Gatwick s Response to the Draft Airports National Policy Statement - Overview

Transcription

1 Gatwick s Response to the Draft Airports National Policy Statement - Overview The need for more airport capacity is more urgent than ever. The latest traffic forecasts, and opportunities from Brexit, mean the UK needs more capacity well before The scope of the draft NPS is too narrow and not ambitious enough. As currently drafted it is a missed opportunity. It does not represent a true National Policy Statement for Airports. The challenges inherent in the Heathrow scheme are so substantial that it would be a huge risk for Government to confirm it as the single preference on the basis of the current evidence. Government s preference for Heathrow expansion is not justified by the evidence in the draft NPS, particularly its partial and unbalanced assessments of Connectivity and Economic Impacts and the inadequate weight it gives to Environmental issues. Revised passenger forecasts promised prior to the end of the Consultation period have not materialised these forecasts are a crucial input to the economic forecasts. The Government s newly published Draft UK Air Quality Plan provides no new evidence to suggest that LHR-NWR will be able to expand lawfully. The Draft Plan confirms exceedances of Air Quality Standards are expected post 2030 in the London area and highlights the huge uncertainties that exist in the air quality modelling process. Gatwick continues to offer a credible and deliverable solution in the form of a second runway. Its shareholders stand ready to invest in LGW-2R - which can be completely privately funded. Gatwick therefore requests that the final NPS should: (1) confirm the continued safeguarding of land for a second runway at Gatwick until at least 2030 to allow Gatwick to: offer a fall-back option in case LHR-NWR does not come forward as planned or is delayed for any reason; and/or provide another runway in addition to LHR-NWR in the event that it is delivered as more capacity is needed due to greater growth than originally expected and to ensure that Brexit opportunities are exploited to the full. (2) ensure airspace "safeguarding" for Gatwick, for the maximum use of the existing runway as well as for a potential future two runway operation.

2 Overview Gatwick is a major national infrastructure asset for the South-East of England and the UK. It is the busiest single-runway airport in the world, serving over 44 million passengers each year to over 200 destinations. Our submission consists of this Overview, a Response to each of the Questions posed and a more Detailed Analysis and Response to Question 2 in Appendix 1. Gatwick Airport Ltd (GAL) welcomes the preparation of the Draft Airports National Policy Statement ( draft NPS ) and considers that urgent action is needed to address the highly damaging capacity constraints facing aviation in the UK. Much has changed even in the last six months and it is clear that not only is the draft NPS too narrow, it is high risk and represents a missed opportunity for the UK. At a time when the country needs additional critical infrastructure quickly, there is a real risk that we will get too little too late, and that the economy and our national competitiveness will suffer as a result. The need for increased airport capacity is more urgent than ever GAL agrees with Government that there is a clear and compelling need for increased runway and airport capacity in the South East of England. GAL believes however that the Government s (provisional) decision to expand Heathrow is not justified by the evidence. In GAL s view, increased capacity is needed well before 2030, a view that is reinforced by the latest traffic forecasts and the opportunities presented by Brexit. A sole focus on Heathrow is a gamble when the UK needs greater certainty. Baseline traffic forecasts are outdated The Airports Commission (AC) was set up in late 2012 and concluded in July It forecast that Gatwick Airport would reach 40m passengers by In the 12 months ending March 2017, Gatwick Airport reached 44m. In 2016, the London Airports system reached 163m, again significantly ahead of forecasts. These figures confirm the need for increased capacity well before 2030, and they underline the importance of DfT publishing its latest traffic forecasts in time for consultees to assess these and comment on them.. 2

3 Brexit puts a greater premium on growth Gatwick Airport Submission 25 May 2017 In reaching its conclusions, the AC could obviously not have foreseen the decision for the UK to leave the European Union. Brexit opens up new opportunities and presents new challenges for the UK, putting an even greater premium on the timing of aviation growth. Accelerated investment in infrastructure is critical if the Government is to send a clear signal that the UK is open for business. With this NPS, the Government has the opportunity to set out a long term plan for airport capacity across the UK and the South East to improve our global connectivity in a post Brexit era. This would continue long standing Government policies of: promoting a strong and competitive aviation industry; creating a diverse and resilient system of airports; making the best use of existing capacity; and, supporting growth when there is an identified need and the effects can be justified. GAL believes the scope of the NPS should be clarified and broadened to reflect the principles above so that it is truly national and, as such, encompasses development at other airports even if a third runway at Heathrow (LHR-NWR) remains the preferred option for runway expansion. Government s preference for Heathrow is not justified by the evidence in the draft NPS It is clear that the draft NPS is flawed in that its preference for LHR-NWR is not justified by a full and fair assessment of the evidence. For example, the draft NPS (para 3.70) sets out a number of strategic considerations which the Government believes LHR-NWR is particularly likely to deliver. The Government has afforded particular weight to four attributes but, when the evidence is considered against each, it is clear that the preference for LHR-NWR cannot be justified. 1. Connectivity. October 2016 traffic forecasts supplied by the DfT to GAL under a Freedom of Information (FOI) Request, show a second runway at Gatwick (LGW-2R) delivering more destinations than LHR-NWR by 2030, including more long haul and virtually the same number to Newly Industrialised and Least Developed Countries. This directly contradicts the draft NPS which asserts that LHR-NWR delivers the UK the biggest boost in long haul flights to vital emerging markets most quickly. Based on the DfT s October 2016 forecasts, total demand for air travel in the UK is substantially the same irrespective of whether the Government chooses a second runway at Gatwick (LGW-2R) or a third runway at Heathrow (LHR-NWR). In 2040, UK demand will be 347.2mppa with LGW-2R and 347.9mppa with LHR-NWR. In 2050, it will be 409.9mppa with LGW-2R and 409.2mppa with LHR-NWR. 3

