INITIAL BUSINESS PLAN SUMMARY - HEATHROW'S - Submit
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CONTENTS Our plans and options 6 Heathrow today 8 Our lessons from Q6 10 Delivering growth for consumers 12 Connecting the whole of the UK to global growth 14 in a changing world Tackling carbon head on 16 Who are our consumers? 20 How we have listened carefully to consumers 22 What we heard from you 24 Delivering outcomes 27 What will the future Heathrow be like for consumers? 28 Delivering outcomes for consumers 30 – I have more choice of flights and destinations Delivering outcomes for consumers 34 – I am confident I can get to and from the airport Delivering outcomes for consumers 38 HEATHROW’S Regular flights to every corner of the UK and rail links to North, South, East capital spend. We are also providing a comprehensive package of measures to reduce passenger fares by tens or even hundreds of pounds a ticket. PLAN FOR – I have a predictable & reliable journey and West will spread the benefits of minimise the negative impacts of growth This value could potentially support the growth to every nation and region of on local communities and maximise the shift to zero carbon flights. Delivering outcomes for consumers 42 our country. benefits they receive. – I feel comfortable and secure at the airport THE 2020s This Initial Business Plan shows how we None of this is easy, but our enviable We do face some real choices over the speed, service, connectivity and resilience Delivering outcomes for consumers 46 will deliver the global connections that track record in delivering complex that we plan for over the next 15 years. Britain needs in a way that is sustainable, infrastructure projects on time and on We have reflected these in two options, – I feel cared for & supported Heathrow expansion will affordable, deliverable and financeable. budget, and our strong, predominantly both of which meet the challenge of Delivering outcomes for consumers 50 connect all of Britain to We will meet all the requirement of the UK supply chain means that we can be being sustainable, affordable, deliverable – I have an enjoyable experience at the airport trusted to deliver. and financeable. Airport National Policy Statement (ANPS), global growth, putting it which received the overwhelming Heathrow expansion will be one of the This Initial Business Plan is the start of Delivering outcomes for our communities 54 – Commitments made by Heathrow for sustainable at the heart of the global support of MPs. Since the ANPS vote, largest privately financed infrastructure a conversation with consumers, airlines growth are met we have committed to doing all we can projects in the world. The current and other stakeholders. Your feedback economy for generations to achieve net zero flying by 2050. For regulatory framework, with a Regulated will be reflected in our Final Business Delivering outcomes for colleagues 56 Heathrow’s own operations at the airport Asset Base and single till, have proven Plan in 2020. – Heathrow is a great place to work to come. We will be the we will be carbon neutral from next year. the most efficient ways to finance large, Heathrow expansion will connect all of long term projects. This plan ensures the Delivering outcomes for airlines 58 best-connected country IAG, our largest airline customer, has committed to net zero carbon for necessary cashflows to support global Britain to global growth, allowing future generations to enjoy the benefits of – Heathrow provides efficient, affordable and reliable in the world, with regular flight by 2050. We are working with debt financing at an investment grade, aviation that we enjoy today, in a world airport services them and others to make this the while maintaining a sufficient return direct flights to all the standard in global aviation, to take the to attract equity investment to support without carbon. Delivering outcomes for investors 60 carbon out of flying and remove any the expansion programme through any – Heathrow delivers predictable and fair returns major cities in the United competitive distortions. shocks or the economic cycle. The strategic options we face 62 States, China and India, This plan meets the affordability The big prize for consumers is through challenge. This is an incredible lower airfares. While we have been Consumer views on options 64 the great economies of achievement, given the increases in constrained by runway capacity, only A consolidated view of our plan 65 the 21st century. charges that have been required to around 50% of routes have faced expand other major hubs. We want competition between airlines, making A supporting regulatory framework 66 to deliver expansion as cost efficiently airfares higher than they could be. as possible, and have worked closely The introduction of more competition John Holland-Kaye The regulatory requirements for our business plan 68 with our airline customers to minimise and choice between airlines will Chief Executive, Heathrow 5
OUR PLANS AND OPTIONS We have listened carefully to our consumers and wider stakeholders. OPTIONS IMPACT THE DELIVERY AND OUTCOMES FOR CONSUMERS We believe these plans meet their needs. However, there are trade-offs to be made and we have reflected some of these in two options “PRIORITISING SAVINGS” and PRIORITISING SAVINGS PRIORITISING SERVICE “PRIORITISING SERVICE.” Both options lead to lower passenger fares. LOWER FARES LOWER FARES £35-£140 £20-£80 Affordable SAVINGS SAVINGS Consumer tested for willingness to pay and meets affordability challenge Financeable Can be entirely privately financed with the right regulation Deliverable Delivers capacity by 2030 and is buildable with an assured plan Investments identified by consumers to improve service Faster growth, more competition, more choice and resilience c. £500m every five years Sustainable Meets tough ANPS requirements in noise, air quality and mode share and compatible with net zero carbon flying by 2050 Maintaining Heathrow in the top half of European airports for service Greater Rail Investments The CAA published its policy update on the early costs of Heathrow expansion in December 2019. Our plan is broadly consistent with AIRPORT CHARGE £23.81 (2014p) AIRPORT CHARGE £27.19 (2014p) the CAA schedule assumptions. However, at first reading we are concerned over whether the CAA is setting the right incentives to allow (15 year average) £26.20 (2018p) (15 year average)£29.91 (2018p) investment. Inability to make these early investments will impact, or could even prevent, the delivery of our plans. We are reviewing the detail and will respond in due course to the CAA consultation. 6 HEATHROW’S INITIAL BUSINESS PLAN SUMMARY 7
