change – more congestion


Alternative Use Not Applicable Not Applicable Yes- Potential to redevelop as mixed use scheme, possibly as alternative site for new community

Yes- Potential to redevelop as mixed use scheme, possibly as alternative site for new community (53ha)

Table 44 - Plymouth Airport Land Use Summary

Plymouth - Option 1

Only in Option 1 is Plymouth Airport retained. In the other options Plymouth airport closes. With respect to airside facilities there would be a requirement under Option 1 to give serious consideration to the extension of the runway, and also to extend the terminal facilities and apron space. To extend the runway from 1050m to 1200m would be extremely problematic (as discussed in Chapter 5) to achieve from a land-use planning perspective as this could involve the loss of some houses, as well as increased over-flying of noise sensitive residential areas. There is a significant local opposition


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group to existing airport activities with the Ombudsman being regularly involved. This reflects the fact that 1400 residents live within the 57dBA contour and 2700 live within the 54dBa contour. Aircraft with a higher noise profile than those specified in a Section 52 agreement require LPA approval to use the airport.

Plymouth City Council is currently seeking funding from the Department for Transport (DfT) to reroute the A386 to facilitate the provision of a Runway End Safety Area (RESA) at the western end of the runway. The DfT has recently requested an economic appraisal of the scheme which also includes a Park and Ride site. A decision on funding is due in December 2003, although the tendering process is already underway. If successful the works could commence in April 2004. Failure to secure funding would put Plymouth Airport in breach of the CAA’s safety regulations and could result in eventual closure. Setting aside the provision for a RESA, a runway extension from 1050m to say 1200m could involve the demolition of several residential properties and result in increased over-flying of existing built up areas, which surround the site. This will undoubtedly lead to objections from local residents. Apart from high infrastructure costs and land compensation costs, the planning process could be lengthy and involve a public inquiry. There is no guarantee that the runway extension would be approved.

In comparison extensions to the terminal facilities and aprons should be relatively easy issues to address from a land-use perspective – there should be adequate space available despite the constrained site to meet the forecast increase in passenger numbers under this option.

With respect to non-airside facilities there is a requirement to provide additional car parking. It is understood that some additional parking could be provided on land released when the A386 is rerouted, whilst part of the Park and Ride site could be used to meet airport related demands.

Surface access to the airport is not satisfactory. Access is via the A386, which is highly congested at peak periods, and then via a local access road through a residential area. There are no proposals to enhance the A386, or to provide alternatives and to upgrade the local access road, apart from junction improvements with Derriford Road.

Plymouth - Options 2 and 3

Under Options 2 and 3 Plymouth City Airport would close, thus providing the City with a major brownfield development site (53ha). Under Option 2, the airport could close at any time between now and say 2011. Under Option 3, it is unlikely to close until after the new Devon Airport is up and running, although this is probably open for debate.

The agreement between the airport operator and Plymouth City Council makes provision for the two parties to enter into a property development business to redevelop the site for a mixed-use development scheme, if the airport did close. It could replace, but only in part due to limited land availability, the Structure Plan proposal for a new community serving Plymouth to be built on a greenfield site to the east of the City on land identified for the new Devon Airport in South Hams District. The redevelopment of the existing Plymouth Airport for a new community would require an amendment to the Structure Plan. As the new community is supposed to be built by 2011, there will be phasing issues to be considered, unless agreement is reached to close Plymouth Airport several years before the new airport is operational. Irrespective of phasing it will be necessary to consider identifying other additional housing sites to meet the Structure Plan requirement. The redistribution of the new community housing allocation into smaller packages will have implications for the provision of community facilities and public transport benefits associated with the new community project. The other key issues to be addressed with the redevelopment of the airport site relate to access arrangements and the capacity of the A386, particularly at key junctions leading from the airport site to where the A386 meets the A38 (T).


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6.8.4 Newquay

Table 45 summarises the existing and potential land use planning implications under the three options at Newquay Airport.

Existing


Option 2 (EXT/NQY)

Option 3 (SHAM/NQY)

Runway

2745m 2745m (No change)

2745m (No change)

2745m (No change)

Apron Space

6 stands shared with Military

Replace within current boundary



Taxiways

Parallel Taxiways

No Change No Change No Change

Terminal Facilities 800m2

Capacity 0.25m pa




Car Parking

470 1500 - 2000 (3 - 4 ha)

1500 - 2000 (3 - 4 ha)

1500 - 2000 (3 - 4 ha)

Urbanisation pressures

Not Applicable Limited Limited Limited


Bus Bus- extend services

Bus- extend services

Bus- extend services

Surface Access – Road

Country lane off A3059, connecting to A30 (T)

New link direct to A3059



Alternative Use Not Applicable Not Applicable Not Applicable Not Applicable

Table 45 - Newquay Airport Land Use Summary

Newquay – All options

On the airside the potential expansion of Newquay International Airport under all options will require expansion of terminal facilities and apron areas (stands) unless additional stands can be negotiated with the MOD. On the non-airside expansion will require the provision of additional car parking and improved road access to be provided. There are no identified land-use policy issues or restrictions to be addressed. Indeed, the Cornwall Structure Plan and the Restormel Local Plan include policies and proposals, which are supportive of the expansion of the airport, which is perceived as bringing significant economic advantages to Newquay and to Cornwall. Specifically, the Development Plan makes provision for the construction of the Newquay Growth Area Distributor Road to serve new housing and employment areas which will improve access between Newquay and the airport. There are also proposals to improve strategic road links to Newquay, which will also enhance accessibility to the airport.


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6.8.5 South Hams

Table 46 summarises the existing and potential land use planning implications under the three options at South Hams Airport.

Existing


Option 2 (EXT/NQY)

Option 3 (SHAM/NQY)

Runway

Not Applicable Not Applicable Not Applicable 2500m

Apron Space

Not Applicable Not Applicable Not Applicable 20 Stands

Taxiways

Not Applicable Not Applicable Not Applicable Parallel Taxiway

Terminal Facilities Not Applicable Not Applicable Not Applicable 15,000m2

Car Parking

Not Applicable Not Applicable Not Applicable 3300 spaces (8-9 ha)


Not Applicable Not Applicable Not Applicable Growth in population and direct and indirect employment over and above RPG10 and Structure Plan forecasts


Not Applicable Not Applicable Not Applicable Bus/LRT potential

Surface Access - Road

Not Applicable Not Applicable Not Applicable Direct access from A38 (T)

Alternative Use (170ha)

Proposed new community



Not Applicable

Table 46 - South Hams Land Use Summary

South Hams Airport - Option 3

Under Option 3, a new airport is proposed on a 170 ha site to the east of Plymouth along the A38 (T) corridor in South Hams District. The proposals show the new airport being built on the site of the proposed new community to serve Plymouth. The proponents of the scheme, Sutton Harbour Holdings Ltd, propose to reprovide the new community on the site of the existing Plymouth Airport, and consider that a mixed use scheme comprising 3500 houses, 3 ha employment and retail, leisure and community uses can be accommodated on this 53 ha site. We consider that there is insufficient land and this view is shared by South Hams District Council.

The development raises a number of land use planning issues:

Firstly, there is no land-use planning framework to consider such a proposal. RPG10, the Devon Structure Plan and South Hams Local Plan do not allude to this scheme. It would represent a departure from the existing and emerging Development Plan policy framework. However, airport strategy in Devon is due to be debated at the Structure Plan Examination-in-Public on 13 June 2003.

Secondly, it would conflict with the proposals for a new community. Other options would need to be considered including the redevelopment of the existing Plymouth airport. Another option would be to examine the potential for an Exeter Airport style solution whereby the new community is built adjacent to the new airport, possibly adjoining the Langage Employment Park;


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Thirdly the new airport would have implications for the proposed LRT associated with the new community. Under current plans a loop system is proposed which follows the A379 corridor via the new community, Langage and then returns to Plymouth via the A38 corridor. It is uncertain whether the LRT proposal would be viable with the airport, but without the new community;

Fourthly, the proposals do not give consideration to the wider land-use planning/urbanisation pressures in terms of employment growth (direct and indirect), population increases and therefore additional demand for housing and employment sites which have not been factored into RPG10 and the Devon Structure Plan;

Fifthly, as an Environmental Assessment would need to accompany such a proposal, it will be necessary to have considered alternative locations – this appears not to have been done.

On the other hand the proposal appears to be broadly acceptable having regard to limited land-use constraints in the vicinity of the site, although the flight path passes over residential areas to the west in Plymouth.

6.8.6 Conclusions

Newquay: The numbers of passengers passing through Newquay (Cornwall) International Airport are similar for all 3 options at between 1.01 to 1.04 mppa by 2030. Thus, airside and non-airside land-use requirements will be similar. Overall provision is generally good with scope to expand terminal facilities, stands, car parking and an improved road access. The policies of the Development Plan are favourably disposed to the expansion of this airport for commercial purposes. Also, there are no apparent planning policy constraints or restrictions to achieving the envisaged expansion during the plan period to 2030.

Plymouth Airport is only retained in Option 1, and in the other options it closes and can be made available for redevelopment. Expansion of the existing airport will be difficult to achieve, particularly if an extension to the runway is needed. The policies of the Development Plan do not effectively address the expansion of the airport. In options 2 and 3 where it closes, there is no planning policy framework to guide its reuse and redevelopment. It would be necessary to carry out detailed land-use and transport studies of the existing airport to assess its potential for alternative uses, and to review the Structure Plan policies relating to the development of a new community to the east of Plymouth. Exeter: Under options 1 and 2, Exeter Airport is retained and expands passenger throughput to between 2.24mppa and 2.44mppa. This will require the expansion and/or re-provision of airside and non – airside facilities. The Development Plan provides a positive framework to guide the further expansion of the airport and related off-site activities. The proposed new community including improved community and transport infrastructure is an advantage to the expansion of the airport. South Hams: There is no land-use planning policy framework within which to consider the new airport, so it will need to be considered as a departure. However, it will occupy the site identified for the new community so it can be argued that the principle of releasing this greenfield site has been accepted. If the airport was developed on this green field site it could minimise greenfield land take in total. For example, the airport will consume 170 ha, whereas it will limit the need to release additional greenfield land for the two new communities, and enable 223 ha of brownfield land to be brought forward for redevelopment. However it should be remembered that the structure plan considers land use requirements up to 2016 (compared to our appraisal to 2030). Beyond 2016 there will be still be a requirement to identify land for housing development, thus it is important that any proposals for new airport development are considered within the context of housing demand over a 25 to 30 year period. Table 43 provides a comparative assessment of the land use impacts at each airport having regard to forecast maximum growth at each airport up to 2030.


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6.8.7 High Forecast Impacts

The land use planning impacts of growth under the high forecast scenarios has also been considered by airport.

Exeter

Under the high growth scenario passenger growth could increase from just over 0.3 mppa now to 4.0-4.3 mppa by 2030, equivalent to a 13-fold increase over 27 years.

At this level it may be necessary to extend the runway, provide a parallel taxiway, reprovide the terminal facilities and apron area to the north side, and provide additional car parking. This should all be achievable inside the current boundary.

Subject to local improvements existing surface access arrangements by road should be satisfactory to cope with this increase. With respect to public transport, consideration could be given to providing a LRT link/rail spur from the London-Waterloo line at the new community or expanding the new community station and having a good bus transfer system. Capacity of the main rail line and capacity of Exeter Station may represent constraints to better rail based public transport links.

It will also result in urbanisation pressures, as it is likely to lead to inward migration due to the tightness of the labour market and a shortage of skilled workers. This will create additional demands for housing over and above normal levels of growth. This will create increased pressure to identify greenfield development sites. It will also be necessary to give serious consideration now to the long-term size of the planned new community together with detailed site planning aspects to ensure potential amenity conflicts with airport expansion are taken into account.

In summary, Exeter Airport should be able to absorb this level of growth having regard to land-use impacts.

Plymouth

Under the high growth scenario passenger growth could increase from around 0.15 mppa now to 0.5 mppa by 2030, equivalent to a 3-fold increase over 27 years. This will make it bigger than Exeter is now.

At this level it will be necessary to extend the runway, review the existing taxiway arrangements, extend the terminal facilities and apron area (only 2 stands at present), and provide additional car parking (1500-2000 spaces will be required, compared to 140 now).

Given the size of the airport (53ha) and its location in the midst of an urban area, it is likely that this level of growth will not be easily achievable or acceptable. The key issue to be addressed will be the runway extension, which will involve land acquisition and demolition of a number of houses. Growth on this scale could prove a step too far for local residents who already object vociferously to the level of aircraft movements.

With respect to surface access, growth will lead to further congestion along the A386, whilst the site access road which passes through a residential area is not suited to an increase in traffic movements.

The urbanisation pressures associated with this level of growth should be absorbable within Plymouth and the PAEA, although policy assumptions should be reviewed and the size and scale of the new community reassessed.


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In summary, if this high growth scenario becomes the basis for airport planning in the SW, then serious consideration would need to be given to reproviding Plymouth Airport with regard to land-use constraints at the existing airport.

Newquay

Under the high growth scenario passenger growth could increase from 0.18 mppa now to between 2mppa and 2.2mppa, equivalent to a 20 fold increase over 27 years.

At this level the runway and taxiways will be adequate, whilst there should be sufficient space to expand terminal, apron and car parking areas, subject to reaching agreement with the RAF.

With respect to surface access, the scale of expansion will necessitate a review of planned improvements to local access roads into Newquay from the airport as well as links to the Trunk road network.

Given the relatively low population size of Newquay, the urbanisation pressures associated with this level of growth are likely to be considerable. Apart from inward migration of skilled workers who will place pressure on the local housing market, this level of growth should encourage significant investment in tourism infrastructure, including hotels, tourist attractions and the second homes market. Land-use policies to ensure a supply of affordable housing for local people will become more critical.