4 2. Economic Benefit. The AC s economic forecasts have been discredited and have not been used by the Government. However, the Government s own economic appraisal is outdated too, as it is based on 2008 traffic figures. The appraisal also downplays the much higher scheme costs and surface access costs of LHR-NWR. It is clear that LGW-2R would deliver virtually identical benefits for the UK ( 52 billion versus 54.5 billion) with quicker delivery and with far greater certainty. When the DfT October 2016 updated traffic forecasts are incorporated, the benefits of LGW-2R are 8 billion higher than LHR-NWR. This updated analysis, using the DfT s own data and in line with Government appraisal guidance, demonstrates clearly the better value for money and higher benefits to the UK which LGW-2R would deliver. 3. Road and rail connections to the rest of the UK. The draft NPS emphasises the wider range of Heathrow s current and future transport links. It does not, however, consider how prone these links are to congestion and to incidents causing delays. Nor is there any indication of how Government will hold Heathrow Airport to account for its pledge to have airport related traffic no greater than today, which is obviously critical for meeting legal air quality standards. There is little clarity as to which additional surface access schemes are necessary to support delivery of LHR-NWR, how these will be funded and by whom. The draft NPS ignores Gatwick s significantly greater number of direct rail connections and its superior public transport mode share. Gatwick s surface access plans require no new projects or additional Government funding, and are deliverable without massive disruption to road users. 4. Freight The conclusion in the draft NPS that LHR-NWR would deliver the greatest support for freight benefits appears to rest on Heathrow s current dominant position in air freight. No freight forecasts have been published for each scheme yet, given the similarity between the schemes in terms of long-haul connectivity, it is highly likely that the increases in UK freight traffic will also be similar. Furthermore, no mention is made of the benefits from the greater competition in air freight markets which LGW-2R would bring. In the light of the above, it is clear that the draft NPS does not provide a balanced and comprehensive comparative assessment of the two schemes. The Government must take steps to remedy deficiencies in the NPS evidence base, and show that it has given sufficient weight to environmental issues, if it is to justify its preference for LHR-NWR. The Heathrow challenges are so great that there needs to be a Plan B The case for LHR-NWR rests on a long series of very uncertain and high risk assumptions, including in particular: Claimed advantages in Connectivity which are disproved by the evidence; Claimed advantages in Economic Benefits which disappear if the calculation is carried out in accordance with Government appraisal guidelines; Obligations on Heathrow to deliver new UK routes obligations which have yet to be reconciled with Competition Policy and Charging Regulations; 4

5 Scheme Scope which still has major uncertainties e.g. as regards runway length, how the runway will extend over the M25, or the disruption and pollution which its construction will cause; Operational concepts for a 3-runway airport for which no safety case has been published, and whose Capacity and Safety parameters cannot therefore be adequately justified; Airspace Changes which are uncertain in themselves, and which also render uncertain the airspace consequences for other South East airports; Local Noise Impacts whose massive effects are downplayed in the draft NPS, which are uncertain because airspace arrangements have not been established, and which require longstanding Government policy on aviation noise to be overridden. Air Quality Impacts have been assessed on a basis that is subject to major uncertainties, and which under predicts the extent of exceedance of legal limits. Further, a legal interpretation has been adopted which is flawed; Carbon Impacts which have not been properly assessed; nor have the potential carbon constraints on other UK airports resulting from Heathrow expansion been considered; A Habitats Regulations Assessment which is legally, technically and factually flawed; Delivery Plans which are clearly over-optimistic and have inherent in them a series of exceptional risks and challenges which the draft NPS glosses over e.g. an unprecedented rate of spend, undefined surface access schemes, the removal of landfill, and replacement of existing buildings and infrastructure; and, Financing Plans which are implausible without substantial Government support given the scale of financing required, the risks and uncertainties referred to above, and the clear impossibility of financing the project with airport charges held flat in accordance with Heathrow s pledge and Government s requirement. It is clear that designating a LHR-NWR only NPS with most or all of these risks and uncertainties unresolved would be a very high risk strategy for the UK. Gatwick expansion remains a credible, financeable and deliverable option. Its shareholders stand ready to invest in additional capacity to help boost the UK post Brexit Even if the final NPS supports expansion at LHR-NWR, GAL believes that the NPS should also support the provision of additional capacity elsewhere. This will enable demand in the South East to be met both before and after the opening of the third runway at Heathrow, the timing of which is highly uncertain for all the reasons stated above. It would improve resilience, enhance competition, bring greater economic benefit to the UK post Brexit, and mitigate risk. GAL continues to offer a credible and deliverable solution in the form of a second runway. Its shareholders stand ready to invest in LGW-2R - which can be completely privately funded. Gatwick therefore requests that the final NPS should: 5