HEATHROW TODAY Heathrow enables over 80 million passengers, to visit the UK, to go on holiday, conduct business and visit friends and relatives each year. 80 EXCELLENT 82% OF PASSENGERS NOW RATING THEIR EXPERIENCE AS 16% REDUCTION £3bn INVESTED Heathrow is the UK’s only hub airport. MILLION EXCELLENT OR VERY GOOD, COMPARED TO 40% IN 2006 OF OPERATING COSTS IN Q6 PASSENGERS Hub airports combine direct passengers, We have more happy passengers We’ve become significantly more In Q6 we invested £3bn in resilience, SERVED IN 2018 transfer passengers and freight to enable travelling through the airport too, efficient. We systematically cut baggage and transforming the with our Airport Service Quality operating costs by 16% in real passenger journey. We are entering long-haul aircraft to fly to destinations (ASQ) scores on an upward trend terms between 2014 and 2018. a new phase of investment which for the last 10 years. will enable the building of a third all over the world that cannot be served runway, new and improved terminal by ‘point to point’ airports which rely on infrastructure and better surface access options. local demand alone. No.1 SHIPPING OVER 84 200+ £100bn AIRPORT IN 99% OF PASSENGERS 100% RENEWABLE 4:1 MPs BACKED AIRLINES GLOBAL OF IMPORTS WESTERN TRAVELLING WITH BAGS ELECTRICITY HEATHROW EXPANSION SERVED DESTINATIONS & EXPORTS EUROPE Heathrow currently serves more It is not just passengers that travel Heathrow has consistently won We established our Airport Heathrow is making progress An overwhelming majority of than 200 destinations in more than through Heathrow; over £100bn Skytrax awards for World’s Best Operations Centre (APOC) in 2014 decarbonising the airport’s almost 4:1 MPs backed Heathrow 80 countries, through 84 airlines, worth of imports and exports with Airport Terminal (where our newest significantly increasing resilience to infrastructure and is on track to expansion to connect all of Britain connecting the UK to the world and countries outside the EU were terminals, Terminal 2 and Terminal weather, technology failures and be carbon neutral in the next to global growth. the world to the UK. shipped through Heathrow in 5 compete for top spot), Best now drones. 12 months. 2018, helping British businesses Airport in Western Europe and In the last five years we also doubled 80% of our flights now depart In 2019, we won edie’s Mission access customers in every corner Best Airport Shopping. our domestic routes and now we within 15 minutes of schedule. Possible Sustainable Business of the of the globe. also serve 12 cities in China. We are Year Award. rated number one for connectivity Heathrow has been running on by OAG’s Megahubs index, which is 100% renewable electricity since valuable for UK PLC. April 2017. We have the UK’s largest fleet of electric vehicles. 8 HEATHROW’S INITIAL BUSINESS PLAN SUMMARY 9
OUR LESSONS FROM Q6 1 2 3 4 5 6 WE ARE A INVESTING IN PEOPLE AN INTEGRATED END-TO- WE ARE NOW COST WORKING WITH AIRLINES AVIATION MUST GET SERVICE BUSINESS DELIVERS SERVICE END OPERATION IS BEST COMPETITIVE WITH CAN UNLOCK GROWTH TO NET ZERO CARBON We are aligned behind a single vision At a global hub airport, with the most FOR SERVICE, EFFICIENCY OTHER HUBS While we have a common agenda with We have to earn our licence to operate “to give passengers the best airport diverse consumers on the planet, service AND RESILIENCE We have systematically reduced airlines on cost, service, sustainability and to grow. Our “environmentally service in the world.” Our work must be delivered by people. We have Since the snow crisis of 2010, we have operational costs at Heathrow since and resilience, we have very different managed growth” proposal would with Team Heathrow to improve therefore invested in the skills of our taken responsibility for the end-to-end 2014 – our own costs and those of commercial incentives. Airlines at mean that we can only grow if we meet punctuality, speed through immigration talented people and promoted diversity passenger journey at Heathrow. We airlines. We have renegotiated all Heathrow have a commercial incentive tough sustainability targets. Heathrow and baggage connection rates have to reflect our consumer base. We have have worked with Team Heathrow contracts and introduced new terms to maximise price per passenger (yield), 2.0 has been a ground-breaking transformed passenger satisfaction. also invested in mental health and well- partners to create a complete view and conditions. This has been extremely whereas the airport is incentivised to approach to delivering ambitious We now have the highest punctuality being, for example through our of airport operations in our Airport challenging, but we have managed to increase passenger numbers and reduce sustainability targets. The next challenge of any major hub airport and are the “StRaW Buddies” programme, where Operations Centre (APOC). We have avoid strike action. Future cost savings cost per passenger. We have had some is to decarbonise flight so that future only one to have improved punctuality specialist trained colleagues listen, standardised processes and systems are likely to come from complete success in working with airlines to generations can enjoy the benefits of in the last five years. offer guidance and can recommend to increase resilience. This has also process re-engineering and looking improve load factors. However, lack of aviation in a world without carbon. professional help if appropriate. reduced operating costs and improved across the value chain. competition on around 50% of routes efficiency and service. The number of as a result of runway constraints is “Gold” disruption incidents has fallen making fares higher than they could be. significantly, and we have been able to provide support to our airline customers during disruption to their business. We were one of the only airports in Europe to remain open through a week of snow in early 2018. We believe we have reflected these lessons in designing our outcomes and proposals for service, efficiency and investment through to 2036. 10 HEATHROW’S INITIAL BUSINESS PLAN SUMMARY 11
DELIVERING GROWTH FOR CONSUMERS The 2020s will be one of the most exciting periods of change ever for Heathrow. Growth will accelerate as we develop and then open new capacity with a third runway. That is a huge win for consumers. All the while we must ensure that over 80 million passengers a year pass through Heathrow safely and delighted with their travelling experience. Our aim today, and throughout Engagement Strategy we have listened The big prize for consumers is through STRIVING FOR BETTER BALANCING VIEWS this period of change, is to provide to their needs and increasingly co- lower fares. While we have been passengers with the best airport service developed ideas through new research, constrained by capacity, only about We made considerable improvements Consumers are at the heart of our plans. in the world. approaches and conversations. We have 50% of routes face competition during Q6 to become a top-ten airport We must also recognise that to deliver spoken to our current passengers and between airlines, making fares higher in terms of service while reducing our for consumers we need to balance, the Consumers have helped shape our operating costs and charges. sometimes competing, views of our potential future passengers to reflect than they could be. The introduction of Initial Business Plan. In the last few years airlines, communities, colleagues and changing needs. competition and choice between airlines Growth is an opportunity for we have revamped and expanded our investors. This is in addition to meeting will reduce passenger fares by tens or transformational change. We will bring consumer insight and engagement. the obligations and guidance set by the even hundreds of pounds on each ticket. in the best ideas from around the world Building on a new Consumer CAA, DfT and wider policy. The DfT estimates Heathrow expansion and work in partnership with others will deliver c£68bn in consumer savings. to find ways to delight our consumers. Our plan must be sustainable. Our This may mean new technologies, or communities need certainty that we We also heard from our