In summary, if this high growth scenario becomes the basis for airport planning in the SW, the population, household and economic growth assumptions which underpin the land use policies and proposals contained in RPG10, Cornwall Structure Plan and the Restormel Local Plan will need to be radically reviewed insofar as they impact on Newquay and the surrounding towns and villages.

South Hams

Under the high growth scenario passenger growth could reach 4.2mppa. The airport plans prepared by Sutton Holdings Limited would appear to have sufficient capacity built into them to facilitate this level of growth. As such there should be no additional land-use issues with respect to the provision of airside and non-airside facilities.

The proposed surface access arrangements with direct access from the A38 should also be able to cope with this increase. With respect to public transport, the higher growth forecast should make the proposed LRT a more viable proposition.

This level of growth will raise similar land-use issues to those considered for Option 3, except that the urbanisation pressures in terms of demand for additional housing arising from inward migration of skilled workers will be greater. Specifically, it will have implications for the location and the ultimate size of the planned new community and/or other development sites around Plymouth.

Setting aside environmental issues such as noise impacts on residential areas on the approaches to the airport, the new South Hams Airport should be able to absorb this level of growth, although it will require an immediate review of land use planning policies in Plymouth and the PAEA.


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7 Strategies for Delivery 7.1 Summary

• The analysis of air transport in the far South West contained within this report, together with that in the Regional Consultation Document, clearly demonstrates the importance of the sector to the region. The far South West is peripheral both to the rest of United Kingdom and Europe and relies on air transport to access global markets.

• Our analysis has demonstrated that whilst there may be demand, it may also be necessary to develop a range of strategies to ensure that as much of the demand originating in the far South West is captured by airports serving the region. In this chapter a number of options are explored which could help achieve this objective. They are:-


• Possible introduction of PSO (Public Service Order) funding to increase accessibility



• Funding of new routes - In a number of regions in the UK (such as Scotland and elsewhere in Europe) there is a realisation that securing routes through financial incentives to the airline is now necessary to attract a new service. Funding is provided either through discounts offered by the airport itself, or through public funding to enable airports to offer even more attractive discounted user charges on a non-discriminatory basis. The principles of the fund would depend on the specific requirements of the region, based upon an agreed set of funding criteria. Funding for route development would have to be considered on a route-by-route basis. This would involve an appraisal of economic benefits of each route, and would probably exclude existing services. The fund would also have to be applied in a non-discriminatory manner – thus enabling all airports in the South West to benefit.

• The likely spend per route would be a function of existing airport charges, projected passenger volumes and frequency. A budget for such a fund would need to be developed based against a set criteria of the key “target” markets/routes and an appraisal of net economic benefits to ensure that the fund provided “value for money” for the funding organisation. A route development fund in the South West could be viable.

• Quantifying how many new routes could be secured at this stage is difficult. However it is reasonable to expect that new services from the far South West to two or three domestic destinations and potentially direct to one or two European destinations could be secured over a period of two to three years.

• Imposition of PSOs - the imposition of “Public Service Obligations” (PSOs) on given routes might provide a means of encouraging economic development through the provision of air services. PSOs offer a form of regulatory protection that entails certainty of an air service for the life of the PSO. The imposition of a PSO also may allow public subsidy to be given to an airline to meet the costs of providing the service, without breaching State Aid rules. A PSO may be imposed in accordance with EC Regulation 2408/92 on access for Community air carriers to intra-Community air routes. Article 2 of EC Reg 2408/92 defines PSOs.

• ‘The Regulation states that Member States may impose a PSO on a route to a peripheral or development region, where the route is considered vital for the economic development of the region. However, there are many difficulties with the PSO regulation - in particular the criteria set out in EC Reg 2408/92 are very strict and offer little flexibility. PSO applications must demonstrate they are in the public interest and there is no recourse to other suitable transport forms. The only PSO routes in the UK are within Scotland on "lifeline" services to the Highlands and Islands; there are no PSOs on routes to London. If no carrier is operating services in accordance with the PSO, a Member State may limit access on the route to one carrier and the right to operate such services must be tendered through OJEC process with all carriers from any member state able to apply. PSOs must be reviewed and re-tendered at least every 3 years.

• EU legislation is often open to interpretation, but a case could potentially be made for the designation of PSO routes from a number of airports in the far South West. The Government has stated that any PSO application received will be considered on its merits against the criteria set out in EC Reg 2408/92. The development of proposals for the application of a PSO would require detailed consideration, costing and legal advice, which is outside the remit of this study.


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• Funding Mechanisms for Airport Development - In our financial analysis, we have assumed that the existing ownership structures remain unchanged. However given the level of investment required, it may be necessary to change the existing ownership structures as existing shareholders may not have the necessary funds available to invest. There are a number of strategic options available to the shareholders of airports in the far South West to meet the funding requirements of the airport. We have assessed and appraised each option against the key objectives of shareholders, these being:


• Minimising risk; and

• Maintaining airport viability.


• Potential funding mechanisms each have advantages and disadvantages and include doing nothing, existing shareholder investment, concession agreements, joint ventures, strategic alliances with other airports, minority or majority equity sales and public funding. Our analysis indicates that whilst Exeter could fund its development plans out of cash flow, and would therefore not require additional investment by shareholders, Newquay (under all options) Plymouth (with a runway extension) and South Hams could not be funded from existing and projected cash flow. Thus in order to deliver the infrastructure identified necessary to capture the wider economic benefits, alternative funding mechanisms will probably be necessary. Whilst we have not undertaken a detailed analysis of the most appropriate mechanism to pursue, this chapter sets out the options available and the relative merits of each. Detailed consideration will be necessary of funding mechanisms on an airport-by-airport basis.

• Development of Strategy to Encourage Inbound Tourism by Air - Tourism is a significant contributor to the local economy of the South West. The role that aviation has serving this market is potentially under developed. The recent Ryanair service to Newquay from Stansted is estimated to have increased visitor numbers using the airport by over 100,000. However, whether this traffic is new is difficult to identify.

• In 2001, there were around 21 million staying trips to the South West, with visitors staying 96.9m nights and contributing over £3bn to the local economy. The South West accounts for 15% of the total UK domestic staying trips, with visitors from overseas accounting for 13% of all staying trips in England. The regions reliance on domestic visitors was made more apparent by the events of 11th September 2001, which saw an even greater concentration of visitors from the UK. The far South West (Devon and Cornwall) accounts for approximately 60% of UK visitors to the South West and 36% of overseas visitors. The size of this market lends weight to the hypothesis that a greater proportion of visitors could access the region by air.

• New services to the region would assist in optimising South West Tourism’s strategy. A clear impediment to its implementation is the current difficultly potential visitors have in reaching the far South West, particularly for short breaks. New services, “packaged” with accommodation and surface transport could be exploited to increase visitor numbers. The spin-off benefits from a successful implementation of such a strategy are discussed in detail in Chapter 6. However what is more difficult to quantify is the perception that as access improves, potential visitors will be attracted to the far South West rather than, say, to other destinations. What is also difficult to quantify is the spin-off benefits associated with developing inbound tourism markets, and the impact that generally raised awareness of the region will have on attracting inward investment, inward migration by those with skills needed to develop new businesses, and the “clustering” effect that airports have in generating economic activity.

• These factors need to be considered in the implementation of a coherent strategy to increase the number of visitors to the far South West by air, not only to benefit inbound tourism, but also the wider economy.


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7.2 Introduction

The analysis of air transport in the far South West contained within this report, together with that in the Regional Consultation Document, clearly demonstrates the importance of the sector to the region. The far South West is peripheral both to the rest of United Kingdom and Europe and relies on air transport to access global markets.

Our analysis has demonstrated that whilst there may be demand, it may also be necessary to develop a range of strategies to ensure that as much of the demand originating in the far South West is captured by airports serving the region. In this chapter a number of options are explored which could help achieve this objective. They are: -


• Possible imposition of PSO (Public Service Obligation)



7.3 Airline and Route Development Funding

Competition amongst airports to attract new services is intense. The principle assets of an airline, its aircraft, are obviously mobile. Thus airports in the far South West are competing not only with other airports in the UK, but with European airports to convince airlines that they can maximise the return on their assets by flying to and from the far South West. For example, Newquay Airport attracted the Ryanair service from Stansted against competition from airports throughout Europe seeking similar services. The airline could have easily allocated the aircraft used on the Newquay service to an alternative destination.

In a number of regions in the UK (and elsewhere in Europe) there is a realisation that securing routes through financial incentives to the airline is now necessary to attract a new service. Funding is provided either through discounts offered by the airport itself, or through public funding to enable airports to offer even more attractive discounted user charges on a non-discriminatory basis.

There are a number of examples where public money has been used to encourage new routes.

In Ireland, all new services at any Aer Rianta56 airport (including Dublin, Cork and Shannon) receive discounts in landing fees to enable airlines to use their airports at no cost for the first three years of a routes operation.

In Scotland, the Scottish Executive launched a route development fund in November 2002. This fund has a budget of £6.5 million over a three-year period and provides funding to enable discounted landing fees at Scottish Airports (over and above those that the airport operator would have offered) on routes where there is currently no direct service. For instance the new service from Cologne to Edinburgh is one of four new routes secured so far, which are funded by the route development fund.

56 Aer Rianta is the primary publicly owned airport operator in Ireland.


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This fund is now managed by Scottish Enterprise57 (an equivalent organisation to the South West Regional Development Agency).

Other regions in the United Kingdom are considering similar funds. Thus consideration could be given to a Route Development Fund in the South West. The principles of the fund would depend on the specific requirements of the region, based upon an agreed set of funding criteria. This could include funding only those routes which it could be demonstrated bring economic benefit to the region, such those serving both inbound and outbound business markets, and inbound leisure and address apparent market failure. Whilst outbound leisure routes deliver social benefits, the net economic benefits of such services are likely to be negative.

Funding for route development would have to be considered on a route-by-route basis. This would involve an appraisal of economic benefits of each route, and would probably exclude existing services. The fund would also have to be applied in a non-discriminatory manner – thus enabling all airports in the South West to benefit. Furthermore an assessment of the impact of new routes from one airport on an existing route to the same destination from another airport in the South West would be necessary. It might be counter productive for the region if a route were funded from one airport which resulted in an existing service to the same destination from another airport being withdrawn.

The likely spend per route would be a function of existing airport charges, projected passenger volumes and frequency. A budget for such a fund would need to be developed based against a set criteria of the key “target” markets/routes and an appraisal of net economic benefits to ensure that the fund provided “value for money” for the funding organisation.

A route development fund in the South West could be viable. Its primary objective would be to enable the introduction of new services from its airports to destinations which otherwise would not have been served. Quantifying how many new routes could be secured at this stage is difficult. However it is reasonable to expect that new services from the far South West to two or three domestic destinations and potentially direct to one or two European destinations could be secured over a period of two to three years. In addition there could be potential to attract additional inbound leisure services by no frills carriers.

7.4 Public Service Obligations

In addition to the consideration of route development funding, the imposition of “Public Service Obligations” (PSOs) on given routes might provide a means of encouraging economic development through the provision of air services.

PSOs offer a form of regulatory protection that entails certainty of an air service for the life of the PSO. The imposition of a PSO also may also allow public subsidy to be given to an airline to meet the costs of providing the service, without breaching State Aid rules.

A PSO may be imposed in accordance with EC Regulation 2408/92 on access for Community air carriers to intra-Community air routes. Article 2 of EC Reg 2408/92 defines PSOs as:

‘Any obligation imposed upon an air carrier to take, in respect of any route which it is licensed to operate by a Member State, all necessary measures to ensure the provision of a service satisfying fixed standards of continuity, regularity, capacity and pricing, which standards the air carrier would not assume if it were solely considering its commercial interest.’

57 AviaSolutions has been retained by Scottish Enterprise to administer the fund and negotiate with potential airlines on their behalf.


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The Regulation states that Member States may impose a PSO on a route to a peripheral or development region, where the route is considered vital for the economic development of the region. However, there are many difficulties with the PSO regulation - in particular the criteria set out in EC Reg 2408/92 are very strict and offer little flexibility. PSO applications must demonstrate they are in the public interest and there is no recourse to other suitable transport forms. At the present time EC Reg 2408/92 does not include the ability to connect onto onward services as a criteria for imposing a PSO. The only PSO routes in the UK are within Scotland on "lifeline" services to the Highlands and Islands; there are no PSOs on routes to London.

If no carrier is operating services in accordance with the PSO, a Member State may limit access on the route to one carrier and the right to operate such services must be tendered through OJEC process with all carriers from any member state able to apply. PSOs must be reviewed and re-tendered at least every 3 years.

Article 9.1.b of EC Regulation 95/93 on the allocation of slots at Community airports then allows Governments to reserve slots at fully co-ordinated airports for services on routes where PSOs have imposed. No slots are currently ring-fenced at UK airports.

The EU is currently revising both EC Reg 2408/92 on PSOs and EC Reg 95/93 on slot allocation.

EU legislation is often open to interpretation, but a case could potentially be made for the designation of PSO routes from a number of airports in the far South West. The Government has stated that any PSO application received will be considered on its merits against the criteria set out in EC Reg 2408/92. The development of proposals for the application of a PSO would require detailed consideration, costing and legal advice, which is outside the remit of this study.

7.5 Funding mechanisms for the development of airport infrastructure

In our financial analysis, we have assumed that the existing ownership structures remain unchanged. However given the level of investment required, it may be necessary to change the existing ownership structures as existing shareholders may not have the necessary funds available to invest.

This section outlines the strategic options available to the shareholders of airports in the far South West to meet the funding requirements of the airport. We have assessed and appraised each option against the key objectives of shareholders, these being:


• Minimising risk

• Maintaining airport viability.


Each option fulfils the shareholder’s (and broader) objectives to a greater or lesser extent and often presents unique opportunities and risk profiles. These options have been broadly categorised by reference to their ability to fulfil the key objectives of shareholders:

Each option is examined below in more detail, with the accompanying benefits and disbenefits of adopting such a structure outlined as well as the possible opportunities and risks which may materialise.