6 (1) confirm the continued safeguarding of land for a second runway at Gatwick until at least 2030 to allow Gatwick to: offer a fall-back option in case LHR-NWR does not come forward as planned or is delayed for any reason; and/or provide another runway in addition to LHR-NWR in the event that it is delivered as more capacity is needed due to greater growth than originally expected and to ensure that Brexit opportunities are exploited to the full. (2) ensure airspace "safeguarding" for Gatwick, for the maximum use of the existing runway as well as for a potential future two runway operation. 6

7 Gatwick s Response to the Draft Airports National Policy Statement - Questions Introduction This document sets out Gatwick Airport Limited s ( GAL ) response to the Department for Transport s ( DfT ) consultation on the Draft Airports National Policy Statement ( draft NPS ). The document addresses each of the questions contained in the Consultation Draft in turn. We begin by explaining the need for the Government to clarify the scope of the NPS and in particular, its applicability to development at other airports in the UK in the short, medium and longer term. We also identify many important weaknesses in the Government s evidence base with regard to the Heathrow Northwest Runway Scheme ( LHR-NWR ) which cast doubt on the validity of the Government s decision making process to date. The majority of GAL s response is focused on Question 2 which seeks views on how best to address the issue of airport capacity in the South East of England by A more Detailed Response to Question 2 with further technical analysis is contained in Appendix 1. GAL maintains that the final NPS must be revised to correct the errors and deficiencies in the existing assessment material and in particular the wording relating to Gatwick at paragraph 3.11 (other shortlisted schemes do not represent true alternatives ) and paragraph 3.18 (expansion of Gatwick would threaten the UK s global aviation hub status ) of the draft NPS, which is without evidential basis and unfairly prejudicial to GAL s interests. This should happen whether or not Heathrow is confirmed as the preferred location for an additional runway. The final NPS should openly report the results of a full and fair comparative assessment, which would lead to the logical and rational conclusion that the Gatwick Second Runway Scheme ( LGW-2R ) should be the preferred option. Indeed, properly comparing LGW-2R with LHR-NWR it is clear that, even on DfT s own figures and analytical approach, LGW-2R better meets the urgent need for new airport capacity in the South East. The draft NPS Consultation Document (para 4.12) makes it clear that the Government will maintain an open mind and wants to hear views on whether the draft NPS has provided the evidence and rationale for the need for a Northwest Runway at Heathrow Airport (para 1.5). GAL s view is that the evidence and rationale presented in the draft NPS is insufficient and very plainly does not justify the Government s current preference for LHR-NWR over LGW- 2R. In summary: There is a clear and compelling need for increased runway capacity in the South East before The draft NPS does not provide a balanced and comprehensive comparative assessment of the LHR-NWR and LGW-2R schemes. When such an assessment is undertaken, it is clear that, even on the DfT s own figures and analytical approach, LGW-2R should be preferred over LHR- NWR. 7

8 The analysis underpinning the draft NPS contains a large number of very serious deficiencies which, once corrected, further increase LGW-2R s superiority over LHR-NWR. LHR-NWR cannot be delivered by 2026 and there is considerable uncertainty as to when it could be delivered thereafter. The absence of firm information on airspace design and associated concept of operations at Heathrow, coupled with submissions by GAL and others, casts serious doubt on whether the assumed capacity of a three runway Heathrow (740,000 ATM s) can be achieved. Increasing airport capacity is critical to the health of the UK economy. The delivery risks associated with LHR-NWR are so large that to promote LHR- NWR alone, ahead of LGW-2R, would risk causing enormous damage to the post-brexit UK economy. In contrast, LGW-2R is credible, can be delivered on time and meets the Government s policy objectives. There is no evidence that the DfT has evaluated the likelihood that the LHR- NWR scheme will be changed so radically that the justification for selecting it as the preferred option will be further and materially undermined. For example, there is no analysis of the impact on operational and economic benefits if the use of the new runway is restricted because of difficulties in meeting noise and air quality constraints. Further the benefits depend on the construction and use of a third full length runway, and not a shortened runway which might prove to be the only practical option. The LHR-NWR option assumes major surface access infrastructure investment and it is not clear whether such investment will take place and, if so, who will pay for it and take the risk of its development. In the event that the LHR-NWR is taken forward, the finalised NPS must include the imposition of much stronger safeguards and mitigation measures to ensure that the eventual outcome is not too far distant from the Government s aims. We have expressed concern as to whether the information provided allows a fair and comprehensive comparison of the short-listed options to be made given that it is effectively a consultation on the Government s preferred option alone. Furthermore, the NPS Consultation Document (at para 1.2) states: The Government is currently updating its passenger demand forecasts and will publish a document setting out the impacts of the new forecasts on the case for expansion at Heathrow Airport as soon as possible during the consultation period. This is to ensure that respondents have access to the most up to date evidence, and enough time to consider it, when they respond to the consultation. We now understand that the DfT does not, at least for the time being, intend to hold to this promise. We also note that the draft UK Air Quality Plan has only very recently been published, giving inadequate time for consultees to assess it for this NPS consultation. The absence of up to date traffic forecasts, coupled with inadequate time to assess the draft Air Quality Plan, undermines the validity of the NPS consultation. 8