consumers that simply doing things in a better, more will meet the tough Airport National we need to get the basics right today, sustainable way. Throughout our Initial Policy Statement (ANPS) commitments for example, cleanliness and getting rid Business Plan, we have tested our on noise, air quality, surface access and of queues at any stage of the journey. assumptions with external benchmarks carbon. We need to deliver a carbon A predictable, reliable journey and and challenged ourselves on efficiency neutral airport and support the broader surface access are also high priorities. and improvements. shift to net zero flying. Consumers want to feel looked after when they are with us. We also need to Both we and our airline customers are delight consumers to ensure Heathrow seeking an affordable scheme. Our is an airport of choice for consumers plans have been tested for consumers’ today and in the future. willingness to pay for them. Our plan meets the affordability challenge. Our plan must be financeable. As our growth will be privately funded at no cost to the tax payer, we need to maintain our strong investment grade credit rating through expansion. This plan ensures necessary conditions to do that, while maintaining a sufficient return to attract equity investment to support the expansion programme through any shocks or the economic cycle. We want to deliver expansion as cost efficiently as possible and have worked with airlines to minimise capital spend. Our enviable track record in delivering complex infrastructure projects on time and on budget and our strong, predominantly UK supply chain mean that we can be trusted to deliver. 12 HEATHROW’S INITIAL BUSINESS PLAN SUMMARY 13
CONNECTING THE WHOLE OF THE UK TO GLOBAL GROWTH IN A CHANGING WORLD The aviation industry has been significantly disrupted in the last few These trends have changed consumer New aircraft technology is allowing However, while Heathrow has been expectations to have better service at airlines to add more “spokes” from operating at capacity, we have had to decades, particularly from within: new economic models (e.g. low- lower cost and to be more in control of their main hubs, which means that turn away airlines who have typically their time. Technology is transforming more UK regional airports now enjoy chosen to operate instead from our cost carriers), new technology (e.g. self-service), automation of airport aviation’s role in society, reducing the direct flights to big hubs such as main European hub competitors in impact of noise on local communities, Singapore, New York and Dubai. But France, Germany and elsewhere. We processes (e.g. baggage), new distribution systems (e.g. Skyscanner) reducing CO2 emissions, but also it also means that more regional cities have not been able to develop the and new technology (e.g. Artificial Intelligence) have transformed the allowing more cities to be connected. around the world can now be served frequent business routes to meet all directly from Heathrow. Our goal is to of the demand to markets such as way we work. We build airport infrastructure to last be the best-connected airport in Europe China and India that Britain will need if for 50-60 years, so in developing our to all the major cities in the US, China it is to remain one of the world’s great masterplan, we are trying to anticipate and India – the great economies of trading nations. the future needs of passengers. We also the 21st Century. That will secure Expansion will allow IAG, Virgin and need to remain flexible to accommodate Britain’s position at the heart of the other UK airlines to grow, as well changing airline ownership and global economy. as allowing international airlines to partnerships. Our masterplan expand in the UK. We expect a mix of accommodates this through fewer, A SIGNIFICANT “low cost” carriers as well as network larger terminals, better inter-terminal OPPORTUNITY FOR airlines. With up to 40 new long-haul connections for passengers and bags and common use facilities. AIRLINE GROWTH routes as well as more domestic and European routes, Britain will be the best- Global air traffic demand is expected connected country in the world. TAKING BRITAIN to grow rapidly, doubling by 2030, FURTHER - THE BENEFITS due to population growth, an ageing demographic travelling more and ENVIRONMENTALLY OF A HUB the growth of emerging economies, MANAGED GROWTH Heathrow is one of the world’s great particularly in the East. We anticipate Through the Airports Commission and airports. We are the largest passenger there is sufficient demand for an Airports National Policy Statement airport in Europe and the largest cargo expanded Heathrow. (ANPS) we have agreed a tough set port in the UK. Almost all our cargo is of measures around carbon, noise, air Heathrow is the number one destination carried in the hold of passenger planes, quality and congestion on local roads. for international airlines. Heathrow so as we develop more long-haul We are proposing a mechanism that is fantastically well located, within destinations, we also develop more incentivises airlines and the airport to a direct flight of 95% of the global direct trading routes. meet these tough targets to release economy. London is the biggest aviation By pooling demand from across Europe, market in the world, meaning strong new capacity. This is a ground-breaking we can support regular long-haul flights point to point demand. We compete approach which will ensure that the to more destinations than any other with other hubs in Europe and the aims of the aviation community and airport in the world. This is a rare and Middle East, particularly for transfer the local community are aligned. valuable asset for the UK. The UK enjoys passengers and cargo. We compete It is described in more detail in our 20 times more trade with countries to on convenience, service and cost. Our consultation materials. which it has a direct flight than those competitive advantages are our high without. Through regular connections to value catchment area, high frequency every corner of the UK, we spread the connections and premium service benefits of a world class hub to every standards. Increasingly, we will nation and region of our country. need to provide better transfer facilities for passengers and simpler processes for cargo. 14 HEATHROW’S INITIAL BUSINESS PLAN SUMMARY 15