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Do Nothing

The commercial and financial implications of undertaking a “do nothing” investment approach are significant. In reality, this approach has been the de facto approach to capital investment.

The Capital Expenditure review in Section 6.3 has identified the minimum capital expenditure required to meet forecast demand. At Newquay and Plymouth (assuming the runway is extended) this capital expenditure cannot be funded via internally generated cash flows and some external funding is required. The do nothing approach defers the future investment until it is affordable and the airports run a significant risk of not being able to meet demand. Doing nothing is not a realistic option.

Shareholder Funded Development

Doing nothing is not a realistic option at Newquay and Plymouth given the capital expenditure requirements identified. If the Shareholders want to maintain the status quo, this can be achieved through a capital injection from the Shareholders.

This approach would have two primary benefits for the Shareholders:

• They would retain 100% control of the airport; and

• They would realise the full benefits of any future increase in operating profits through increased dividends as well as increasing the value of their underlying investment.

However, this approach must be considered against the following disbenefits:

• It increases shareholders investment in the airport and hence their risk;

• No dividend expectations over the next five years;

• No new management skill sets introduced; and

• Creation of share premium reserve, which may impact on dividend distribution.

Concession

An alternative to shareholder investment is to let an operating management concession.

A concession solution has been achieved for other UK Local Authority owned airports (Luton, Highlands and Islands Airports Ltd), several international airports such as Peru, Mexico and a number of Australian airports. The process involves a private sector partner being granted an operating concession, usually for a period of 25-30 years. In return for receiving all revenue from airside, retail and property activities the concessionaire will undertake phased development of the airport and will make payments to Shareholders on the basis of identified outputs such as passenger numbers.

Drivers for embarking on a management concession route include:

• Requirement to develop infrastructure which cannot be met by available cash flows or further investment by existing shareholders;

• Transfer of risk to the concessionaire for the duration of the concession; and


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• Wish to realise value from the developed business.

The key features of a management concession are:

• A new special purpose company (NewCo) is set up to operate and develop the airport with effective operational and financial control for the duration of the concession period;

• Shareholders get capital receipt and/or ongoing concession payment;

• Shareholders may have the ability to participate in the success of the airport going forward, through a profit sharing agreement, whilst limiting their exposure to risk; and

• Assets remain in existing ownership with operational control being exercised via NewCo.

Figure 31 provides an overview of the generic contractual structure for a concession agreement.

Figure 31 – Overview of Generic Contractual Structure

Delivering a management concession can be attractive as it enables the shareholders to retain ownership but offer a long-term concession to manage, contractually develop and operate the airport.

The private partner is not usually a single investor as with a trade sale but a consortium typically comprising of an airport operator, contractor, facilities manager and property developer who form a contractual relationship to develop and manage the airport. A new special purpose company, NewCo, is established which has limited recourse to the parent companies and is usually quite highly leveraged.

Assets and the management of those assets delivering aviation services will be transferred at net book value and are controlled by NewCo and not by the airport company. Additionally, the staff and employees of the airport are transferred under TUPE to the special purpose company. As a result the Local Authorities would lose control over the operational direction and control of the airport but retain long-term ownership.

The complexity of the funding structure and development obligations means that concession contracts are detailed legal and commercial agreements requiring specialist advisers. The process

Fixed Assets

Staff

Norwich City Norfolk County

Debentures PWLB

SurplusLand Agreement

Tenants

NAL

NewCo

Funder Others Operator

Lenders Loan

Agreement100%

Shareholder Agreement

AssignmentTUPE Transfer

LeaseAgreements

Employment Contracts

Loan Agreement100%

Shareholder Agreement

Ownership

ConcessionAgreements

Airport

Fixed Assets Fixed Assets

Staff

Norwich City Norfolk County

Existing Shareholders Debentures PWLB

Debentures PWLB

SurplusLand Agreement

Tenants


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will require a large financial and organisational commitment by the airport and the Shareholders over a long period to bring to a successful close.

An advantage of the concession arrangement is that development plans and capital expenditure commitments are an integral part of the contract. When traffic grows to a pre-agreed threshold, there will be an obligation on Newco to further develop and expand the infrastructure.

A concession contract is only feasible if there is likely to be a demand for services from the airport over the long term. This is extremely likely in the case of the airports under consideration. Transport studies, financial forecasts and robust development plans are required in order to fully assess the feasibility of a concession agreement and provide comfort to potential operators that the growth to date is sustainable and that the opportunity exists for further traffic growth.

One concern regarding a concession structure is the low level of operating profit generated by the airports and the low level of passengers that would lead to a low level of interest by the private sector.

Joint Ventures with Project Financing

Entering into a long-term partnership with a private sector partner on specific investment projects is also possible. The agreement would take the form of an investment in a joint venture single purpose company that undertakes a specific project.

The key to this structure is that a long-term agreement is entered into with the user of the facility or service. The cashflows generated by the agreement must be sufficient to cover the financing costs and provide a return for the airport via the joint venture company.

A joint venture structure is more appropriate for investments in stand-alone investment projects where there is no established relationship with the partner. By entering into a joint venture for any project, the airport is limiting its risk exposure to the level of its investment and any committed funding although it is also sharing any benefit.

This option does not address the operational capital expenditure but may be explored for the commercial opportunities, particularly property development in the case of Newquay and Exeter.

Strategic Alliances with Other Airport Operators

One of the themes emerging from the Regional Consultation Documents is regional airports co-operating to the benefit of the respective regions. Potential benefits of a strategic alliance include:

• More effective competition to retain and improve traffic catchment;

• Increased operating margins on existing traffic from reduced operating costs;

• Increasing opportunities to expand regional airport opportunities to become viable regional airport group;

• Greater regional competition to South East airports;

• Enhances shareholder value and attracts high profile strategic investors;

• Increases staff development opportunities, training, promotions; and

• Diversifies operating and business risks.


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• There are a number of airport “groups” now forming in the UK including Manchester Airport Group (Manchester, East Midlands, Humberside and Bournemouth) Peel Airports (Liverpool, Finningley and Teesside), and TBI (Belfast, Cardiff and Luton) as well as BAA.

Apart from the financial benefits, the strategic rationale for some form of alliance could be:

• Potential to add to the required skill base with the right partner;

• Potential to distribute capacity between alliance partners;

• Stronger negotiating position with suppliers (including airlines);

• Industry consolidation could force alliance necessity.

As with all relationships, alliances have potential disadvantages:

• The strongest party holds the power;

• Weaker member may be downgraded to strengthen the stronger party position, e.g. displacement of low value traffic to the weaker party;

• Visions and goals of alliance members are frequently not aligned and can create integration difficulties;

• The advantages may have been achieved anyway;

• Distribution of financial benefits is always difficult;

• Significant synergies may not be immediately apparent;

• Reaction of the regulator given potential local monopoly issues;

An alternative model could be the formation of a single airport group managing the three airports in the South West.

Minority Equity Sale

The sale of a minority interest would allow capital receipt for the shareholders if they were willing to offer some of their shares to make a more attractive package for potential investors.

The key requirement will be to get the correct profile of strategic investor who can contribute to the continued development of the company for the benefit of the region.

The rights attached to the shares will impact the value of the minority stake, the obligations required of the investor as well as any subsequent disposal of shares by the principal shareholders.

It will be necessary to accompany a minority sale with conditions that enhance the attractiveness of the deal to the private sector, such as:

• Influence over the capital expenditure programme and restrictions on cash flow;

• Influence over the strategic direction of the company;

• Pre-emptive rights over the remaining shares;


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• Preferred rights over dividends; and

• Representation on the Board.

The amount to be invested will be based on the degree of control gained, financial projections and current valuation. In the UK there are few target opportunities left for investors and the airport scarcity value could have a significant impact on offers for a minority stake. In addition, strategic investors would bring benefits similar to the strategic alliance including:

• Required skills e.g. operational, property/retail development;

• Systems and processes e.g. IT, logistics, customer relationship management;

• Access to capital;

• Creation of synergies with their existing operations e.g. integrated transport solutions;

• Exploitation of existing relationships e.g. freight operators and offering of bundled service packages to potential business partners;

• Creation of new market opportunities e.g. expansion opportunities.

The required skills and resources profile of any prospective minority strategic investor must be carefully assessed before any marketing of shares takes place to ensure marketing is targeted at those partners whose aims and objectives are aligned as closely as possible with the remaining shareholders.

We believe that a minority sale is more likely to attract a financial investor rather than an operational investor, and are aware that many airport companies are restricted from holding minority interests.

A professional investment structure is typically a medium term investment in the equity of a business. The return is achieved through a combination of yield and capital gain and the professional investor controls are enshrined through legal documentation such as the subscription agreement and articles of association.

The professional investor often holds a minority interest in the equity that would normally be accompanied by a yield investment in convertible redeemable preference shares. These provide a fixed return but also the opportunity to convert to ordinary equity (thus increasing their ownership) if the business fails to meet specified targets.

A professional investor is typically looking at a 3-5 year time horizon in which the preference shares will be redeemed and the value of the equity is realised through a further sale or flotation. Increasingly however, we are seeing professional investors maintaining their interest in airport investments for much longer periods. Debt finance is usually structured into the transaction to gear up the business and increase the possible quantum of equity gain.

A minority sale to a professional investor will not necessarily meet the needs of the airport and its shareholders where an operating investor is a more attractive option. Additionally a minority sale will not maximise the realised value of the airport to its shareholders due to the bid premia considerations discussed. In addition to this a minority investor will impact the value of any future sale of shares by the existing shareholders and the potential level of dividend distribution.


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Majority Equity Sale

There are two possible options that the shareholders could take to pursue a majority equity sale. These include:

• Trade sale of majority of the airport; and

• Flotation.

We consider a majority sale would attract interest from several potential partners, who are likely to meet the shareholders objectives of maximising shareholder value and development of the airport to enhance the benefits to the local economy. Flotation is unlikely to be practical due to the size of the airports. Interest in airport companies is strong and we would expect significant interest from all sectors.

When considering the value of a majority equity sale, investors are driven by the view they take on the value of the business and the ability of the equity investment to generate a return. Investors seek a return through dividends and through a capital gain in the value of the business. Additionally as aviation assets are rare we would expect to secure a strategic premium from companies not currently represented in the UK.

Only by selling a controlling stake will value be maximised. Shareholders should also note that new investors might not be committed to funding any capital expansion at the airport. Additionally long term ownership will be transferred to the private sector.

A trade sale investment would involve the development of a sales process that best suits the circumstances of the individual airport. Key considerations in the development of this process would be:

• Time constraints;

• Public procurement requirements;

• Number of prospective interested parties;

• Sensitivity of non-public commercial information; and

• Desired conditionality of sale.

Given the buoyant nature of the airport market we would expect that a competitive sales process could be developed that resulted in a premium value being received for a majority share.

Public Funding

The financial analysis contained within Section 6.3 indicates that capital investment required at Newquay and Plymouth (with a runway extension) cannot be funded from cash flow. An alternative option to private equity funding described above could be that public funding is provided to deliver the capital investment required. A high level analysis indicates that the joint funding of the airports through cash flow and public funds would necessitate a public contribution of £24 million at Newquay and £9 million at Plymouth. Funding of Newquay would be for both Capex and to cover the expected ongoing operational losses that would arise from its current low charging base. Funding at Plymouth would be to fund capital investment. At South Hams, we estimate that the level of public funding necessary would be £65 million.


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7.6 Tourism strategies to encourage greater volumes of inbound tourism by air

Tourism is a significant contributor to the local economy of the South West. The role that aviation has serving this market is potentially under developed.

The recent Ryanair service to Newquay from Stansted is estimated to have increased visitor numbers using the airport by over 100,00058. However, whether this traffic is new is difficult to identify. A survey59 carried out by Cornwall County Council in April 2002, showed that most Ryanair passengers would have previously made their journey to Newquay by other transport modes. Fewer than 10% would have not made the journey at all60. This survey though is limited in scope, as it was carried out over one weekend in April 2002 and may not be representative of all passengers.

In 2001, there were around 21 million staying trips to the South West, with visitors staying 96.9m nights and contributing over £3bn to the local economy. The South West accounts for 15% of the total UK domestic staying trips, with visitors from overseas accounting for 13% of all staying trips in England. The regions reliance on domestic visitors was made more apparent by the events of 11th September 2001, which saw an even greater concentration of visitors from the UK.61 The far South West (Devon and Cornwall) accounts for approximately 60% of UK visitors to the South West and 36% of overseas visitors. The size of this market lends weight to the hypothesis that a greater proportion of visitors could access the region by air and is illustrated further in Table 4762.

Trips (m) Nights (m) Spend (m)

UK residents 12.4 51.5 £2,161 Overseas residents 0.59 5 £169

Far SW Total 12.99 56.2 £2,330 Table 47 – Overview of SW Tourism (2001)

Since 1989, the volume of trips to the South West has risen by 49%, while nights stayed has increased at a much lower rate of 3%. However, real spend has increased over the same period by some 22%.63 This trend points to falls in length of stay but a rise in spend per night. The region appears to be benefiting from a change in the preferences of leisure visitors who are focusing more on high value, shorter stay trips.

The DACOM (Devon and Cornwall Overseas Marketing Consortium) study64 identified the region’s main overseas markets. They are Germany, USA, France, Netherlands and Australia /New Zealand/South Africa. Discussions with South West Tourism suggest that increasing visitors from France is difficult to achieve, but that the smaller European markets could be exploited further. These

58 Newquay Cornwall Airport



61 South West Tourism, Annual Report 2001 - 2002

62 Source South West Tourism

63 Source of statistics - South West Tourism, Annual Report 2001 - 2002

64 DACOM New Markets Study, South West Tourism, July 2000


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include Scandinavia (surfing, green tourism), Austria/Switzerland (coasts), Ireland (Celtic) and in the medium term Italy/Spain. The study analysed market segments within each country, indicating the potential size. The study concluded that:

• Low Frills airlines are having a significant role in providing regional spread elsewhere within the UK. This concept could be used for the South West and that dialogue needs to be initiated with carriers.