9 It is the DfT s responsibility to ensure that it has maintained an open mind on the choice of options, that enough information has been provided in a timely manner and that it has responded properly to evidence and information that is drawn to its attention. 9

10 2 Question 1: The Government believes there is the need for additional airport capacity in the South East of England by Please tell us your views GAL agrees that London needs at least one additional runway, but considers that this is required earlier than In its final report the AC concluded that by 2030 the London Airports system would be operating at 90% of available capacity, a level at which efficient airport operations would be increasingly difficult to maintain (paragraph 3.54). The AC went on to say that in order to maintain a truly competitive UK airport system there is a clear need for one net additional runway in London and the South East by 2030 (paragraph 3.61). The draft NPS agrees with this conclusion, and GAL also agrees, with the exception of timing. Actual traffic growth has far outstripped the AC s forecasts. In 2016 the London system handled 163mppa, substantially ahead of the AC s forecast of 149mppa by that date. The DfT s updated forecasts, details of which were made available to GAL under a Freedom of Information Request in October 2016 (FOI Ref: F ) are also 5 years ahead of the AC s forecasts thus strongly indicating that the London system will require additional runway capacity, and associated terminal and apron facilities, by 2025/26 at the latest. As a consequence, GAL considers that the NPS should give considerable weight to the runway scheme which affords the greatest possibility of delivering additional runway, terminal and apron capacity by 2025/26. In light of the relative scale, complexity and risk profiles of each scheme, it is clear that the option with the greatest prospect of opening by 2025/26 is clearly LGW-2R. 3 Question 2: Please give us your views on how best to address the issue of airport capacity in the South East of England by This could be through the Heathrow Northwest Runway scheme (the Government s preferred scheme), the Gatwick Second Runway scheme, the Heathrow Extended Northern Runway scheme, or any other scheme Scope of the NPS Before addressing Question 2 in detail, GAL wishes to highlight an important issue that the DfT should address. At present, the scope of the NPS is unclear as to whether it relates solely to the proposed development of LHR-NWR or whether it relates also to development in general at other UK airports in the short, medium and longer term. In GAL s view there are strong reasons to support the proposition that the scope of the NPS should be broad. As stated above, another runway is needed in the South East of England well before Air travel growth 10

11 has been stronger than anticipated by the AC, and every airport in every region of the UK has an important contribution to make in supporting economic growth and ensuring our continued prosperity in a post-brexit era. Another runway at Heathrow in 2030 (even if it can be achieved by this date) does not on its own provide a reliable and sufficient basis for aviation to continue to play its crucial role in facilitating trade and promoting economic growth. In the light of the impending General Election, it appears that the Aviation Strategy will not be finalised and concluded for some considerable time. Investment in growth should not be stifled in the meantime and the NPS should, as a minimum, provide general policy support in the way we have set out in the Overview section earlier, and should ideally go much further and spell out the Government s airports and aviation policy more generally. Gaps in the NPS Evidence Base We also note that there are many important gaps and weaknesses in the Government s evidence with regard to LHR-NWR and we question whether the Government s choice of LHR-NWR can be justified in the absence of a better understanding of these issues. They include for example: A strong possibility that the scope of the LHR-NWR scheme will need to be significantly modified; The absence of a finalised and legally compliant UK Air Quality Plan and any appraisal of impacts based upon it; The absence of indicative airspace designs and safety case, and hence uncertainty about capacity and noise impacts; Uncertainty over the financeability of the scheme; Uncertainty over the level of airport charges at Heathrow and the affordability of these charges should they rise above the present level; A lack of clarity as to the surface access schemes and costs, a lack of understanding over who will pay and, if these schemes cannot be justified, what levels of congestion will be experienced. Response to Question 2 GAL s response to question 2 assesses the relative benefits and impacts of LGW- 2R and LHR-NWR. This is undertaken on a topic by topic basis, addressing the particular factors identified by the Government at paragraph 3.15 of the draft NPS, and seeking to draw together the best evidence and information currently available. This assessment demonstrates that, when the evidence is looked at in a balanced and comprehensive way, LGW-2R is the best option for meeting the need identified by Question 1 because it: is the only option which can be delivered by 2026; will deliver connectivity and economic benefits on a par or greater than those projected for LHR-NWR; will have environmental impacts an order of magnitude lower than those projected for LHR-NWR; and 11

12 is the only option which Government can be confident will be delivered, without Government subsidy or other state aid. This clear conclusion from the available evidence has been obscured by the lack of a clear and comprehensive analysis of that evidence in the draft NPS. The following sections set out GAL s views on the wide range of factors which have been, or should have been, considered by the Government in reaching its preference for LHR-NWR. The sections cover the following topics: Traffic and Connectivity Economics Appraisal and Competition Air Quality Noise Habitats Regulations Assessment Carbon Deliverability Financeability Surface Access Each section provides a summary of the key issues under each topic. More detailed evidence and analysis related to our response to Question 2 is contained at Appendix 1. 4 Traffic and Connectivity Sources of Traffic and Connectivity Forecasts In this submission we refer to three sources of traffic forecasts: (i) (ii) (iii) The AC Strategic Fit Forecasts July 2015, supplemented by FOI (the AC traffic forecasts); The DfT Further Review and Sensitivities Report updated model October 2016 supplemented by FOI14500 (the DfT October 2016 updated forecasts); and Unpublished DfT traffic forecasts 2017 (DfT 2017 unpublished forecasts), promised to be published as soon as possible during the consultation period. 12