TACKLING CARBON HEAD ON There are many benefits of aviation. It connects consumers to the world - enabling CARBON NEUTRAL engines on the ground. We will improve NEAR: ACCELERATE AIRPORT FROM 2020 public transport options for passengers SUSTAINABLE visits to family and friends, letting people explore their world and connecting the UK and the 70,000-plus people who work ALTERNATIVE FUELS (SAFs) Heathrow has made significant progress at Heathrow. to markets, trade and global growth. in decarbonising our infrastructure – Heathrow wants to work with reducing emissions by 93% since 1990 DECARBONISING FLIGHT Government to tackle the gross carbon The challenge is to protect the benefits Heathrow can’t solve the carbon through steps including: emissions from flights head on. SAFs are An expanding, commercially successful the fastest way for aviation to reduce of aviation in a world without carbon. challenge alone. Where we control • Reducing use of heat and electricity industry, including a growing Heathrow, gross carbon emissions. SAFs from It is possible. It will need a complete emissions - from our infrastructure - with low energy technology provides an opportunity to accelerate second-generation biofuels are now industry shift – with more investment in we will get to carbon neutral from next • Smart infrastructure design to cut decarbonising wider UK flying as well. proven to work safely, can be blended offsetting and carbon capture schemes, year. The real prize beyond that is to direct emissions In the 2020s we need to accelerate and with traditional kerosene, run through a major switch to sustainable fuels and decarbonise flights - which account scale solutions. We believe zero carbon existing infrastructure and aircraft new flight technologies. for 95% of aviation’s overall carbon • Investing in on-site renewable flight is possible. Our plan is structured engines. They can potentially deliver footprint. We will support our airline energy including biomass and solar Consumers say sustainability matters to allow us to work with others to make up to 100% cuts in flight emissions. customers’ growing commitment to directly to them too: it reality. The cost of SAFs is currently too high. net zero flight. We already run our airport on 100% • 60% think reducing emissions renewable electricity. Our cars and small Airlines must be supported in adopting should be an industry priority vans will be electric from 2020. Our NOW: CARBON these breakthrough fuels. We believe last major source of emissions is from OFFSETTING AND that potential ways to help include • 38% of people would be willing to pay a levy to help protect heating the airport with gas. The final REMOVAL prioritising second generation biofuels big step is to switch off our boilers and for aviation, mandating a rising volume the environment (8% more than Carbon offsetting is an important part of SAFs, stimulating production of SAFs in 2018)1 go carbon free. We are planning to of aviation’s transition to net zero. do that by the mid-2030s at the latest and narrowing the cost gap between The one thing passengers can do fossil fuels and SAFs. Heathrow will do with a heat exchange scheme included immediately is to fund reducing and in our plan but we want to go faster if what it can by structuring our charges. removing emissions in other parts of the However, Government support is we can. We already run Terminal 2 on economy. Flights in Europe have been green gas and from 2020 will do the needed to stimulate this change at in the Emissions Trading System since the speed needed. same for all our buildings which will cut 2012, reducing 130m tonnes of carbon our absolute emissions. We will remove by 2018. A binding UN agreement will any remaining emissions through natural offset all growth in global flights from NEXT: ZERO-CARBON climate solutions in the UK, such as 2020. Some airlines are going further, FLIGHT peatland restoration and major forestry such as IAG offsetting all domestic In the long-term, the goal is flying projects in Scotland. flights, and easyJet all its flights. We without producing any carbon. are looking at how our landing charges Manufacturers and start-ups are REMOVING CARBON FROM could provide a stronger incentive for investing in electric flight. These could GROUND OPERATIONS airlines to reduce carbon or offset. We start to be used for short-haul routes will promote responsible offsetting to from the 2030s. We will need the right The two major UK-based carriers at our passengers too so that they can electric charging network for these Heathrow, IAG and Virgin, have both choose to fly “carbon neutral today.” planes. The weight of batteries means committed to be net zero by 2050. Nature-based carbon removals in the they are not an option for long journeys, We need to support them and other UK, which include peatland, forest and but renewably produced hydrogen airlines to deliver their ambitions. soil projects, offer cost effective and could be. In the meantime, airlines are We can help by setting standards for trustworthy, verifiable opportunities making significant progress by choosing operations on the ground and investing to remove residual emissions from to operate newer, cleaner and quieter in the right infrastructure. We will flights. They also protect and enhance aircraft and we actively encourage that introduce an Ultra-Low Emissions Zone biodiversity and manage flood risk. through our charges today. We have for airside vehicles in 2025 and build the infrastructure to support electric not built the cost of these infrastructure vehicles. We will upgrade plug-in air- changes that could be required for this conditioning and change our charging, into our plan. so aircraft do not need to run their 1 NATS, Aviation Index 2019 16 HEATHROW’S INITIAL BUSINESS PLAN SUMMARY 17
AIRSPACE OUR COMMITMENTS MODERNISATION Heathrow 2.0 is our overall plan for Airspace change is required as part sustainable growth. It sets out how of our expansion and part of plans we will improve life for colleagues and to modernise the wider UK’s airspace communities, contribute to a thriving to benefit the environment and economy, and how we can help to passengers. The major changes to flight tackle global challenges including paths will make airspace more efficient climate change. by improving punctuality, cutting CO2 We have made commitments as part emissions, better managing noise by of our expansion which will not be exploring the use of multiple routes, compromised. Our commitments require reducing of aircraft holding at low levels investment which is reflected in our and ensuring capacity to meet future plan. We recognise that there may demand. We will also collaborate in be instances where acting sustainably the EU’s Single European Sky proposal, means not choosing the cheapest which will significantly reduce emissions option, and Heathrow is clear on and improve service. advocating this choice where we think it right. CLEAN AIR We are collaborating with other Clean air on the ground in local firms across global aviation through communities is vital for health. Road our sustainability partnerships with transport is the single biggest lever to Sustainable Aviation, Air Transport improve air quality as well as reducing Action Group (ATAG) and the World carbon emissions. Even with expansion, Economic Forum (WEF). we will have no more airport related traffic on the roads relative to today’s Some of the carbon initiatives with levels. We have shown this is possible. financial impacts in our plans include: Over the last 20 years, Heathrow’s • Carbon offsetting through UK passenger numbers have risen, forestry and peatland restoration with airport related traffic remaining the same. • Maximising investment in on-site generation and energy demand We continue to reduce the reliance on reduction and management cars to access the airport by: • Masterplan components such as • Improving public transport options new zero carbon heating schemes • Supporting ways to reduce the • Use of less carbon intensive reliance on cars to access the airport materials and manufacturing • Introducing an Ultra-Low Emissions principles during construction Zone, followed by a Vehicle Access • Expanded infrastructure for charging Charge in the 2020s electric and hybrid vehicles We are clear that Heathrow and aviation can only grow if we cut carbon. It would be a huge mistake to try to cut flying instead. Taking the carbon out of flying is possible, but we all need to tackle that challenge head on. Previous attempts to cut carbon by stopping airport growth have just exported emissions. The better solution is to decarbonise flight, protecting the benefits of aviation for future generations. 18 HEATHROW’S INITIAL BUSINESS PLAN SUMMARY 19