• Most markets identified as providing growth opportunities are seeing growth in the short break market. With a few exceptions, Devon and Cornwall do not have the adequate facilities to serve this market, not least its ability to access the area compared with air access to competing short break markets.

• More activity in the travel trade industry should occur. Examples such as the Channel Islands and Scotland should be considered as models for future development.

• Although outside the project brief, the study also recommended that the Irish market should be considered as a potential market to develop.

The potential for the far South West to develop a strong inbound charter market was examined in more detail for Newquay and its surrounding area in a report commissioned by Restormel District Council and Cornwall Tourist Board.65

The report’s conclusions were similar to the DACOM study, in that Cornwall has a strong ‘brand identity’ but is not currently realising its full potential. There are, ‘product gaps’ in Cornwall that need to be met, before the full potential of the inbound market can be served. They are:

• Lack of support infrastructure; hotels, (ground) transport infrastructure etc.

• Competition from other areas of the world is high; Cornwall should improve its marketing. [if airline attracted has strong brand it will do a lot of indirect marketing for them]

• Cornwall should target those markets that provide the greatest return.

• The lack of a competitively priced scheduled air market is a constraint, which cannot simply be filled by a bespoke inbound charter market.

• Cornwall has ‘special attractions’, such as the coastline and the Eden Project whose success needs to be built upon.

• There is a lack of information regarding support for hoteliers and local attractions about how regional bodies can help.

It could be argued that the same observations could be made for Devon.

In respect to the airport at Newquay, the study stated that the complicated ownership and operational structure is an inherent weakness in the county’s transport system and that the faster development of other airports in the South West could have a detrimental effect on the County’s economy.66

65 Newquay Airport: The Potential for the Development of Inbound Charters, Dec 2000

66 ibid. pp 3 - 11


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New services to the region would assist in optimising South West Tourism’s strategy. A clear impediment to its implementation is the current difficulty potential visitors have in reaching the far South West, particularly for short breaks.

A number of strategies could be developed including:-

• Developing web base technology that enables easy packaging and booking of air services with accommodation, visitor attractions, and surface transport (for example progress made by Wales tourist board and partners).

• Developing marketing strategies targeted at specific inbound tour operators and airlines, again “packaging” each component of the trip for visitors.

• Greater promotional activity with the retail travel trade, raising awareness of existing services and testing appetite for new links.

• Develop strategies for promoting specialist holiday’s such as surfing, bird watching and walking (for instance Wales Tourist Board actively promotes “extreme sports” such as mountain biking, Ireland and Scotland promote fishing and golfing)

• Develop joint approaches to market with airlines to test market opportunities. For example Ryanair in Germany (this could be linked to the route development fund initiative).

• Benchmarking marketing campaign success against comparable regions.

New services, “packaged” with accommodation and surface transport could be exploited to increase visitor numbers. The spin-off benefits from a successful implementation of such a strategy are discussed in detail in Chapter 6. However what is more difficult to quantify is the perception that as access improves, potential visitors will be attracted to the far South West rather than, say, to other destinations. What is also difficult to quantify is the impact that general “raised awareness” of the region will have on attracting inward investment, inward migration by those with skills needed develop new businesses, and the “clustering” effect that airports have in generating economic activity.

These factors need to be considered in the implementation of a coherent strategy to increase the number of visitors to the far South West by air, not only to benefit inbound tourism, but also the wider economy.

7.6.1 Conclusion

There are a number of strategies that could be pursued by stakeholders in the far South West, which could have a positive impact on the level of traffic using its airports. Clearly strategies which influence supply of air services (such as Route Development Funding and potentially the application of PSO’s) could help attract airlines which otherwise would not have provided services at all or for a number of years. Furthermore strategies to encourage demand (particularly inbound tourism) need to be co-ordinated with airports and airlines. We understand that South West Tourism is actively pursuing this.

Strategies for the provision of infrastructure also need careful consideration. Our analysis indicates that whilst Exeter’s development can be funded from cashflow, Plymouth (with a runway extension) Newquay and South Hams will all require innovative funding mechanisms to enable such infrastructure to be delivered. The costs of such provision compared to the wider economic benefit that could be delivered needs to be assessed in greater detail than has been possible in this study.


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8 Conclusions 8.1 Introduction

In the time available, a significant amount of analysis has been undertaken of the three potential development options in the South West. The advantages and disadvantages of each Option are summarised in this Chapter.

8.2 Forecasts

Option 1 can be considered “business as usual” in that the existing airports continue to develop. This option delivers the highest overall number of passengers in the far South West. Based on our analysis, the route network potential from Exeter and Plymouth are comparable to that that could be achieved at South Hams. Our analysis does not support the hypothesis that concentrating all services at one location will increase the overall size of the network. This is partly a function of passengers that would have used Exeter diverting to Bristol, and others that would have used Plymouth diverting to Newquay.

There is very little difference between the total forecasts under each option (Option 1 is 3.61m, Option 2 is 3.56m and Option 3 is 3.36m respectively). Whilst Option 3 delivers less overall traffic to the far South West, the international business mix is forecast to be higher. This is explained by concentration of Plymouth and Exeter demand at the new site, which is likely to deliver the same level of frequency to a given destination from one airport than could be achieved by splitting the market between two airports. For instance two services a day from Plymouth and two a day from Exeter is likely to be less attractive to some business users than four a day from South Hams. In addition the higher frequencies offered from Bristol means that competition is more keenly felt in this sector than at Exeter than South Hams.

The differences in the traffic mix generated by option are as follows:-

• Option 1 serves more domestic leisure passengers (5.7% more than Option 2 and 12% more than Option 3)

• Option 2 serves more international leisure (7% more than Option 1 and 9% more than Option 3) and domestic business passengers (3% more than Option 1 and 9% more than Option 3)

• Option 3 serves more international business passengers (30% more than Option 1 and 21% more than Option 2)

Potential Services

All three options could potentially provide the far South West with a similar pattern of services, including destinations such as Amsterdam, Dublin, Frankfurt, Brussels, Glasgow, Edinburgh, Copenhagen, Paris, Munich, Barcelona, Zurich, Manchester, Belfast, Aberdeen, and London City. Option 1 and 2 potentially realise these services earlier due to the time it will take to build the new South Hams airport.

Option 1 and Option 3 continue to support the existing London Gatwick service from Plymouth.

Infrastructure

All options require a new terminal, apron, stands, new access road and additional car parking at Newquay airport.


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There remains a medium to long-term question over the future of Plymouth Airport. It is constrained and could only fulfil a “niche role” serving primarily business routes with a limited range of aircraft types. In our analysis we have assumed that the runway will be extended to just under1200m. This is a big assumption in that such a development would likely be subject to a Public Inquiry and result in opposition from local communities. Such an extension would provide the opportunity for the airport to develop as the primary business airport for the region, and as such would be attractive to full service airlines in that it is unlikely that Low Frills airlines would serve the airport (due to runway constraints and likely airport charges).

Options 1 and 2 support the case for a new terminal at Exeter airport.

Option 3 includes a new airport in the South Hams and the closure of Exeter and Plymouth.

Economic Appraisal

There is little difference in the direct employment generated from each option. Business travel is higher under Option 2 and generates greater business spin offs. However the closure of the existing Plymouth airport with no new airport in the South Hams could impact significantly on the local economy, losing between 2,000-5,000 jobs.

Leisure travel is lower without the existing Plymouth airport, demand being best met by Option 1.

The business survey only generated 51 responses, of which half identified air travel as being vital to their business, Heathrow was identified as by far the most important London airport, few surveyed actually use the Gatwick air link and most responses called for better European air links from the far South West.

Land Use Planning Appraisal

In planning terms, Options 1 is likely to be the easiest to deliver. The existing structure plans are generally supportive of growth at all three airports (although a runway extension at Plymouth has not been considered). In addition the environmental assessment indicates that, with the exception of noise at Plymouth, there are no significant issues. Options 1 and 2 are consistent with adopted and future draft structure and local plans.

Option 3 is contrary to the structure and local plans and could cause severe problems for Devon in meeting its housing requirement between now and 2016.

Financial Appraisal

A key issue is the financial deliverability of each option. Each of the airports is likely to be profitable at an operational level. However the capital investment requirements are likely to be significant. The only airport likely to be able to fund its capital requirements from cash flow and borrowings is Exeter. Based upon the assumption contained within this report, alternative funding vehicles and ownership structures may be required. These could include the sale of Exeter and Newquay as separate businesses, or potentially the sale of both airports to a single organisation, which could bring economies of scale, and joint marketing opportunities. Plymouth could also be included within this “system” approach.

An alternative would be public funding of developments at Plymouth and Newquay. Under all options this could cost the public sector up to £24m to develop Newquay Airport, whilst under Option 1 would require an additional public sector investment of £9m for a runway extension at Plymouth airport.

Option 3 would require £65m public sector investment to develop the new South Hams airport.

.


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Overview

There is not much difference between the options in the forecasts and potential services that could be supported.

Initial conclusions from this study are that Option 2 is preferable, providing better support for the regional economy overall and costing the public sector around £24m to deliver. Option 2 however could have a significant impact on the local economy of Plymouth. The closure of the airport is likely to bring significant economic disbenefits to the city, making it more difficult to secure inward investment, and putting at risk existing business owned by foreign companies. This statement is based primarily on both the economic analysis contained within this report, anecdotal evidence provided in discussion with key stakeholders, and on analysis undertaken by others. Continuing to support the existing Plymouth airport, and building a runway extension could mitigate this impact.

Option 3 has a significant impact on the current and future land use planning framework in Devon and generates the highest cost to the public and private sectors - £89m in total.

.


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9 Appendix A – Detail Forecasts and Methodology 9.1 Top Down” Analysis

9.1.1 Methodology


The principal assumption was that passengers will be influenced in their choice of airport by three factors; the cost of getting to the airport by surface access, the frequency of services at that airport and the fare differences between airports.

The function used (and which has been found to operate well in the past) is:

Proportion of traffic using airport A = Cii

C

ee A

λ

λ

−

−

Σ

.

where the denominator is summed over all possible airport choices, CA is the cost of getting to airport A, and where λ is a parameter which is calibrated on past observed passenger behaviour and has been found to give the best fit.

CA is composed of three elements, surface access costs in terms of passenger time and resources, the logarithm of the frequency on a given route (suitably scaled) and a fare differential where appropriate. The logarithm of frequency is used as opposed to the absolute value as the higher the frequency of services at an airport then the less will be the effect of the next added frequency.

For example, an airport will capture a comparatively greater proportion of traffic in moving from one flight per day to two than from six flights per day to seven.

The value of surface access, λ and the scaling factor for frequency will vary from passenger type to passenger type (business or leisure, UK or Foreign).

Thus, having calculated the surface access costs of i) getting from each district to the competing airports, ii) by assuming given frequencies at each airport and iii) any fare differentials between airports, an estimate can be made of the proportion of passengers within each passenger type which would use each of the competing airports.

It was further assumed that any candidate service from Newquay, Exeter, Plymouth or South Hams would in most instances already be served at Bristol and the London airports. In the case of Bristol, it was assumed that the services would be lower cost (with the exception of Channel Island routes) and fare adjustments made accordingly.

The fare adjustments made were tested against historic data. These were tested against an actual comparison of services from both Exeter and Bristol to Dublin. The result of this test run was that the model accurately forecast the number and mix of passengers on the Dublin service out of Exeter in 2000 in competition with low cost and full service flights out of Bristol.

No allowance was made in the base forecasts for leakage to interline services via London although, depending upon the frequency of the London service, the direct service is considered to capture the greater proportion of the passengers. On the other hand, no addition has been incorporated to allow for the generation of passengers deriving from the inception of the service in the base case.


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An allowance was made for onward interlining traffic at the overseas point depending upon the route.

The computations were carried out on a route-by-route basis starting with the largest passenger volumes and working down until it was apparent that no new viable services would be found.

Initially, one frequency per day was assumed from the far South West airport under consideration. If it was found that the forecast level of passengers with only one frequency were sufficiently high under that assumption, a higher level of frequency was assumed and the analysis repeated until a consistent pattern was achieved.

A threshold of 13,000 passengers per annum was assumed for route viability and only those services achieving this level were permitted.

The resulting routes and passenger numbers for 2015 and 2030 are shown in Table 48.

Outbound Charter Traffic

A similar method, in principle, was used for short haul charter services with the following differences.

The charter traffic was forecast as a totality for a base year. Future traffic, which is a combination of two elements, (growth in existing routes and the introduction of new routes), was forecast by observing the growth in charter traffic at existing airports over the past ten years.

It is seen in other markets that the traffic at smaller airports grows faster than at the larger ones which tend to grow at or just below the national average. The faster growth rate at the smaller airports represents the inception of new routes and to allow for this factor at the study airports the appropriate growth levels were applied to the base year allocations. This is illustrated in Figure 32.

However, for Newquay under all scenarios, an off model adjustment was made reflecting the possibility of developing small scale seasonal charter services, such as the winter only programme which currently operates from Blackpool used by many of the hoteliers in the area who take their holidays during the UK’s low season.

Figure 32 - Charter Traffic and Growth Relationship

Growth in Charter Traffic (1991-2000) v 1991 Levels

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

10 100 1000 10000

1991 Charter Traffic '000

Ann

ual g

row

th


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Instead of frequency being used as an attractor in the allocation model, total charter traffic at the airport was used. At a new or candidate airport some traffic was seeded into the model and the model iterated until a stable solution was found i.e. a solution whereby the traffic attracted by the airport was consistent with the charter traffic assumed to be served for there.