13 2030 Gatwick Airport Submission 25 May 2017 Connectivity The AC traffic forecasts, and DfT October 2016 updated forecasts, show that Gatwick expansion creates as much, if not greater, UK connectivity than Heathrow expansion. Destinations Served The chart below, using the AC forecasts, shows the destinations served at total UK level by economic region in LGW-2R delivers one more destination overall, delivers virtually the same number of long haul destinations including to Newly Industrialised and Least Developed Countries. The draft NPS statements that Heathrow expansion delivers the UK the biggest boost in long haul flights to vital emerging markets, faster than LGW-2R, are not therefore substantiated by the evidence. Overall, as shown below, LGW-2R will deliver superior connectivity for the UK direct to short and long haul destinations. Destinations served at total UK level by economic region (2030) Gatwick 2R Heathrow NWR DOMESTIC SHORT HAUL OECD NEWLY INDUSTRIALISED COUNTRY LEAST DEVELOPED COUNTRY Source: AC traffic forecasts, DfT response to FOI F As shown below the DfT October 2016 updated traffic forecasts confirm that, in 2030, LGW-2R delivers for the UK two more long haul destinations than LHR- NWR (127 v 125) and one more destination overall (397 v 396). 13

14 2030 Gatwick Airport Submission 25 May 2017 Overall Destination Analysis for LHR-NWR and LGW-2R Gatwick 2R Heathrow NWR SHORT HAUL inc. DOMESTIC LONG HAUL Source: DfT October 2016 Further Review and Sensitivity Report updated forecasts and response to FOI F , February 2017 UK Origin & Destination (O&D) Passengers A key metric for traffic outcomes is the number of Origin and Destination (O&D) passengers i.e. passengers who begin or end their journeys in the UK. The table below shows O&D passenger numbers in 2030, 2040 and 2050, again confirming little difference between LGW-2R and LHR-NWR. In 2040, UK passengers will be 347.2mppa with LGW-2R and 347.9mppa with LHR-NWR. In 2050, it will be 409.9mppa with LGW-2R and 409.2mppa with LHR-NWR. LGW-2R LHR- NWR LGW-2R LHR- NWR LGW-2R LHR- NWR LH SH Dom Total Trips Source: AC traffic forecasts and DfT response to FOI F

15 Transfer Passengers The only metric in which Heathrow is clearly superior is the number of International-to-International (I-I) transfer passengers, but this should not be given weight in the draft NPS connectivity or economic analyses since these passengers, who do not actually enter the country, contribute no direct economic benefit to the UK. The destination analysis above indicates clearly there is no evidence to support the draft NPS contention that transfer passengers, make more routes viable, particularly to fast growing economies. The draft NPS therefore places undue weight on the role and value of Heathrow s hub status, seemingly as an objective in itself, and wrongly concludes that LGW- 2R would threaten the UK s global aviation position. This is not supported by either the AC traffic forecasts or the DfT October 2016 updated forecasts. Out of Date Forecasts This submission is made without the benefit of seeing the DfT s 2017 unpublished traffic forecasts which are being withheld. Gatwick has asked for an extension to the consultation period to allow time for the NPS to take account of the traffic updates. This request has been declined. The AC traffic forecasts upon which the draft NPS relies are significantly out of date, and understate Gatwick traffic in particular. The DfT must therefore correct its traffic analysis and evidence base to take account of these deficiencies. When it does so, it will be seen that LGW-2R delivers at least equivalent, and probably better, traffic and connectivity benefits to the UK than LHR-NWR. Heathrow Capacity is overstated The draft NPS contains no firm information on airspace design or concept of operation for a Heathrow three runway operation. GAL and others, including Heathrow Hub, have submitted evidence raising serious doubts as to whether the assumed capacity of an expanded Heathrow i.e. 740,000 annual ATM s, can actually be achieved. It is highly likely that the need to avoid runway conflicts, and the application of environmental mitigation measures, will result in a significantly lower annual ATM capacity, quite possibly as low as 670,000 ATM s. New Domestic Routes The DfT s proposed obligation on Heathrow to establish six additional domestic routes is cause for concern in terms of competition between airports. Heathrow airport has already taken steps to discount airport charges on domestic services and is looking to the Government to take a leadership role in delivering these additional domestic connections. The International Airlines Group (IAG) which is the parent company of British Airways has expressed the view that airlines will be unable to operate domestic services on a commercial basis with the costs currently projected for the LHR-NWR. We are concerned that the obligation that is being placed on Heathrow may result in its having to discount charges on domestic routes to levels which cannot be objectively justified with a consequent distortion of the market. Accordingly, the Government should not take into account any perceived benefits associated with this obligation in its consideration of its airports policy. 15