WHO ARE OUR CONSUMERS? OUR CURRENT CONSUMERS2 OUR FUTURE CONSUMERS Age Connecting/Direct Frequency of Travel in the past 12 months 65+ Connecting 5% 14-24 7 or more More fliers from emerging 55-64 17% 28% 13% markets and key trade routes 44% of additional air passenger trips 11% like China, India, Indonesia will come from China and India.5 4-6 First and Vietnam 15% Average no. Flight 45-54 of Flights: 40% 18% 25-34 4.1 29% 35-44 Direct 2-3 20% 32% “John Lewis - nothing is too 72% Passengers with higher much trouble.” expectations, making more discerning choices “Apple – they tell you how long regarding travel you’ve got to wait if there are Top 10 Residencies Top 10 Trade Routes Top 10 Airlines queues. Brilliant.” 6 (Cargo Tonnage) 1. United Kingdom 45.5% 1. British Airways 47.0% 1. United States of America 31% 2. United States of America 18.1% 2. American Airlines 4.8% 2. India 6% 3. Germany 3.8% 3. Virgin Atlantic 3.7% 3. China 6% “I think this is going to involve lots of 4. Canada 2.8% 4. United Airlines 2.6% 4. United Arab Emirates 6% ‘smart technology’, such as real-time 5. Australia 2.3% 5. Aer Lingus 2.5% 5. Canada 4% tracking of passenger numbers, End-to-end personalised 6. India 1.8% 6. Lufthansa 2.2% 6. Hong Kong 4% journey driven by data management of queues etc., as well as 7. Ireland 1.7% 7. Emirates 2.2% 7. Qatar 4% services and connectivity more personalisation, where passengers 8. France 1.6% 8. Air Canada 2.1% 8. Singapore 3% can receive discount vouchers for their favourite airport retailers/restaurants 9. Switzerland 1.3% 9. SAS 1.7% 9. South Africa 2% ahead of their visit.”3 10. Italy 1.1% 10. Qatar Airways 1.6% 10. Japan 2% Purpose of Trip Top 10 Destinations 1. New York Older demographics mean 31% new demands on mobility By 2050, the UN expects 21% of the Visiting friends/relatives 2. Dubai global population to be over 60.4 and convenience 3. Dublin 4. Amsterdam Business 32% 5. Hong Kong 6. Frankfurt 7. Madrid 37% 8. Los Angeles Holiday 9. Munich 2 Heathrow Passenger profiler (survey of departing passengers), Twelve months to September 2019 10. Doha 3 Arup, Future of Air Travel, 2016 4 Join the Dots, Innovations, January 2019 5 IATA, 20 Year Air Passenger Forecast, April 2019 6 Caroline Thompson Associates, Willingness to Pay: Qualitative Research Findings, November 2017 20 HEATHROW’S INITIAL BUSINESS PLAN SUMMARY 21
HOW WE HAVE LISTENED CAREFULLY TO CONSUMERS For H7 we have built our plans based on Horizon has been central to our The CCB has challenged our research a more sophisticated understanding of engagement programme. Horizon is an and engagement work programme - consumers. We have developed a new online community of 3007 current and aspects of the research, how we have consumer research and engagement 601 potential Heathrow users. They are interpreted the results and how we are strategy to deliver a step change in the set up to engage, often in real time, reflecting them in our plans. To date, breadth and depth of our engagement. virtually or live, with both narrow and we have completed approximately 30 We have conducted consumer research broader issues related to how we shape additional separate pieces of research and engagement through multiple the airport. This new community has specifically focused on the development formats and techniques with over one allowed direct passenger participation in of the H7 Initial Business Plan and million current and future consumers, shaping our H7 Initial Business Plan and masterplan and in response to feedback including engaging many thousands of expansion masterplan. and challenges from the CCB. consumers through in-depth discussions The Consumer Challenge Board An example of such was the and studies. We have increasingly (CCB) helped shape our consumer enhancement of our definiton to go developed and validated our plans engagement strategy and provided further than just mobility issues and CC based on this growing new insight. B S E AT & independent challenge on the use of our the standard Passengers with Reduced ST A T EG ir T li n R consumer research and engagement in Mobility (PRM) legislation. The CCB IN Y e w G or ki ng our business planning. suggested we followed best practice gr from other sectors and helped us ou develop our new framework. This has ps he ld led to more research packages which are m on informing our design principles and our th ly D new accessibility standard which we are er nt E FI sumgeme gy A developing in conjunction with disability 1 N N n IN TC D Co ga rate charities and the Heathrow Access G OM O en st U N E Advisory Group. E S E D CC S B This constructive feedback will continue & A ir to to improve our Final Business Plan and li n essor fit e w n other future work. 2 or g lin y f ene is ki ng Wil past/b alys gr We must ensure we provide the right ou co an ps O HO he FF IC ld service at the right price for consumers, m C f E E is o to on R S IN th e s ly 3 s G th ht ate s U T R E otherwise they will choose to fly from S A U C Syninsigenercome T S N R T A N LT I E A ON O PE U P IO C O F RS g ut I A elsewhere. For this reason, we have used o P R O consumer and stakeholder insights to P CC O h B SA arc e s & A inform our business decisions. e LS ir s v L S T N d T N e i li n s rrelat d nee U N R IO 4 T IO S A O e w N P P e A O X IR c or i n Cho fornts a C E A ki ng gr a ou w ps he ld m on th n lity ly Plaptabi 5 e acc L N L N SS CC P I IA A E B S T & U I B IN A ir li n e w or ki ng gr ou ps N SS L N L he P I A A E U IN ld B F m S on th ly 22 HEATHROW’S INITIAL BUSINESS PLAN SUMMARY 23
WHAT WE HEARD FROM YOU Through engagement we know increasingly more about what matters most to LEISURE consumers from their experience at Heathrow. We can also start describing how expansion could best serve consumers and other stakeholders. “I want to get there [to my flight] on time Consumers want a smooth, stress free Consumer expectations continue to Consumers do not want us to treat and that we don’t journey that flows well and gets them rise based on their other experiences. everyone the same; different have any delays… to the gate or to their onward Consumers welcome an airport consumers have different needs, destination quickly and efficiently. experience that induces a sense of well- depending on whether it is their first no security check Travelling can be stressful, caused by being as well as meeting their practical flight, if they need assistance, or they queue. Just getting anxiety to get to the flight on time, and needs. This can be an experience are an anxious flyer. through quickly.” for the flight to be on time. Therefore that makes it stand out: the sense of ease, control and predictability are all personal care and welcome, the key factors for consumers. terminal design, the sense of calm, UK BUSINESS the sense of place, the elements that surprise or delight. “Now more than ever, BUSINESS we need connections For H7, we have greatly increased our consumer engagement. Since 2017 we have engaged with over one million consumers to through Heathrow inform our business plan. In 2019 alone, our consumer research has involved engaging with over 350,000 consumers and taken over 70,000 hours. Here is just a snapshot of what they’ve said7: “It could be more for exporting to new personalised. As a markets and to attract frequent traveller investment.” there could be more done to use your known identify to help you.” LEISURE “Maybe an App… The gate information. If it’s personal to you CARGO LEISURE BUSINESS LEISURE it can tell you where “As Britain’s hub airport, “To have a wheelchair “I want a really quick “One of the things I your gate is and how only Heathrow can available when immigration system - found at Heathrow to get there. It comes provide us with the disembarking. We had just want to be is the lack of light. It up and it tells you global connections we to wait.” home once I get needs more greenery when your flight is need to get our salmon off that plane.” and plants.” ready to board. You to stores, stalls and don’t even have to dinner tables across ask anyone.” the world.” 7 Caroline Thompson Associates, Willingness to Pay: Qualitative Research Findings, November 2017 24 HEATHROW’S INITIAL BUSINESS PLAN SUMMARY 25