9.2 “Bottom-Up” Traffic Forecasting

9.2.1 Methodology

Calculation of Low Frills (LF) International and Domestic and Full Service (FS) Domestic forecasts

The first stage necessitates determining a catchment area for each airport in the three development options being evaluated. Each catchment area is based on “drive-time” between strategic towns or places in the South West and each of the three far South West airports together with alternative airports at Bristol, Southampton, Gatwick and Heathrow where applicable.

Using “drive-time” and de facto migration influences a formula was devised to allocate the proportion of passengers with origin/destination in each Local Authority Planning district that might be attracted to the three far South West airports in the various scenarios in each development option. The percentages of traffic were applied to the O/D (Origin/Destination) demand data identified in the CAA 2000 South West survey of passengers using “surface” access.

Whilst catchment areas are primarily based on “drive-time”, account has also been taken of de facto migration to airports where there is already an established and often greater range of services and frequency. One example of this is in the scenario where Exeter and the existing airport at Plymouth are closed, with the market being served by a new airport sited at South Hams near Plymouth. Based on “drive-time” alone, Exeter, being closer to South Hams, might expect to fall within the new airport catchment area. In practice however, people with origin or destination in Exeter, Mid and East Devon would predominantly be likely to use Bristol Airport to the north because of the greater frequency and range of services possible (because of its significantly greater catchment area).

Having determined the percentage of passengers with origin/destination in each Local Authority Planning District likely to use one or more airports, the CAA survey data was then factored to reflect such proportions of demand for each of the seven scenarios contained in the three development options being considered. From each CAA data listing it was possible to identify the scheduled service destinations with the greatest demand for each of the scenarios.

The routes market potential table, contained in this Appendix, is based on scheduled service demand identified in the 2000 CAA survey which was carried out at Bristol, Bournemouth, Exeter and Southampton, in addition to the London area airports. The passenger numbers in the “surface” access demand column have, in the case of EXT-BHX, been redistributed according to catchment area and final destination as over 90% of passengers using that service were identified in the 2000 survey as connecting at Birmingham.

In the forecast model, the surface access demand was then added to the number of passengers flying direct to/from Newquay and Plymouth airports who were identified in the 2000 CAA survey at Gatwick and Bristol with a connecting flight to one of the destinations selected in the table. The two demand streams were then combined and formed the core market for each scenario.

These core indications of market demand were then factored to take account of two circumstances likely to influence future market potential on each of the identified routes. The first of these is in circumstances where the destination or route being assessed is to a “gateway” or hub airport. [NB: The importance of connecting traffic at a “gateway” airport is evident from the CAA survey data for


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EXT-BHX and NQY/PLH-LGW]. In the case of a service to a “gateway” airport such as Birmingham or Manchester a stimulation factor of 5.0 was allocated. However in the event of a second hub destination being served the stimulation factor would have to be adjusted downwards, with the connecting traffic split between the two routes.

The second circumstance requiring stimulation was in recognition of the need to take account of the generative effect of tourist attractions such as the Eden Project. For this purpose an assumption was made that the 2000 pre-Eden market demand would double and be distributed between the various airport options on the basis of the “drive-time” to/from the Eden centre located near St Austell as set out below (but also taking account that each airport would be keen to promote itself as a gateway to the Region).

Development Option 1: EXT (20%) PLH (30%) NQY (50%)

Development Option 2: PLY (40%) NQY (60%)

Development Option 3: EXT (30%) NQY (70%)

The next stage in the route forecasting model was a market growth projection for the period 2000-2030 at five yearly intervals. An average growth projection of 4% pa was used to calculate future demand but this is capable of adjustment consistent with other forecasts in the study.

Finally, depending upon the number of years to run prior to justification of route commencement, a stimulation factor of 20% for Full service and 75% for Low Frills was added to each market forecast. This stimulation factor is consistent with experience of route development elsewhere in the UK.

The route market tables contained within this Appendix, present modelled forecasts that indicate the proportion of the market demand that a service could attract at given levels of frequency and capacity. The level of frequency provided primarily determines the level of market penetration for a conventional scheduled service. Using this table, an assumed break-even load factor and thresholds for the introduction of a new service, it was possible to determine if and when a service to each of the destinations listed would become viable and at what level of frequency and capacity.

In the market forecasts, the demand for Belfast City and Belfast International was combined as this increases the likelihood of a service to Belfast starting to one or the other airports, rather than considering them as discrete options.

Within the context of forecasting the potential delivery of new routes, we applied the following thresholds of passenger numbers for the viability of a new route:

• Low Frills (International and domestic)

o 1 rotation per day (2 rotations per day for UK business orientated routes). Assuming a new market stimulation of 75% and a load factor of 70%, the threshold for the inauguration of the service is at 39,000 passengers per annum, based on the Dash 8 Q400 (78 seats). For a 737-300 the equivalent demand threshold would be 75,000 seats. Given flyBe’s recent change in strategy to towards becoming regional low frills operator and its Exeter based head office we elected to base the capacity for threshold for low cost market entry on the Dash 8-Q400. This aircraft type lowers the barrier for market entry, which would not be possible on the typical 737-300 industry workhorse.

• Full Service (Domestic)

o 2 rotations per day for business routes, such as Glasgow / Edinburgh and Birmingham / Manchester within the UK and Paris, Dublin and Amsterdam outside of


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the UK. Assuming a new market stimulation of 20% and 60% load factor, the threshold for the inauguration of the service is 13,200 passengers per annum, based on a BAe Jetstream – 31 / Dornier – 228 (18 seats).

o 1 rotation per day for leisure routes, such as Jersey and Guernsey. Assuming a new market stimulation of 20% and a 60% load factor, the threshold for the inauguration of the service is at 6,700 passengers per annum, based on a BAe Jetstream – 31 / Dornier – 228 (18 seats).

The model was applied to each scheduled international route in turn, starting with the largest and proceeding to the ‘thinner’ routes until the potential routes dropped below the threshold for the inauguration of a new service.

The model also made an allowance for the possibility of interlining passengers at key European hubs and existing traffic percentages have been applied in developing these forecasts.

Inbound Charter and Longhaul

For inbound Charter and Longhaul services, the forecast passenger numbers are based on ‘off model’ adjustments. These adjustments reflect an appreciation of potential local markets and how these services may grow. As an example, we have assumed that there will be inbound charters to Newquay, given its location and number of local tourist attractions and some longhaul operations from Exeter or South Hams. However, it should be noted that although there is a level of uncertainty around these forecasts, the levels are low and do not significantly affect the overall passenger throughput.

9.3 Baseline Forecast Tables

Table 48 shows the detailed results, including destinations for Full Service International routes. Within the results are data for end to end flying and onward interlining. The forecasts reflect the combination of these two segments.

Table 48- Full Service International detailed forecasts

Standard scheduled Threshold, 1/day 30 seats @ 60% seat factor = 11,000 per annum (or thereabouts) Calibrated on Business and Leisure from the Exeter Dublin Service. Calibrated no frills cost differentials. Business -£54.30 Leisure -£10.78 End to end Newquay and Exeter Plymouth Exeter Newquay S Hams Total

2015 Dublin 13,308 21,005 34,313 Amsterdam 11,345 19,350 30,695 Paris 0 Brussels 10,993 10,993 Total 35,646 40,355 76,001

2030 Dublin 23,202 35,692 58,894 Amsterdam 19,379 33,005 52,384 Paris 10,705 10,705 Brussels 18,130 14,585 32,715 Total 71,416 83,282 154,698 Plymouth, Exeter and Newquay

2015 Dublin 11,309 16,929 28,238 Amsterdam 11,345 19,403 30,748


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Paris Brussels 15,232 15,232 Total 26,541 11,345 36,332 74,218

2030 Dublin 18,495 17,112 28,481 64,088 Amsterdam 19,379 33,005 52,384 Paris 12,048 12,048 Brussels 28,081 13,117 41,198 Total 58,624 49,608 61,486 169,718 Newquay and S Hams

2015 Dublin 17,391 17,016 34,407 Amsterdam 16,979 10,331 27,310 Paris Brussels 18,369 18,369 Total 34,370 45,716 80,086

2030 Dublin 29,579 29,709 59,288 Amsterdam 29,101 18,237 47,338 Paris 13,615 13,615 Brussels 11,500 28,854 40,354 Total 70,180 90,415 160,595 Assumptions for additional onward interline traffic % Dublin 5 Amsterdam 40 Paris 25 Brussels 15 Jersey 0 Guernsey 0 Forecasts including interline Newquay and Exeter Plymouth Exeter Newquay S Hams

2015 Dublin 13,973 22,055 36,029 Amsterdam 15,883 27,090 42,973 Paris 0 Brussels 12,642 12,642 Total 42,498 49,145 91,644

2030 Dublin 24,362 37,477 61,839 Amsterdam 27,131 46,207 73,338 Paris 13,381 13,381 Brussels 20,850 16,773 37,622 Total 85,723 100,456 186,180 Plymouth, Exeter and Newquay

2015 Dublin 11,874 17,775 29,650 Amsterdam 15,883 27,164 43,047 Paris Brussels 17,517 17,517 Total 29,391 15,883 44,940 90,214

2030 Dublin 19,420 17,968 29,905 67,292 Amsterdam 0 27,131 46,207 73,338 Paris 15,060 15,060 Brussels 32,293 15,085 47,378 Total 66,773 60,183 76,112 203,068 Newquay and S Hams


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2015 Dublin 18,261 17,867 36,127 Amsterdam 23,771 14,463 38,234 Paris Brussels 21,124 21,124 Total 42,031 53,455 95,486

2030 Dublin 31,058 31,194 62,252 Amsterdam 40,741 25,532 66,273 Paris 17,019 17,019 Brussels 13,225 33,182 46,407 Total 85,024 106,927 191,951

Table 49 details the routes and forecast volumes for Full Service Domestic routes. Those routes that are marked in colour on the table indicate viability of a route being operated.

Table 50 details the routes and forecast volumes for Low Frills operations (Domestic and International). Again routes marked in colour indicate viability.


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Exeter Domestic Routes Market Potential Option 1: competing with PLH & NQY

base year 2000 4% market growth 20% stimulation (New Service) 60% mkt pentration5/ Years 5 10 15 20 25 30

Bus' Destination Surface Air 3/ Ttl Pax Hub 1/ Eden 2/ Ttl Pax 2005 2010 2015 2020 2025 2030 2005 2010 2015 2020 2025 203047% Aberdeen 4,961 0 4,961 0.00 0.20 5,953 7,243 8,812 10,721 13,044 15,870 19,309 5,215 6,345 7,719 9,392 11,427 13,90245% Belfast BFS 6/ 6,794 0 6,794 0.00 0.20 8,153 9,919 12,068 14,683 17,864 21,734 26,443 7,142 8,689 10,572 12,862 15,649 19,03975% Edinburgh 13,045 0 13,045 0.20 0.20 18,263 22,220 27,034 32,891 40,016 48,686 59,234 15,998 19,464 23,681 28,812 35,054 42,64949% Glasgow 7,692 0 7,692 0.20 0.20 10,769 13,102 15,940 19,394 23,596 28,708 34,927 9,433 11,477 13,964 16,989 20,670 25,148

MAN/BHX 4/ 39,287 0 39,287 0.00 0.20 47,144 57,358 69,785 84,904 103,299 125,679 152,908 57,358 69,785 84,904 103,299 125,679 152,90881% Newcastle 7,267 0 7,267 0.10 0.20 9,447 11,494 13,984 17,014 20,700 25,184 30,641 8,276 10,068 12,250 14,904 18,133 22,061

Guernsey (Existing 23,296 0 23,296 0.00 0.00 23,296 28,343 34,484 41,955 51,044 62,103 75,558 28,343 34,484 41,955 51,044 62,103 75,558Jersey (Existing) 41,386 0 41,386 0.00 0.00 41,386 50,352 61,261 74,534 90,682 110,328 134,231 50,352 61,261 74,534 90,682 110,328 134,231

152,052 251,288 485,496

Exeter Domestic Routes Market Potential Option 2: EXT and NQY only Far SW airports


Bus' Destination SW Survey Air 3/ Ttl Pax Hub 1/ Eden 2/ Ttl Pax 2005 2010 2015 2020 2025 2030 2005 2010 2015 2020 2025 203045% Aberdeen 5,491 0 5,491 0.00 0.30 7,138 8,685 10,566 12,856 15,641 19,030 23,152 6,253 7,608 9,256 11,261 13,701 16,67048% Belfast BFS 6/. 10,245 0 10,245 0.00 0.30 13,319 16,204 19,715 23,986 29,182 35,505 43,197 11,667 14,195 17,270 21,011 25,564 31,10278% Edinburgh 15,705 0 15,705 0.20 0.30 23,558 28,661 34,871 42,426 51,617 62,800 76,406 20,636 25,107 30,547 37,165 45,216 55,01348% Glasgow 9,102 0 9,102 0.20 0.30 13,653 16,611 20,210 24,588 29,915 36,397 44,282 11,960 14,551 17,704 21,539 26,206 31,883

MAN/BHX 4/ 39,287 0 39,287 0.00 0.20 47,144 57,358 69,785 84,904 103,299 125,679 152,908 57,358 69,785 84,904 103,299 125,679 152,90878% Newcastle 7,889 0 7,889 0.10 0.30 11,045 13,437 16,349 19,891 24,200 29,443 35,822 9,675 11,771 14,321 17,424 21,199 25,792

Guernsey (Existing 23,296 0 23296 0.00 0.00 23296 28,343 34,484 41,955 51,044 62,103 75,558 28,343 34,484 41,955 51,044 62,103 75,558Jersey (Existing) 41,386 0 41386 0.00 0.00 41386 50,352 61,261 74,534 90,682 110,328 134,231 50,352 61,261 74,534 90,682 110,328 134,231