16 Freight The draft NPS places significant weight on the claim that Heathrow expansion delivers the greatest benefit for air freight. However, the draft NPS contains no evidence to support this conclusion as no freight forecasts have been published for each scheme yet, given the similarity between the schemes in terms of longhaul connectivity, it is highly likely that the increases in UK freight traffic will also be similar. Furthermore, no mention is made of the benefits from the greater competition in air freight markets which LGW-2R would bring. 5 Economics Appraisal and Competition Scheme benefits and costs As set out above, LGW-2R and LHR-NWR would each enable very similar additional levels of passenger air travel for the UK as a whole. It is unsurprising therefore that, once the benefits to non-uk international to international (I-I) transfer passengers are excluded from the appraisal in line with Government guidelines (since these passengers do not directly contribute to the UK economy), the benefits to the UK of the LGW-2R and LHR-NWR would be approximately equal ( 52 billion versus 54.5 billion). This analysis, which is based on the DfT s own evidence, means that the weight which the draft NPS gives to economic benefits in preferring LHR-NWR cannot be justified. The balance moves in favour of LGW-2R when the traffic forecasts on which the whole appraisal are based are brought more up to date, from a 2008 to a 2014 base year as in the DfT October 2016 updated forecasts. Reflecting Gatwick s recent traffic growth, this update shows that LGW-2R would deliver greater economic benefits than LHR-NWR ( 86.7 billion versus 78.5 billion). This shifts the balance of economic advantage in favour of LGW-2R rather than LHR-NWR. The draft NPS preference for LHR-NWR in economic terms is further undermined by omission of costs from the analysis. Construction costs are a very material consideration and ignoring them (via metrics such as Net Social Benefit and Net Public Value) would be irrational and contrary to Government guidance. These construction costs have to be paid for, ultimately, by passengers and/or airlines. When costs are weighed against benefits, which should be at the heart of any fair and realistic appraisal, the net present value for LGW-2R are seen significantly above that of LHR-NWR, and LGW-2R scores more highly than LHR-NWR on the DfT s own recommended Benefits to Costs Ratio (BCR). Environmental costs, dominated by the monetised costs of noise disturbance, are inadequately weighed in the balance. The draft NPS ignores in its overall assessment the potentially very high values of the costs of noise disturbance, which would eliminate all of LHR-NWR s net present value, making it a valuedestroying project. The DfT acknowledges that LHR-NWR has higher delivery and cost risk than LGW-2R, but these risks and other uncertainties are not brought to bear on the draft NPS assessment of relative scheme merits. The merits of the lower cost, lower risk, and earlier delivery of LGW-2R are thus improperly ignored in reaching policy conclusions. Moreover, the draft NPS s economic analysis lacks definition with regard to those surface access schemes that will be necessary to support LHR-NWR. A variety 16

17 of assessments indicate a much greater need for investment in surface access than is acknowledged in the draft NPS. Furthermore, as indicated above, there is evidence to suggest that a three runway Heathrow would not be able to accommodate as much air traffic as is claimed. These factors represent substantial risks to the economics and financeability of LHR NWR. The draft NPS s failure to take account of such risks is contrary to Treasury appraisal guidance, and distorts the conclusions of its economic appraisal. Wider economic benefits The draft NPS over-emphasises the magnitude, relative difference and certainty of estimation of the wider economic benefits associated with LHR-NWR. It fails to assess the material risk that the relatively small 1 billion advantage for LHR- NWR over 60 years may not in practice be realised if further development in West London creates over-heating, with resulting additional costs to business and employees in that area. There s also a very real risk that the 1 billion benefit advantage would be wiped out by the final costs for surface access. Local employment Contrary to DfT s own appraisal guidance, the draft NPS focuses heavily on local employment impacts as a separate net benefit to LHR-NWR. This factor should be set aside in judging between the schemes which are aimed at improving UK aviation connectivity, not at alleviating localised deprivation in what are both relatively affluent areas of the country. Re-estimating economic appraisal Using the DfT s evidence base, including updated forecasts where available, and making adjustments in line with DfT s own appraisal guidance, it is clear that LGW-2R delivers better economic value than LHR-NWR. The following table provides indicative estimates of the effects of these changes: Removing benefits related to Non UK I-I transfer passengers; Updating base year of traffic forecast to 2014, which increases both incremental benefits to passengers and incremental airline profit/loss; and, Including the full range of environmental costs. 17

18 Economic appraisal re-estimated Line Metric LGW-2R LHR-NWR Better Scheme A B C D = A-B+C E F G Total benefits (DfT) 52.4 to to 61.1 Benefits to I-I transfer pax 1.6 to to 6.6 Amended baseline traffic: incremental benefits Benefits adjusted for updated traffic and I-I transfers to to 78.5 LGW-2R Environmental costs -2.7 to to -2.3 Airline profit loss (DfT) Amended baseline traffic: incremental airline profit loss H = D+E+F+G Net social benefits 14.7 to to 16.8 LGW-2R I J Surface access costs Scheme cost to to to K = H+I+J NPV 7.7 to to 2.5 LGW-2R L = H/(-I-J) BCR (wide) 2.1 to to 1.2 LGW-2R Source: DfT Economic impacts: Further review and sensitivities report, Table ES.2 (lines A, F, I, J), Table A 16 (lines C and F), chapter 4 (line E); Airports Commission: Economy: Transport Economic Efficiency Impacts, July 2015, Tables 4.1 and 4.5 (line B). The table above demonstrates that when the economic appraisal is correctly adjusted, in line with the Government s own appraisal guidance, LGW-2R is clearly superior to LHR-NWR on Benefits (the DfT s own cited metric), as well as Net Present Value and Benefit Cost Ratio (the metrics recommended for assessing Government policies and projects). LGW-2R performs better than LHR-NWR on all officially recommended measures of economic impact. Airline and Airport Competition There is no meaningful analysis in the draft NPS of the impact of each scheme on airport and airline competition. LHR-NWR undoubtedly increases and concentrates market power at Heathrow and no evidence has been produced to support the claim that LHR-NWR results in lower fares. The draft NPS does not recognise the positive impact which LGW-2R would have on competition. 18