We’ve also listened to our airlines: DELIVERING OUTCOMES WILLIE WALSH, CEO IAG, 2019 SHAI WEISS, CEO VIRGIN ATLANTIC, 2019 “We do support the expansion of Heathrow, but “We need a stronger hub airport in order to it has to be at the right price and it cannot connect Britain to the world, but we need be the consumers using Heathrow that are to make sure it works for British customers We synthesised our extensive research into six consumer outcomes and expected to pick up the bill.” and businesses. And the way to do that is through competition.” also have collaboratively developed four stakeholder outcomes. And our communities through consultations: Stakeholder CONCERNS FOR EMISSIONS, EITHER AIR QUALITY OR CARBON outcomes “This is a significant step change in Heathrow’s effort to clean up Former London Deputy Mayor for Hea local ground level air pollution by shifting people into the cleanest Transport and Chair of independent met r o Heathrow Transport Area Forum, I feel comfortable thro fforda wf modes of transport. I have never pulled my punches talking to the Val Shawcross and secure at gro eathro airport about local air quality and I look forward to continuing to wp a are nity the airport hold Heathrow to account in my new independent role as Chair rov le airp wth ea a t Airl th to en pr liab irp nd H of the Heathrow Area Transport Forum.” t re ides ed le I h tab urn or m get fid mu b airp e by ic jo av le ey fro n con ines effi t servi ort able s mad e a an Com I c am cien or a I t CONCERN FOR NOISE FROM INCREASED ATMS AND CONCENTRATION OF FLIGHT PATHS OVER SPECIFIC AREAS sus itmen t, re es d Consumer liab c tain m “Whilst a majority of local people support Heathrow for jobs, they Seema Malhotra, Member of outcomes Com le Parliament for Feltham and Heston and also want a fair deal. That’s why in March alongside local Cranford I h of f stin residents and councillors, I called on Heathrow to extend the d av lig at te an Quieter Homes Initiative and our representation has been fed e m ht ion or or de d into the Noise Consultation.” pp d f or s an s su are ec d ho lc ee ice If CONSIDERATION OF THE ECONOMIC AND SOCIAL BENEFITS OF AN EXPANDED HEATHROW I have an enjoyable experience at the He Co “In Slough we recognise that the proposed Heathrow expansion will Cllr James Swindlehurst, Leader of ath ro lle airport o rs icatble w ag t s pred bring huge benefits to our local area, including new jobs, improved Slough Borough Council on the HSPG is ue e s s Inv deliverrreturn ag public transport and an enhanced transport infrastructure. We do rea tp lac s realise that all of this will not come without its challenges, which et w i ow ro nd fa th a is why hosting a summit like this as part of the Heathrow Strategic or k Hea Planning Group (HSPG) will ensure that any potential impacts are raised and minimised.” 26 HEATHROW’S INITIAL BUSINESS PLAN SUMMARY 27
WHAT WILL THE FUTURE New landside spaces and passenger terminal interchange HEATHROW BE LIKE FOR CONSUMERS? New runway and airfield capacity New on airport hotels and offices New rail and road access New security process New retail and digital offers 12-Mile Green Loop and new spaces on perimeter 28 HEATHROW’S INITIAL BUSINESS PLAN SUMMARY 29
DELIVERING OUTCOMES FOR CONSUMERS “I have more choice of flights and destinations” OVERVIEW WHAT WE HEARD FROM CONSUMERS Consumers want the airport to offer To be the airport of choice, Heathrow needs to be able more destinations served more widely to support as wide a range as possible of consumers’ by airlines, at more convenient times travel plans. We heard three needs: and more competitive prices. They Flights I want when I need them Trust in Heathrow want to be able to trust Heathrow Consumers have told us that to be an Consumers need to trust that Heathrow will deliver. Central to our plan for the option for them, Heathrow has to offer will deliver their travel plans. Consumers flights to their chosen destination at a tell us it is important that they have clear next 15 years therefore is expanding time that meets their needs. Consumers’ and comparable information before overall aim is to find the right flight for they travel so that they can make an our capacity to add at least 260,000 their trip. If Heathrow doesn’t offer it, informed decision. They also need to they’ll travel from elsewhere. have confidence that Heathrow will more flights a year. This new capacity provide the journey as planned. Previous 57% of British travellers would support could allow us to serve 6 million more more choice at Heathrow airport, while experience is a key driver of passenger choice and trust in Heathrow. So too passengers per year by 2028 and an 59% of passengers would choose to connect via Heathrow if there are consumer views on our sustainability and responsibility in the widest sense. additional 30 million more by 2036. were more airlines and routes to Perceptions of Heathrow from other choose from.8 Airfares could be £20 to £140 a ticket sources also impact consumers’ willingness to choose us. Good value and affordable travel cheaper than otherwise. We could For Heathrow to meet consumers’ needs serve up to 100 new destinations, when booking, the cost of the overall journey needs to represent good value connecting the whole of the UK to for money. They consider the whole vital trading links including China, cost of the journey. That includes the overall ticket price from Heathrow, India and the United States. travel to the airport, direct airport costs and the “notional cost of stress.” This is compared to the value and service of the whole journey – flight, airport and access. Cost is an influencing factor on where consumers fly from – but cost means more than the ticket price.9 Of those who have not flown recently, 31% cite budget constrains/ the cost of travel as the main barrier.10 Populus/Virgin Atlantic Survey, October 2019 8 9 Caroline Thompson Associates, Willingness to Pay: Qualitative Research Findings, November 2017 10 CAA, UK Aviation Consumer Survey, June 2019 30 HEATHROW’S INITIAL BUSINESS PLAN SUMMARY 31