156,690 281,234 523,157

Annual Capacity (51 Weeks) Frequency 6 Seats 30 18,360 Seats 50 30,600 Seats 75 45900 Seats 100 61,200 Market penetration 40%Annual Capacity (51 Weeks) Frequency 12 Seats 30 36,720 Seats 50 61,200 Seats 75 61200 Seats 100 122,400 Market penetration 60%Annual Capacity (51 Weeks) Frequency 17 Seats 30 52,020 Seats 50 86,700 Seats 75 86700 Seats 100 173,400 Market penetration 75%

11016EXT-DUB/GCI/IOS/JER services currently operated. (2000 Traffic: DUB 12,199, BHX 39,387, GCI 23,296, IOS 4,693 JER 41,386). 22032(EXT-Ch.Isles traffic exceeds modelled market share due EXT regarded as historical gateway; better times and more frequent services than elsewhere in the S. West) 31212

Notes1/. If no other "gateway" hub served from Exeter then the "hubbing" factor could be further increased (NB: Of 40,804 EXT-BHX survey pax only 3,751 Terminating)2/, Eden project stimulation factor3/. EXT-BHX Pax included in Surface Pax (2000 CAA Survey Pax)4/. Gateway airport hubbing stimulation factor of 5 (based on 2 weekdaily frequencies) allocated to Manchester 5/. Business mix applies to "Surface" O/D Passengers only6/. A Belfast service to either airport would, subject to competitive fare levels, capture most of the combined traffic

FSW/Domestic Routes Fcst.xls


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Plymouth (PLH) Domestic Routes Market Potential Option 1: competing with EXT & NQY


Bus' Destination Surface Air 3/ Ttl Pax Hub 1/ Eden 2/ Ttl Pax 2005 2010 2015 2020 2025 2030 2005 2010 2015 2020 2025 203045% Belfast BFS 4,680 134 4,814 0.00 0.30 6,258 7,614 9,264 11,271 13,712 16,683 20,298 5,482 6,670 8,115 9,873 12,012 14,61478% Edinburgh 3,574 3,419 6,993 0.20 0.30 10,490 12,762 15,527 18,891 22,984 27,963 34,022 9,189 11,179 13,602 16,548 20,134 24,49644% Glasgow 3,054 5,720 8,774 0.00 0.30 11,406 13,877 16,884 20,542 24,992 30,407 36,995 9,992 12,156 14,790 17,995 21,893 26,636

Gatwick (Existing) 53000 0 53000 0.00 0.10 58,300 70,931 86,298 104,995 127,742 155,418 189,090 70,931 86,298 104,995 127,742 155,418 189,090Jersey (Existing) 10324 0 10324 0.00 0.00 10,324 12,561 15,282 18,593 22,621 27,522 33,485 12,561 15,282 18,593 22,621 27,522 33,485

83,492 151,980 288,321


18 6 11016 6,610 30 6 18360 11,01618 12 22032 13,219 30 12 36720 22,032

Plymouth (S. Hams) Domestic Routes Market Potential Option 3: PLY and NQY only Far SW airports


Bus' Destination Surface Air 3/ Ttl Pax Hub 1/ Eden 2/ Ttl Pax 2005 2010 2015 2020 2025 2030 2005 2010 2015 2020 2025 203035% Aberdeen 3,709 757 4,466 0.00 0.40 6,252 7,607 9,255 11,260 13,700 16,668 20,279 5,477 6,664 8,107 9,864 12,001 14,60163% Belfast BFS 7,154 3,433 10,587 0.00 0.40 14,822 18,033 21,940 26,693 32,476 39,512 48,073 12,984 15,797 19,219 23,383 28,449 34,61338% Birmingham 4/ 4,606 0 4,606 1.00 0.40 11,054 13,449 16,363 19,908 24,222 29,469 35,854 9,684 11,782 14,334 17,440 21,218 25,81584% Edinburgh 9,124 8,857 17,981 0.20 0.40 28,770 35,003 42,586 51,812 63,038 76,695 93,311 25,202 30,662 37,305 45,387 55,220 67,18446% Glasgow 5,471 7,206 12,677 0.20 0.40 20,283 24,678 30,024 36,529 44,443 54,072 65,786 17,768 21,617 26,301 31,999 38,932 47,36630% Guernsey 8,301 0 8,301 0.00 0.00 8,301 10,099 12,288 14,950 18,189 22,129 26,923 10,099 12,288 14,950 18,189 22,129 26,92329% Jersey 23,252 0 23,252 0.00 0.00 23,252 28,290 34,419 41,876 50,948 61,986 75,415 28,290 34,419 41,876 50,948 61,986 75,41587% Manchester 1/ 845 440 1,285 5.00 0.40 8,224 10,006 12,174 14,811 18,020 21,924 26,674 7,204 8,765 10,664 12,974 15,785 19,20573% Newcastle 4,202 1,403 5,605 0.10 0.40 8,408 10,229 12,445 15,141 18,422 22,413 27,269 7,365 8,961 10,902 13,264 16,137 19,634

Gatwick (Existing) 61,000 0 61,000 0.00 0.10 67,100 81,637 99,324 120,843 147,024 178,878 217,632 81,637 99,324 120,843 147,024 178,878 217,632165,881 274,827 548,388


Notes1/. Potential to increase hubbing at "gateway" airport2/. Eden project estimated stimulation factor (scheduled services) it being assumed major movements would be by Charter or Budget airline operations3/. Also includes passengers from "Drive-time" catchment area flying between EXT-BHX in 20004/. Of 18,128 BHX demand, passengers have been allocated to main destinations in line EXT-BHX distribution (6598 Belfast split 50/50, 5438 GLA and 1486 EDI); Of 4606 residual Pax 25% are connecting5/. Business mix applies to "Surface" O/D Passengers only



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Newquay Domestic Routes Market Potential Option 1: competing with EXT & NQY

base year 2000 4% market growth 20% stimulation (New Service) 60% mkt pentration5/ Destination Years 5 10 15 20 25 30

Bus' Destination Surface Air Ttl Pax Hub 1/ Eden 2/ Ttl Pax 2005 2010 2015 2020 2025 2030 2005 2010 2015 2020 2025 20300% Edinburgh 6/ 754 1,459 2,213 0.20 0.50 3,762 4,577 5,569 6,775 8,243 10,029 12,202 3,296 4,010 4,878 5,935 7,221 8,785

59% Glasgow 3,176 987 4,163 0.20 0.50 7,077 8,610 10,476 12,745 15,507 18,866 22,954 6,199 7,543 9,177 11,165 13,584 16,527Skybus routes 30,000 0 30,000 0.00 0.00 30,000 36,500 44,407 54,028 65,734 79,975 97,302 36,500 44,407 54,028 65,734 79,975 97,302

10% Jersey 2,587 0 2,587 0.10 0.50 4,139 5,036 6,127 7,454 9,069 11,034 13,425 3,626 4,411 5,367 6,530 7,945 9,666LGW existing 61581 0 61,581 0.00 0.10 67,739 82,415 100,270 121,994 148,425 180,581 219,705 82,415 100,270 121,994 148,425 180,581 219,705

118,915 176,023 333,534

Newquay Domestic Routes Market Potential Option 2: S Hams & NQY only Far SW airports

base year 2000 4% market growth 20% stimulation (New Service) 60% mkt pentration5/ Destination Years 5 10 15 20 25 30

Bus' Destination Surface Air Ttl Pax Hub 1/ Eden 2/ Ttl Pax 2005 2010 2015 2020 2025 2030 2005 2010 2015 2020 2025 203058% Glasgow 4,263 987 5,250 0.20 0.60 9,450 11,497 13,988 17,019 20,706 25,192 30,650 8,278 10,072 12,254 14,908 18,138 22,06837% Guernsey 2,179 0 2,179 0.10 0.60 3,704 4,507 5,483 6,671 8,117 9,875 12,015 2,163 2,632 3,202 3,896 4,740 5,767

Skybus routes 30,000 0 30,000 0.00 0.00 30,000 36,500 44,407 54,028 65,734 79,975 97,302 36,500 44,407 54,028 65,734 79,975 97,30211% Jersey 3,403 0 3,403 0.10 0.60 5,785 7,038 8,563 10,419 12,676 15,422 18,763 3,378 4,110 5,001 6,084 7,403 9,006

LGW existing 61,581 0 61,581 0.00 0.10 67,739 82,415 100,270 121,994 148,425 180,581 219,705 82,415 100,270 121,994 148,425 180,581 219,705118,915 196,479 353,848

Newquay Domestic Routes Market Potential Option 3: EXT and NQY only Far SW airports

5/ base year 2000 4% market growth 20% stimulation (New Service) 60% mkt pentration5/ Destination Years 5 10 15 20 25 30

Bus' Destination Surface Air Ttl Pax Hub 1/ Eden 2/ Ttl Pax 2005 2010 2015 2020 2025 2030 2005 2010 2015 2020 2025 203016% Belfast (BHD) 924 1,045 1,969 0.00 0.70 3,347 4,073 4,955 6,028 7,334 8,923 10,857 1,955 2,378 2,894 3,520 4,283 5,21121% Birmingham 4/ 1,633 0 1,633 5.00 0.70 10,941 13,312 16,196 19,704 23,973 29,167 35,486 9,584 11,661 14,187 17,261 21,000 25,55030% Edinburgh 1,668 1,459 3,127 0.20 0.70 5,941 7,228 8,795 10,700 13,018 15,839 19,270 5,205 6,332 7,704 9,373 11,404 13,87453% Glasgow 4,821 987 5,808 0.20 0.70 11,035 13,426 16,335 19,874 24,179 29,418 35,792 9,667 11,761 14,309 17,409 21,181 25,77039% Guernsey 3,134 0 3,134 0.10 0.70 5,641 6,863 8,350 10,159 12,361 15,039 18,297 3,294 4,008 4,877 5,933 7,218 8,782

Skybus routes 30,000 0 30,000 0.00 0.00 30,000 36,500 44,407 54,028 65,734 79,975 97,302 36,500 44,407 54,028 65,734 79,975 97,30222% Jersey 4,638 0 4,638 0.10 0.70 8,348 10,157 12,358 15,035 18,292 22,255 27,077 4,875 5,932 7,217 8,780 10,683 12,997

LGW existing 61,581 0 61,581 0.00 0.10 67,739 82,415 100,270 121,994 148,425 180,581 219,705 82,415 100,270 121,994 148,425 180,581 219,705216,612 409,192


Notes1/. Potential to increase hubbing at "gateway" airport2/. Eden project estimated stimulation factor (scheduled services) it being assumed major movements would be by Charter or Budget airline operations3/. Also includes passengers from "Drive-time" catchment area flying between EXT-BHX in 20004/. BHX demand from NQY catchment area was significantly higher but this include passengers interlining at BHX who have been redistributed.5/. Business mix applies to "Surface" O/D Passengers only6/. EDI "Surface" passengers shown as all Leisure but as is evident from the CAA survey passengers flyinging EXT-BHX were predominently business


Table 49 - Full Service Domestic detailed forecasts


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Exeter Low Frill Routes Market Potential Option 1: with PLH (no Low Frills) & NQY

base year 2000 4% market growth 75% stimulation (Low Frills) 40% Mkt penetration+1/ Years 5 10 15 20 25 30

Bus' Dest' Surface Air 2/ Core Pax Stim' 3/ Ttl Pax Hub 4/ Eden 5/ 2000 2005 2010 2015 2020 2025 2030 2005 2010 2015 2020 2025 203030.0% AMS 30,488 125 30,613 0.4 42,858 0.10 0.20 55,715 67,786 82,472 100,340 122,079 148,528 180,707 47,450 57,731 70,238 85,455 103,970 126,49522.0% CDG 12,226 400 12,626 0.4 17,676 0.10 0.20 22,979 27,958 34,015 41,384 50,351 61,259 74,531 19,570 23,811 28,969 35,245 42,881 52,17225.0% DUB 23,367 218 23,585 0.4 33,019 0.05 0.20 41,274 50,216 61,095 74,332 90,436 110,030 133,868 35,151 42,767 52,032 63,305 77,021 93,7075.0% GVA 21,125 72 21,197 0.4 29,676 0.05 0.20 37,095 45,132 54,909 66,806 81,279 98,889 120,313 31,592 38,437 46,764 56,896 69,222 84,219

49.0% GLA 3,945 12421 16,366 0.6 26,185 0.05 0.20 32,732 39,823 48,451 58,948 71,719 87,257 106,162 41,814 50,873 61,895 75,305 91,620 111,47015.0% CPH 13,277 0 13,277 0.4 18,588 0.10 0.20 24,164 29,399 35,768 43,518 52,946 64,417 78,373 20,579 25,038 30,462 37,062 45,092 54,86157.0% BRU 9,992 51 10,043 0.4 14,060 0.10 0.20 18,279 22,239 27,057 32,919 40,051 48,728 59,285 15,567 18,940 23,043 28,036 34,109 41,4990.0% SZG 13,844 0 13,844 0.4 19,381 0.00 0.20 23,258 28,296 34,427 41,885 50,960 62,001 75,433 19,807 24,099 29,320 35,672 43,400 52,803

18.0% MUC 12,756 785 13,541 0.4 18,957 0.10 0.20 24,645 29,984 36,480 44,384 53,999 65,699 79,932 20,989 25,536 31,068 37,800 45,989 55,95354.0% FRA 13,155 0 13,155 0.4 18,416 0.10 0.20 23,941 29,128 35,439 43,117 52,458 63,824 77,651 20,390 24,807 30,182 36,721 44,677 54,35613.0% ZRH 11,391 116 11,507 0.4 16,110 0.10 0.20 20,944 25,481 31,002 37,718 45,890 55,832 67,928 17,837 21,701 26,403 32,123 39,082 47,550

47,450 169,035 775,085

Exeter Low Frill Routes Market Potential Option 2: EXT & NQY only FSW airports

base year 2000 4% market growth 75% stimulation (Low Frills) 40% Mkt penetration+1/ Years 5 10 15 20 25 30