19 6 Air Quality Draft UK Air Quality Plan (May 2017) On 5 th May 2017, the Government produced its draft UK Air Quality Plan. In the short time available GAL has attempted to identify key points that are of greatest significance to this NPS response. However, given the extent of information released on the 5 th May, and the time remaining for this submission, it has not been possible to undertake a full review and analysis of all the latest Air Quality information. Therefore, GAL must reserve the right to submit additional information on the inter-relationship between the draft Air Quality Plan and the NPS. All sections relating to air quality should be read in conjunction with GAL s response to the draft Air Quality Plan consultation and we specifically request that our response to the draft Air Quality Plan consultation, once submitted, is taken into account in considering the responses to this draft NPS consultation. Failure to do so would result in obvious unfairness. In the meantime, it is possible to draw certain conclusions from the draft Air Quality Plan and we set these out below in section 6.5. The Government s conclusion that the LHR-NWR can be delivered by 2026 without breaching the UK s air quality obligations is based on an incorrect interpretation of the legal requirements The Government s approach is based on a legally flawed interpretation of the UK s legal air quality obligations to the effect that ground level concentrations of Nitrogen Dioxide (NO2) could lawfully be permitted to increase to any level as a result of LHR-NWR, so long as they remain below the maximum ground level concentrations of NO2 forecast elsewhere in the Greater London Air Quality Zone (GLAQZ) and so long as they do not delay the date at which compliance with NO2 limit values would be achieved for the GLAQZ as a whole. In other words, as long as LHR-NWR would not make the air quality in any areas worse than the air quality in the worst part of the GLAQZ or delay the date at which the GLAQZ as a whole complies with the limit value, there would be no breach of relevant air quality legislation, regardless of the extent of the breach of limit values caused by the construction and operation of LHR-NWR and regardless of the harm to human health that may be caused in the interim. The UK s air quality obligations are founded in the 2008 ambient air quality Directive (2008/50/EC) which has been transposed into English law by the Air Quality Standards Regulations 2010 ( the 2010 Regulations ). EU Directives are to be interpreted to give effect to their objectives and a key objective of the 2008 Directive is to reduce pollution to levels which minimise harmful effects on human health. The UK is divided into air quality zones. There is a legal obligation to attain the annual average limit value throughout each zone by Where this has not happened, there is a duty to adopt measures to ensure that the limit value is achieved as soon as possible. Once limit values are achieved there is a duty to ensure that they are not exceeded again. The Government s Air Quality Assessments show that the LHR-NWR scheme carries significant risk of exceeding legal limits 19

20 The latest air quality studies undertaken by the Government in association with the draft NPS are, for reasons summarised below, seriously inadequate and do not support the conclusion in the draft NPS that with mitigation LHR-NWR is capable of taking place within legal limits 1. On the contrary, based on the correct interpretation of the legal requirements, the Government s studies show that the Heathrow area is almost certain to cause breaches of legal limits if it was to come forward in 2025/26, and would still risk causing breaches of legal limits if it was to come forward in The assessment work underpinning the draft NPS cannot be relied upon to support the conclusion that with mitigation LHR-NWR is capable of taking place within legal limits 2 by 2026 or indeed any identifiable later date The draft NPS and the supporting air quality reports which the Government is relying on to support its preference for the LHR-NWR option contain a number of serious deficiencies. They do not provide a sound basis for concluding that the LHR-NWR option can come forward without breach of the UK s legal duties in respect of air quality. The key deficiencies are set out in our detailed air quality response to Question 2 in Appendix 1 and its technical appendix, but in summary they comprise: i) Deficiencies in the underlying Air Quality Plan; ii) iii) Deficiencies in the modelling work carried out by the AC and now relied upon by the Government in the latest air quality studies; and Deficiencies in the Government s air quality studies themselves. The main deficiencies in the underlying Air Quality Plan are: The Government has based its air quality assessments on a UK Air Quality Plan (AQP) that is out of date and which the Courts have found to be unlawful because, amongst other reasons, it adopts overly optimistic air quality modelling. A robust assessment of whether it would be lawful for LHR-NWR to be constructed and operated cannot be made prior to the adoption of a new lawful AQP because until then the baseline air quality conditions in future years, against which the impact of LHR-NWR scheme must be assessed, are unknown. The PCM (Pollution Climate Mapping) Model s past performance demonstrates consistent over-optimism - the new UKAQP needs to address multiple deficiencies in the PCM model that have been raised previously by GAL 3 and others. Remedying these deficiencies will involve: o o A requirement for annual future baseline projections; Correcting the model s systematic bias which leads it to under-predict roadside NO2 concentrations in the most polluted locations, whilst over-predicting concentrations in less polluted locations; 1 Para 3.6 Draft National Policy Statement 2 Para 3.6 Draft National Policy Statement 3 A Second Runway for Gatwick Air Quality Projections in the London Air Quality Plan. GAL (April 2016) 20