WHAT WE WILL DELIVER OUR DELIVERABLES IN A SNAPSHOT More choice with a new runway Opening more routes also means more hopes that through the slot allocation domestic connections to emerging process and flexible terminal occupancy We have consistently worked with growth economies around the world. we will encourage a diverse set of our airlines to start or increase flights As the UK’s only hub airport, being able airlines able to provide compelling to destinations in demand. We have to offer more choice of destinations offers to consumers. also attracted new airlines such as New capacity through more carriers will have a unique China Southern and Garuda Indonesia. We also understand the growing multiplier effect by helping to strengthen However, we have been capped by a requirement from consumers to have the UK’s connection proposition and Capacity for at least 260,000 more flights 480,000 Air Transport Movement (ATM) their service providers act in a socially trade links through increased cargo. per year with a new runway limit. At the centre of our plans for and environmentally responsible way. the 15 years from 2022 is delivering a Direct air connections support economic This will be reflected in how we expand new runway and new capacity to raise growth. UK businesses trade 20 times and operate – from the most basic that limit. Our expansion plans play a more with emerging markets that services we provide in the terminals such large part in delivering on this outcome have direct daily flights than with as water refill points to the construction for consumers. Capacity means we those with less frequent or no direct methods and materials we use to build. can offer them more choice of flights, services. Through expansion we have We will need airlines to support this, to more destinations over the 2020s and beyond. We will give airlines that the opportunity to double our cargo capacity, bringing significant trading by flying more efficient new aircraft, switching to sustainable fuels and More choice currently do not operate at the scale links and benefits to exporters of all size signing up to night flight regimes Up to 100 new international and domestic routes they might wish, or do not operate across the UK. amongst other important measures. We from Heathrow at all, the opportunity will continue to use our pricing structure Subsequent phases of expansion will see to grow their businesses. Expansion will to incentivise these behaviours. us able to release more runway capacity also help to drive down ticket prices in a phased way from the late 2020s The impact of strategic options for consumers, thanks to releasing the – we are proposing to release at least capacity constraint. Long-term this is • The pace of growth will have an More passengers 24,000 ATMs a year subject to meeting the surest way to ensure that flights impact on airline choice, where environmental targets. We will also available from Heathrow are affordable. slower growth means a more gradual construct new terminal capacity in both c.88m passengers by 2028 (+6%) release of slots and therefore less the west and east of the airport to meet c.120m passengers served by 2036 (+43%) More choice with Early Growth competition and impact on airfares passenger and airline demand. We can start to deliver more choice for • Faster growth is possible within consumers right from 2022, ahead of a Reflecting the values of our environmental limits, but we are new runway. We are proposing targeted consumers mindful of these constraints and the investments and improvements to the impact on airline operations. We We recognise that different passengers use of existing terminal infrastructure anticipate that parts of the airport have different requirements from their alongside an additional 25,000 ATMs could feel slightly more congested on the existing two runways. These improvements can reinforce Heathrow’s time at Heathrow and from their choice of airline. For this reason, Heathrow but aim to mitigate this through efficiency improvements. Cheaper fares resilience at the same time. By adapting Airfares £20-£140 lower per ticket our current infrastructure and with support from airlines, Heathrow estimates that load factor can increase Heathrow Passenger Forecast (m) from 79.4% in 2018, up to the IATA 130 average of 81.9%. This 2.5%-point increase to average load factors would Boosting UK exports 120 deliver an extra 2.5m passengers to the airport, which would also improve airport economics and reduce the 110 Expanding cargo capacity so that we can handle three airport charge. million tonnes per annum 100 90 80 70 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 Central case Prioritising Service Prioritising savings 32 HEATHROW’S INITIAL BUSINESS PLAN SUMMARY 33
DELIVERING OUTCOMES FOR CONSUMERS “I am confident I can get to and from the airport” OVERVIEW WHAT WE HEARD FROM CONSUMERS A consumer’s physical journey begins Speed Trust from the moment they leave their home, Time is critical for consumers travelling As with a consumer’s choice of airport, to or from an airport. They either have they need to trust that a surface access office or hotel. Therefore, getting to, a flight to catch or want to get to option will deliver for them. The service their destination as quickly as possible. needs to be reliable and predictable. from and around Heathrow matters to Consumers’ perception of speed is Consumers often choose transport airport experience and airport choice. important when they are making they frequently use or are reticent to choices between modes. change if an option has worked for Consumers want to do so quickly, Private transport modes, i.e. car and them before. easily and in a way they trust. taxi, remain an important choice at Providing consistent up-to-date Heathrow. Consumers perceive these information is also key to ensure modes to be direct and give them the passenger trust. As with ease, Perception, research and relative value feeling of control. When calculating consumers want to access the right for money all affect airport and mode speed, consumers look at the end-to- information at the right time to forward choice. By 2040 we can expand the end journey, including time to and from plan and reassure on the go. range and resilience of rail and road train or coach stations and making links, closing gaps in our access to the changes between modes. Sustainability west and south and bringing 90% more people within an hour by public “Drive with no hold ups on roads... Consumers also care about the general transport than there are today. Lower straight to a parking space and as soon sustainability of travel. public transport fares combined with as unloaded the shuttle bus turns up... “Making travel more affordable, new vehicle charging at the airport will then straight to the terminal”12 comfortable and climate friendly are incentivise more sustainable modes However, consumers do trade-off this great initiatives for Heathrow and of transport. Raising the share of need for a quicker journey with price, will allow its reputation to grow journeys on public transport to 50% to find the best value for money for even further.”14 will also cut congestion and delay for them for each trip. all consumers. They support efforts to cut carbon emissions, improve air quality and cut Simpler, intuitive consumer journeys to Ease congestion for everyone’s benefit. all parts of the airport will improve the Consumers clearly say they want to Heathrow will also only be able to experience for all and create a further get to or from Heathrow via the most grow if we meet stretching ANPS positive incentive for sustainable simple, intuitive and direct route with requirements for mode share. choices. We could invest to improve the fewest changes. An easy journey wayfinding across the airport too. minimises stress and improves the airport experience. To make their journey easy, consumers say they want to have the knowledge they need to make the right decisions for them. Without information, the experience becomes much more stressful. “Easy access. It’s the biggest one for me. If I can’t get there easily it becomes a 12 Join the Dots, Surface Access Report, August 2018 big event. [I’m worried about] getting 13 Caroline Thompson Associates, Willingness to there on time.”13 Pay: Qualitative Research Findings, November 2017 14 Join the Dots, Surface Access Interventions, April 2019 34 HEATHROW’S INITIAL BUSINESS PLAN SUMMARY 35