Bus' Dest' Surface Air 2/ Core Pax Stim' 3/ Ttl Pax Hub 4/ Eden 5/ 2000 2005 2010 2015 2020 2025 2030 2005 2010 2015 2020 2025 203033.0% AMS 46,778 125 46,903 0.0 46,903 0.10 0.30 65,665 79,891 97,200 118,258 143,879 175,051 212,977 55,924 68,040 82,781 100,716 122,536 149,08425.0% DUB 35,935 218 36,153 0.0 36,153 0.05 0.30 48,807 59,381 72,246 87,899 106,942 130,112 158,301 41,567 50,572 61,529 74,860 91,078 110,81059.0% FRA 33,137 0 33,137 0.0 33,137 0.10 0.30 46,392 56,443 68,672 83,549 101,651 123,674 150,468 39,510 48,070 58,485 71,155 86,571 105,32755.0% BRU 27,645 51 27,696 0.0 27,696 0.10 0.30 38,774 47,174 57,395 69,830 84,959 103,365 125,759 33,022 40,176 48,881 59,471 72,356 88,03248.0% GLA 9,102 12421 21,523 0.0 21,523 0.05 0.30 29,056 35,351 43,009 52,328 63,664 77,458 94,239 37,118 45,160 54,944 66,848 81,330 98,95118.0% CPH 20,265 0 20,265 0.0 20,265 0.10 0.30 28,371 34,518 41,996 51,095 62,165 75,633 92,019 24,162 29,397 35,766 43,515 52,943 64,41378.0% EDI 15,705 3,345 19,050 0.0 19,050 0.05 0.30 25,717 31,289 38,068 46,316 56,350 68,558 83,412 32,854 39,971 48,631 59,167 71,986 87,58229.0% CDG 17,377 400 17,777 0.0 17,777 0.10 0.30 24,888 30,280 36,840 44,822 54,532 66,347 80,721 21,196 25,788 31,375 38,173 46,443 56,50518.0% MUC 16,488 785 17,273 0.0 17,273 0.10 0.30 24,182 29,421 35,795 43,550 52,985 64,464 78,431 20,595 25,056 30,485 37,090 45,125 54,90215.0% ZRH 15,673 116 15,789 0.0 15,789 0.10 0.30 22,105 26,894 32,721 39,810 48,435 58,929 71,696 18,826 22,905 27,867 33,904 41,250 50,18734.0% BCN 14,578 159 14,737 0.0 14,737 0.10 0.30 20,632 25,102 30,540 37,157 45,207 55,001 66,917 17,571 21,378 26,010 31,645 38,501 46,842

97,491 355,251 912,635


Notes1/. Business mix (Surface Pax)2/. EXT-BHX Pax3/. Enhanced catchment area due no Low Frequency (LF) possible at PLH4/. Pax figures weighted to reflect hubbing opportunities at destination/gateway airport5/. Eden centre stimulation factor

FSW/Routes Fcst.xls


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Plymouth (S Hams) Low Frill Routes Market Potential Option 3: PLY (S Hams) & NQY only FSW airports

base year 2000 4% market growth 75% stimulation (Low Frills) 40% Mkt penetration1/ 2/ 3/ Years 5 10 15 20 25 30

Bus' Dest' Surface LGW Air BRS Air EXT Air Ttl Pax Hub 4/ Eden 5/ 2000 2005 2010 2015 2020 2025 2030 2005 2010 2015 2020 2025 203037% AMS 24,571 263 576 62 25,472 0.10 0.40 38,208 46,486 56,557 68,810 83,718 101,856 123,923 32,540 39,590 48,167 58,603 71,299 86,74647% GLA 5,471 1662 2335 6,210 15,678 0.05 0.40 22,733 27,658 33,650 40,941 49,810 60,602 73,732 29,041 35,333 42,988 52,301 63,632 77,41867% FRA 25,237 959 0 0 26,196 0.10 0.40 39,294 47,807 58,164 70,765 86,097 104,750 127,445 33,465 40,715 49,536 60,268 73,325 89,21130% DUB 22,132 0 0 109 22,241 0.05 0.40 32,249 39,236 47,737 58,079 70,662 85,971 104,597 27,465 33,416 40,655 49,463 60,180 73,21821% CPH 16,998 90 0 0 17,088 0.10 0.40 25,631 31,184 37,941 46,161 56,161 68,329 83,133 21,829 26,558 32,312 39,313 47,830 58,19362% BRU 18,278 1684 0 25 19,987 0.10 0.40 29,981 36,476 44,378 53,993 65,691 79,923 97,239 25,533 31,065 37,795 45,984 55,946 68,0673% GVA 12,342 614 0 36 12,992 0.05 0.40 18,838 22,919 27,885 33,926 41,276 50,219 61,099 16,043 19,519 23,748 28,893 35,153 42,769

84% EDI 9,124 0 2,917 0 12,041 0.05 0.40 17,459 21,242 25,844 31,443 38,256 46,544 56,628 22,304 27,136 33,016 40,168 48,871 59,4590% SZG 10121 3718 0 0 13,839 0.00 0.40 19,375 23,572 28,679 34,893 42,452 51,650 62,840 16,501 20,075 24,425 29,716 36,155 43,988

20% MUC 8639 2508 0 785 11,932 0.10 0.40 17,898 21,776 26,493 32,233 39,217 47,713 58,050 15,243 18,545 22,563 27,452 33,399 40,63519% ZRH 10,918 0 0 58 10,976 0.10 0.40 16,464 20,031 24,371 29,651 36,075 43,890 53,399 14,022 17,060 20,756 25,252 30,723 37,38010% MAD 9921 372 0 0 10,293 0.10 0.40 15,440 18,785 22,854 27,806 33,830 41,159 50,076 13,149 15,998 19,464 23,681 28,811 35,05434% CDG> 17614 1053 124 200 18,991 0.10 0.40 28,487 34,658 42,167 51,303 62,417 75,940 92,393 24,261 29,517 35,912 43,692 53,158 64,675

138,358 644,920

Aircraft Capacity Projections


Load Factor Threshold (assuming 70% break-even load factor)

Annual Capacity (51 Weeks) Frequency 6 Seats 78 33,415 Seats 100 63,403 Seats 148 63,403 Seats 189 63,403 Market penetration 40%Annual Capacity (51 Weeks) Frequency 12 Seats 78 66,830 Seats 100 85,680 Seats 148 85,680 Seats 189 85,680 Market penetration 60%Annual Capacity (51 Weeks) Frequency 17 Seats 78 94,676 Seats 100 121,380 Seats 148 121,380 Seats 189 121,380 Market penetration 75%

78 7 55692 41,76978 12 95472 71,604

Notes1/. Business mix (Surface Pax)2/. Pax flying from BRS connecting at BRS3/. Pax flying EXT-BHX with a connecting flight (estimated at 50% EXT-BHX)4/. Pax figures weighted to reflect hubbing opportunities at destination/gateway airport5/. Eden centre stimulation factor


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Newquay Low Frill Routes Market Potential Option 2 and 1: EXT & NQY and EXT, NQY and PLY

base year 2000 4% market growth 75% stimulation (Low Frills) 40% Mkt penetration1/ 2/ 3/ Years 5 10 15 20 25 30

Bus' Dest' Surface LGW Air PLH Est EXT Air Ttl Pax Hub 4/ Eden 5/ 2000 2005 2010 2015 2020 2025 2030 2005 2010 2015 2020 2025 203013% CDG 5,629 1736 2700 40 10,105 0.10 0.70 18,189 22,130 26,924 32,757 39,854 48,489 58,994 15,491 18,847 22,930 27,898 33,942 41,29628% AMS 7,350 2505 0 12 9,867 0.10 0.70 17,761 21,608 26,290 31,986 38,916 47,347 57,605 15,126 15,126 15,126 15,126 15,126 15,12620% DUB 13,244 0 0 22 13,266 0.05 0.70 23,216 28,245 34,365 41,810 50,868 61,889 75,297 19,772 19,772 19,772 19,772 19,772 19,77269% BRU 8,382 69 0 5 8,456 0.10 0.70 15,221 18,518 22,531 27,412 33,351 40,576 49,367 12,963 12,963 12,963 12,963 12,963 12,96356% MAD 7,916 1174 0 0 9,090 0.10 0.70 16,362 19,907 24,220 29,467 35,851 43,618 53,068 13,935 13,935 13,935 13,935 13,935 13,93540% ZRH 6,658 330 0 0 6,988 0.10 0.70 12,578 15,304 18,619 22,653 27,561 33,532 40,797 10,712 10,712 10,712 10,712 10,712 10,712

100% SZG 803 7989 0 0 8,792 0.00 0.70 14,946 18,185 22,124 26,918 32,749 39,845 48,477 12,729 12,729 12,729 12,729 12,729 12,7299% FRA 5,475 91 0 0 5,566 0.10 0.70 10,019 12,189 14,830 18,043 21,952 26,708 32,495 8,533 8,533 8,533 8,533 8,533 8,533

26% CPH 5,434 70 0 0 5,504 0.10 0.70 9,907 12,054 14,665 17,842 21,708 26,411 32,133 8,438 8,438 8,438 8,438 8,438 8,43853% GLA 4,821 118 0 1242 6,181 0.05 0.70 10,817 13,160 16,011 19,480 23,701 28,836 35,083 9,212 9,212 9,212 9,212 9,212 9,21293% ARN 3,601 1004 0 0 4,605 0.10 0.70 8,289 10,085 12,270 14,928 18,162 22,097 26,885 7,059 7,059 7,059 7,059 7,059 7,0590% VIE 4,486 0 0 0 4,486 0.10 0.70 8,074 9,823 11,952 14,541 17,691 21,524 26,187 6,876 6,876 6,876 6,876 6,876 6,8760% NCE 4,918 0 0 0 4,918 0.05 0.70 8,607 10,472 12,740 15,501 18,859 22,945 27,916 7,330 7,330 7,330 7,330 7,330 7,330

68% VCE 0 4904 0 0 4,904 0.00 0.70 8,337 10,143 12,341 15,014 18,267 22,225 27,040 7,100 7,100 7,100 7,100 7,100 7,100STN (New 150,000 0 0 0 150,000 0.00 0.00 150,000 182,498 222,037 270,142 328,668 399,875 486,510 182,498 222,037 270,142 328,668 399,875 486,510

182,498 270,142 527,806


Notes1/. Business mix (Surface Pax)2/. 25% share of estimated PLH-CDG Pax (No published statistics for PLH)3/. Pax flying EXT-BHX with a connecting flight (estimated at 10% EXT-BHX)4/. Pax figures weighted to reflect hubbing opportunities at destination/gateway airport5/. Eden centre stimulation factor

Table 50 - Low Frills detailed forecasts


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10 Appendix B – Results of Survey of Business Users (April 2003)

The airports under consideration were, Stansted, Gatwick, Heathrow, Bristol, Newquay, Plymouth and Exeter.

The questionnaire asked a number of questions, the key ones being:

• How many times have you flown from the following airports in the past 12 months?

• How do you travel to these airports?

• Where do you fly to now?

• Where might you be flying to in the future?

• How important is air travel for your business?

• What are your reasons for travelling by air for business?

• Which is/are your preferred airport/s?

• Which is your nearest or local airport?

• What impact would improved access to air services from your local airport have?

• What are the key factors in your investment decisions?

A number of key themes have emerged following analysis of the questionnaire. Respondents stated that, within the last 12 months, 70% have used Bristol airport, closely followed by Heathrow at 65%. Some of those users have flown through Bristol and Heathrow airports on multiple occasions. The far South West airports are used less often, with only Exeter attracting around 30% use but mostly for infrequent trips. Newquay and Plymouth were lower at 20% each.

Responses to questions on surface access showed that most SW passengers use road to access airports in the far South West and most by car or taxi. Only Heathrow, Gatwick and Stansted attract a significant numbers of passengers to use rail.

Respondents indicated the future destinations that they intend to travel to include the USA, France, Spain and the rest of the UK.

Airports are being used for a variety of business reasons, including meeting suppliers and customers, attending conferences and exploring new opportunities, with 51% of respondents considering air travel essential for their business.

However, there was an interesting response arising from the survey regarding the nearest airport to the respondents versus the actual airport used. For Plymouth around half of the respondents used Exeter and Bristol, whilst in the vicinity of Exeter around 50% of passengers used their local airport; Bristol, Heathrow and Gatwick represented the other 50%. None of the respondents in the Exeter area stated that they used Plymouth Airport. This is probably because, given its location relative to London, it is easier to access Heathrow via surface modes from Exeter, than drive to Plymouth, fly to Gatwick and then if necessary transfer to Heathrow via the M25.


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Not being able to access air services from local airports has a number of impacts on the business community. 70% of respondents stated that an increase in journey times and 60% of respondents stated an increase in costs as being important. Respondents gave a broad range of answers on how improved air services affect the local economy. Answers included; encourages inward investment, benefits local business, enables the development of market opportunities, generate jobs and encourage inbound tourism.

10.1 Q1 - Frequency of Use of South West and Adjoining Region Airports

University of Exeter excluded as multiple responses were submitted and skewed further analysis. However, the University consider air travel very important for their prime use of attending conferences.