21 o o o Modelling to be based on realistic vehicle emission factors; Ensuring that the fraction of primary NO2 emissions in NOx emissions is not understated; and Allowing, in line with the precautionary principle, for a range of other modelling uncertainties including the estimated benefits of measures to reduce emissions, increased vehicles emissions from driving in congested areas, and uncertainties about the maintenance, durability and performance of vehicle emission control systems. The main deficiencies in the modelling work carried out by the AC and therefore carried through to the Government s air quality studies are: A baseline model verification process that has understated the impacts of LHR-NWR and overstated those of LGW-2R 4 ; Failure to assess the plausible air quality worst case air traffic forecast scenario for LHR-NWR; and Failure to assess all the impacts of key elements of the LHR-NWR scheme, including its construction impacts. The main deficiencies in the Government s later air quality studies are: Over optimistic approach to vehicle emissions; Use of a Streamlined Model which is not suitable for the detailed assessment on which the government relies; Inaccuracies from summing the outputs of two different models; and Modelling for 2025 based on a cleaner aircraft fleet which will not materialise until 2030 or later. Initial review of the Draft UK Air Quality Plan May 2017 serves only to reinforce the view that the air quality assessment work underpinning the draft NPS cannot now be relied upon, and that LHR-NWR is not capable of coming forward by 2026 without air quality limits being breached The draft UK Air Quality Plan (May 2017) provides no new evidence to suggest that legal compliance in the Heathrow area can be achieved by 2025/6 or by On the contrary, it serves to reinforce the analysis undertaken by GAL and others that compliance cannot be achieved in these timeframes and that there is significant uncertainty as to when compliance may actually be achieved. The draft 2017 Plan also supports the submissions made by GAL and others throughout the AC process that the vehicle emissions factors previously adopted in the 2015 Air Quality Plan were too optimistic. Predictions using the more realistic emissions factors now adopted show that exceedances of the limit values in London will continue beyond 2030 even without Heathrow expansion. The 2017 draft Air Quality Plan does little, however, to address the other criticisms that we have made previously and which are summarised above, suggesting that the present Plan continues to incorporate a significant degree of optimism bias. Moreover, the draft Plan does not identify where the exceedances 4 GAL (2015), paragraphs to

22 are expected to occur within the London zone. Thus, whilst it can be seen that, in general background concentrations are higher than those predicted previously, no forecasts for the Heathrow area are produced. Accordingly, the draft Plan demonstrates that the background levels used in the draft NPS impact appraisal cannot be relied upon, but produces no further data that enables assessment of impact on a baseline comparable to that adopted in the draft Plan. Further, there is no assessment of the effectiveness of the measures in bringing forward compliance in any part of the London zone, for example the Heathrow area. The absence of a year-by-year analysis is also a weakness of the draft Plan. In addition, unlike the 2015 Plan, there is no mention of the Government s proposals for a third runway at Heathrow or indeed of the implications of this for compliance with air quality limit values. Instead, the Plan passes accountability for compliance to local authorities and the London Mayor who are obliged to implement charging mechanisms only as a last resort, suggesting that compliance may not be achieved in the shortest possible time. The draft Plan requires a decision maker to explore all non-charging option before proposing a charging options. Refusing LHR-NWR permission to proceed is clearly a non-charging option which has to be considered. Thus, refusing permission for LHR-NWR to proceed has to be considered as a possible policy response ahead of the implementation of a CAZ. The draft Plan does not identify what policy measures are to be adopted in the Heathrow area, nor does it identify the likely background levels that those measures will produce. The draft Plan thus provides no firm basis against which anyone can assess the impact of the LHR- NWR scheme. As a result, it cannot be concluded that the LHR-NWR scheme can be lawfully delivered by The draft Plan goes much further than previous studies by the AC and the DfT in acknowledging the very considerable degrees of modelling uncertainty inherent any air quality predictions. In doing so, however, the draft Plan wholly undermines the DfT s conclusion in its review of the AC s Final Report that: The Department therefore considers that present uncertainties over how a Heathrow scheme would meet air quality requirements do not affect the validity of the Commission s conclusions (Para 82). In the light of the uncertainties now acknowledged in the 2017 draft Air Quality Plan, that conclusion is neither reasonable, nor credible. The draft Air Quality Plan also requires local authorities to consider how to meet air quality limit values within their administrative areas. This approach suggests that the Government now accepts that compliance needs to be achieved and thereafter maintained in all parts of a zone in the shortest time possible. This is contrary to the legal approach adopted by the AC and the Government in selecting LHR as its preferred location for expansion. The Government is in serious danger of repeating mistakes of the past Many of the individual deficiencies identified above represent serious failings in their own right. When taken together, however, they expose a very high level of uncertainty in the predictions and, moreover, demonstrate that the air quality impacts of the LHR-NWR scheme have been significantly understated. If the Government is minded to continue to support LHR-NWR the deficiencies set out above should be rectified. If not, the Government will be in serious danger of repeating mistakes of the previous Government of which gave its 22