WHAT WE WILL DELIVER Consumers will see a wider and cheaper OUR DELIVERABLES range of rail fares as the Elizabeth IN A SNAPSHOT Line and other services begin. We We plan a long-term programme of rail, road and on-airport changes to 2036 that will continue to expand the range of will make Heathrow an easier and faster airport to access for more consumers. We discounts on the revamped Heathrow Express. Our plan will also increase will become a fully integrated transport hub with rail lines to north, south, east and subsidies for local buses and to incentivise airport colleagues to shift west. We can offer more choices and resilient back-up options for journeys. The out of single-occupancy cars. A “green package of better choices and different financial incentives should also shift how loop” around the perimeter of the airport will connect bus routes with cycle Bigger catchment area More of the largest towns connected to Heathrow. Elizabeth people access Heathrow - with 50% of passengers using public transport by 2030, and walking paths. Line and refreshed Heathrow Express services a 25% fall in colleague car journeys by the same date and no increase in airport To protect air quality around the airport, • Western Rail by mid-2020s we are proposing an HULEZ (Heathrow • Southern Rail by mid-2030s related traffic. If we deliver all these improved links, by 2030, over 40% of Britain’s Ultra Low Emissions Zone) from 2022 that will charge the older, more polluting population will be within three hours of the airport. vehicles extra. This becomes a general Heathrow Vehicle Access Charge New rail links Better road links and new We will redevelop our Central Terminal (HVAC) of around £15 from 2026 to transport services Area in Terminal 2 (T2) and Terminal Cheaper rail fares Committed new public rail schemes, ease congestion for travellers even as 3 (T3) to support growth. We have we grow. The charges will be recycled such as the Elizabeth Line, HS2 and Even as we promote a shift to public also designed better public transport to bring down airport charges and fund upgrades to the Piccadilly line will mean transport, road links will continue to be More and cheaper options on rail and bus fares interchanges as part of our masterplan, airport linked transport investments. 2.1m more people will be 90 minutes indispensable for consumers. In the last creating easier connections and from Heathrow by public transport. five years taxi and private hire trips have We are currently discussing with DfT, interchanges and making us a transport More of these rail journeys will be direct risen from 12% to 17% of all journeys an airport contribution to Western Rail hub beyond aviation. and easier too. Heathrow Express tops to Heathrow as consumers have project. If the project was delayed or the UK in rail satisfaction surveys due taken to the convenience and price of cancelled we can still meet mode share More intuitive terminal access to its easy, 15 minute reliable service. services like Uber (which now makes up targets with alternative investments and The service will be rejuvenated with a modern fleet before the start of H7 and almost 30% of these trips). In response Heathrow plans to work with providers Legacy infrastructure means that access in, out and around terminals is not a higher vehicle access charge. However consumers prefer the rail option so we Less road congestion continue to operate to at least 2028. to develop new offers – such as shared as simple as consumers might want. Southern Road tunnel and two junctions to M25 offer options to increase the likelihood We are also working with DfT to create rides, backfilling incentives, and even Changes of direction, level and gaps in of delivery. new airport rail links. A Western Rail managed air-taxi services. These steps information confuse, stress and delay. As link to Reading would allow passengers will mitigate congestion, emissions and we expand the airport we can steadily 36% of those who currently park at to travel to the airport from the South other downsides of theses shifts while improve this part of the journey. We the airport would be less likely to do Coast, South West, South Wales and maximising the consumer convenience plan new ‘transport interchanges’ in the so following an emissions charge15 West Midlands without going into and choice. These new multi-user east and west that will create shorter, London. In the 2030s a Southern Rail link connecting the South West and services improve congestion and air quality and could be considered a form line of sight journeys to terminals, particularly from public transport. The impact of strategic option Integrated vehicle Waterloo to Heathrow is also planned. A key option is any airport contribution of “public transport.” This will create more welcoming, less stressful environments. New terminal • We assume building Western Rail in both options, but our contribution parkways Our masterplan will build new varies. Investment in any Southern Consolidated parking with easy transfers to terminals to these schemes balanced with overall spaces such as T5X will have fewer Rail Link also varies by option consolidated parkways on the southern consumer costs. floors reducing changes in level and and later the northern perimeter to • Road, tunnel and parkway direction. We also see opportunities to offer a different mix of parking and construction would be the same invest in digital and physical wayfinding vehicle charging services. They will have in each option to reassure and guide passengers in a direct links into terminals. We will also more 21st century way. • Passenger interchanges with new New cycle paths invest to improve local bus services and coach links, including 24-hour buses terminals come in faster in the Changing financial incentives Prioritising Savings option similar to the recently introduced Rail Air Perimeter Green Loop with 12 miles of cycle paths link from Guildford. Consumers want the widest possible • Fare, carparking and HULEZ/ HVAC by 2035 range of price and service options when changes are similar in both options, By 2030 we will address some judging access value for money. We although with faster growth there critical pinch points in road access by must also incentivise more sustainable may be a need to bring some opening the Southern Road Tunnel travel choices. A mix of charges and forward sooner giving access to the Central Terminal discounts are part of our plans to 2036. Area from the south for the first time. Likewise, two new M25 junctions will create safer, easier and faster routes into both Terminal 5 (T5) and the new Access charging Southern parkway. Access charging (HULEZ 2022; HVAC from 2026) 15 Join the Dots, Surface Access Interventions, April 2019 36 HEATHROW’S INITIAL BUSINESS PLAN SUMMARY 37
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