Frequency of Use of South West and Adjoining Region AirportsNumber of Times flown from airport in last 12 months where airport is originating point

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Exeter

Plymouth

Newquay

Bristol

Heathrow

Gatwick

Stansted

% of Respondents from South West Businesses (excluding Uni of Exeter)

20+9-195-91-40


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10.2 Q2 - How do you travel to these airports? - 1st travel preference only

10.3 Q3 - Future Destinations flown to by South West Businesses

Future Destinations flown to by South West Businesses

0

2

4

6

8

10

12

14

16

18

20

USA

Fran

ce

Oth

er E

ngla

nd

Spai

n

Far E

ast

East

ern

Euro

pe

Scot

land

Euro

pe(U

nspe

cifie

d)

Net

herla

nds

Scan

dina

via

Ger

man

y

Afr

ica

Irela

nd

Switz

erla

ndNum

ber o

f res

pond

ents

flyi

ng to

des

tinat

ion

in fu

ture

Leisure

Business & Leisure / unspecified

Business

How do you travel to these airports? - 1st travel preference only

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Exeter

Plymouth

Newquay

Bristol

Heathrow

Gatwick

Stansted

Sub-total

% of Respondents from South West Businesses

Drive Yourself Driven by Non-Flyer Taxi Rail Bus/Coach Other


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10.4 Q4 - How important is Air Travel for your business

How important is Air Travel for your business

51%

17%

15%

6%

11%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1 (Essential) 2 3 4 5 (Not Important)

% o

f Sou

th W

est b

usin

ess

resp

onde

nts

10.5 Q5 - Reasons for travelling by air for business

Reasons for travelling by air for businessSample of South West businesses excluding University of Exeter

Visiting Colleagues

Meeting Customers

Meeting SuppliersCarrying Out Work

Seeking Investment

Exploring New Opportunities

Attending Conferences

CommutingOther


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10.6 Q6 - Respondents stated 1st choice airport versus actual airport usage

Respondents stated 1st choice airport versus actual airport usage

0

2

4

6

8

10

12

14

Bristol Exeter Heathrow Newquay Plymouth1st choice airport

Num

ber o

f res

pons

es fr

om S

outh

Wes

t B

usin

esse

s

1st choice airport used morethan any other single airport

Other airport used more than1st choice airport

10.7 Q7 - Impact of not being able to fly from preferred airport

Impact of not being able to fly from preferred airport

0%

10%

20%

30%

40%

50%

60%

70%

80%

Incr

ease

Cos

ts

Incr

ease

Jou

rney

Tim

es

Red

uces

Acc

ess

to S

uppl

iers

Dec

reas

eC

ompe

titiv

enes

s

Dec

reas

eEm

ploy

men

t

Oth

er

% o

f Sou

th W

est B

usin

ess

Res

pons

es


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10.8 Q8 - Comparison of Nearest Airport v Preferred Airport

Comparison of Nearest Airport v Preferred Airport

0 5 10 15 20 25 30 35

Exeter

Newquay

Plymouth

Nea

rest

Airp

ort

Preferred Airport (number of responses from South West businesses)

Nearest airport = Preferred airport Exeter Bristol Heathrow Plymouth Gatwick Newquay Other

10.9 Q9 - Impact of improved access to air services from local airport

Impact of improved access to air services from local airport% of Ranking points from South West businesses [Rank 1 = 7 pts, Rank 2 = 6 pts etc.]

Benefit Local Business

Develop Market Opportunies

Generate Wider Employment

Encourage Inward Investment

Encourage Regeneration

Other

Encourage Inbound Tourism

Encourage Public Transport Use


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10.10 Q10 - Key Factors in Investment Decisions

Key Factors in Investment Decisions% of Ranking points from South West businesses [Rank 1 = 8 pts, Rank 2 = 7 pts etc.]

Labout/ Skills Availability

Labour Costs

Access to Road Network

Access to Rail Services

Access to Air Services

Close to Suppliers

Attractive EnvironmentOther

Close to Market

Property Prices

Links to Other Firms/Uni


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11 Appendix C – Profit and Loss Projections 11.1 Option 1 Profit and Loss

PROFIT & LOSS PROJECTIONS OPTION 1 Exeter, Plymouth and Newquay (Base Case) 2002 2003 2015 2030 real estimate projection projection £'000 £'000 £'000 £'000 EXETER Traffic (pax) 349 370 946 2,243 Traffic charges 4,122 4,433 7,411 16,677 Other ops income 4,800 5,169 10,379 21,158 Property 328 338 482 1,001 Turnover 9,250 9,939 18,272 38,836 % growth 7.5% 4.9% 5.5% Labour costs 3,671 3,750 5,146 7,504 Other ops expenses 3,929 4,274 9,694 19,762 Operating expenses 7,600 8,024 14,840 27,267 % growth 5.6% 5.1% 4.8% EBITDA 1,650 1,916 3,432 11,570 margin 17.8% 19.3% 18.8% 29.8% % growth 16.1% 4.3% 7.3% Depreciation 822 1,050 1,919 2,020 EBIT 828 866 1,512 9,550 margin 9.0% 8.7% 8.3% 24.6% % growth 4.5% 11.4% 9.6% Interest received 95 100 100 100 Interest paid - 429 - 449 - 481 - 122 EBT 494 517 1,131 9,528 margin 5.3% 5.2% 6.2% 24.5% % growth 4.7% 21.5% 9.8% Taxation 66 155 339 2,858 Net profit/(loss) 428 362 792 6,669 margin 4.6% 3.6% 4.3% 17.2% % growth -15.4% 21.5% 9.8% Accumulated profits 790 1,443 12,745 PLYMOUTH Traffic (pax) 76 81 181 355 Traffic charges 1,280 1,312 1,685 3,830 Other ops income 1,260 1,318 2,171 3,389 Turnover 2,539 2,630 3,856 7,219 % growth 3.6% 3.3% 4.4% Labour costs 1,127 1,508 2,429 Other ops expenses 501 1,117 2,539 Operating expenses 1,627 2,625 4,969 % growth 4.2% 4.4%


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EBITDA 1,003 1,232 2,250 margin 38.1% 31.9% 31.2% % growth 1.4% 4.4% Depreciation 71 71 671 571 EBIT 932 561 1,679 margin 35.4% 14.5% 23.3% % growth 3.0% 6.0% Interest paid - - 111 - 28 EBT 932 451 1,651 margin 9.4% 2.5% 4.3% % growth 6.4% 6.3% Taxation 280 135 495 Net profit/(loss) 652 315 1,156 margin 6.6% 1.7% 3.0% % growth 6.4% 6.3% Accumulated profits 652 612 2,244 NEWQUAY Traffic (pax) 180 194 533 1,012 Traffic charges 735 772 2,009 4,622 Other ops income 316 345 1,135 3,122 Turnover 1,050 1,117 3,144 7,743 % growth 6.4% 7.0% 9.2% Labour costs 334 873 2,082 Other ops expenses 1,010 2,617 5,771 Operating expenses 1,344 3,490 7,853 % growth 7.3% 7.3% EBITDA - 227 - 346 - 110 margin -8.6% -9.0% -1.5% Depreciation 63 63 765 675 EBIT - 290 - 1,111 - 784 margin -26.0% -35.3% -10.1% Interest paid - - 111 - 28 EBT - 290 - 1,222 - 812 margin -2.9% -6.7% -2.1% % growth 31.6% -13.1% Taxation - - - Net profit/(loss) - 290 - 1,222 - 812 margin -2.9% -6.7% -2.1% % growth 31.6% -13.1% Accumulated profits - 290 - 2,150 - 1,747


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11.2 Option 2 Profit and Loss

PROFIT & LOSS PROJECTIONS OPTION 2 Exeter and Newquay only 2002 2003 2015 2030 real estimate projection projection £'000 £'000 £'000 £'000 EXETER Traffic (pax) 349 372 1,085 2,444 Traffic charges 4,122 4,457 8,004 17,505 Other ops income 4,800 5,198 11,906 22,194 Property 328 338 482 1,001 Turnover 9,250 9,993 20,391 40,701 % growth 8.0% 5.0% 5.0% Labour costs 3,671 3,750 5,287 7,784 Other ops expenses 3,929 4,292 10,903 20,325 Operating expenses 7,600 8,041 16,191 28,109 % growth 5.8% 4.9% 4.2% EBITDA 1,650 1,952 4,200 12,591 margin 17.8% 19.5% 20.6% 30.9% % growth 18.3% 5.4% 6.7% Depreciation 822 1,050 1,919 2,020 EBIT 828 902 2,281 10,572 margin 9.0% 9.0% 11.2% 26.0% % growth 8.9% 11.1% 8.7% Interest received 95 100 100 100 Interest paid - 429 - 449 - 486 - 124 EBT 488 701 1,533 1,996 margin 5.3% 7.1% 8.4% 5.1% % growth 43.7% 2.2% -2.0% Taxation 66 210 460 599 Net profit/(loss) 422 491 1,073 1,397 margin 4.6% 4.9% 5.9% 3.6% % growth 16.3% 2.2% -2.0% Accumulated profits 913 2,123 2,822 NEWQUAY Traffic (pax) 180 195 578 1,112 Traffic charges 735 783 2,321 5,494 Other ops income 316 346 1,191 3,202 Turnover 1,050 1,130 3,513 8,697 % growth 7.5% 7.8% 8.9% Labour costs 334 912 2,216 Other ops expenses 1,019 2,912 6,318 Operating expenses 1,353 3,825 8,533 % growth 7.9% 7.0% EBITDA - 224 - 312 163 margin -19.8% -8.9% 1.9% % growth -8.6% -1158.0% Depreciation 63 63 765 675


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EBIT - 287 - 1,077 - 512 margin -25.4% -30.6% -5.9% % growth -38.0% 22.7% Interest paid - - 88 - 23 EBT - 287 - 1,165 - 534 margin -2.9% -6.4% -1.4% % growth 32.8% -22.2% Taxation - - - Net profit/(loss) - 287 - 1,165 - 534 margin -2.9% -6.4% -1.4% % growth 32.8% -22.2% Accumulated profits - 287 - 2,042 - 1,221


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11.3 Option 3 Profit and Loss

PROFIT & LOSS PROJECTIONS OPTION 3 Newquay plus New South Hams 2002 2003 2015 2030 2040 real estimate projection projection projection £'000 £'000 £'000 £'000 £'000 NEWQUAY Traffic (pax) 180 194 551 1,036 Traffic charges 735 778 2,131 4,826 Other ops income 316 348 1,250 3,164 Turnover 1,050 1,126 3,381 7,990 % growth 7.2% 7.6% 5.9% Labour costs 334 893 2,109 Other ops expenses 1,015 2,739 5,894 Operating expenses - 1,349 3,632 8,003 % growth 7.6% 5.5% EBITDA - 223 - 251 - 12 margin -19.8% -1.2% 0.0% % growth -6.6% 72.4% Depreciation 63 63 765 675 EBIT - 286 - 1,015 - 687 margin -2.9% -5.0% -1.7% % growth -39.4% 4.6% Interest paid - - 86 - 22 EBT - 286 - 1,101 - 709 margin -2.9% -6.0% -1.8% % growth 33.9% -4.7% Taxation - - - Net profit/(loss) - 286 - 1,101 - 709 margin -2.9% -6.0% -1.8% % growth 33.9% -4.7% Accumulated profits - 286 - 1,923 - 1,453 SOUTH HAMS Traffic (pax) 1,088 2,322 3,408 Traffic charges 7,963 16,197 23,156 Other ops income 9,239 18,280 25,521 Property 704 1,096 1,473 Turnover 17,906 35,574 50,151 % growth 8.5% 6.5% 3.6% Labour costs 4,255 7,865 11,885 Other ops expenses 7,971 16,376 23,443 Operating expenses 12,226 24,241 35,328 % growth 7.2% 6.4% 4.1% EBITDA 5,680 11,332 14,823 margin 31.7% 31.9% 29.6% % growth 11.4% 6.9% 2.7% Depreciation 5,322 4,427 3,281 EBIT 358 6,906 11,542


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margin 2.0% 19.4% 23.0% % growth 121.1% 18.3% 3.4% Interest paid - 2,566 - 851 - 408 EBT - 2,209 6,055 11,134 margin -12.3% 17.0% 22.2% % growth -15.1% 23.0% 3.9% Taxation - 1,816 3,340 Net profit/(loss) - 2,209 4,238 7,794 margin -12.3% 11.9% 15.5% % growth -15.1% 23.0% 3.9% Accumulated profits - 4,809 7,684 15,298


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12 Appendix D - Bibliography • The Future Development of Air Transport in the United Kingdom: South West, 2002, DfT.

• Newquay Airport. The Potential for the Development of Inbound Charters, 2000, Close Focus.

• Interview Survey Report, Newquay Cornwall Airport, 2002, Cornwall County Council.

• DACOM. New Markets Study, 2000, South West Tourism.

• South West Tourism Annual Report. 2001/02

• The Thin Routes Study. Plymouth / Newquay and Inverness to Gatwick, 2001, DfT.

• Relocation of Plymouth City Airport Study. Stage 1. Final Report, 2002, Sutton – Harbour Holdings.

• Exeter Airport North Side Planning Application, development statement, 2000, Exeter Airport

• South West Multi Modal Study (SWARMMS) Final Report, 2002, Government Office for the South West.

• Improvements to Airport Infrastructure at Plymouth City Airport: Economic Appraisal, 2001, ERM Economics.

• Regional Planning Guidance for the South West (RPG11)

• Cornwall Structure Plan (1991-2011 (Adopted 1997), Cornwall County Council

• Cornwall Structure Plan Deposit Draft 1996-2016, Cornwall County Council (2002)

• Restormel Local Plan 2001-2011 (As Agreed for Adoption), Re. District Council

• Devon Structure Plan First Review 1995-2011 (Adopted February 1999)

• Devon Structure Plan 2001-2016, Deposit Draft (July 2002) and Pre-EIP changes (January 2003)

• East Devon Local Plan 1995-2011, Deposit Draft (January 2002)

• Exeter Local Plan First Review, First Deposit Plan 1995-2011

• Exeter Local Plan First Review 1995-2011, Second Deposit Draft Plan (May 2002)

• City of Plymouth Local Plan 1995-2011 First Deposit (December 2001)

• South Hams Local Plan 1989-2001 (Adopted April 1996)

• An Economic Overview of the Case for a New Devon Airport at Plymouth, University of

Plymouth