The Importance of Aviation to Scotland's Economic Success - July 2021
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The Importance of
Aviation to Scotland’s
Economic Success.
July 2021
The Importance of Aviation to Scotland’s Economic Success.
Content
Executive
1. Overview of Pre-Covid Growth Patterns p4
Summary
2. We are already falling behind our Competitors p6
3. Scotland’s Tourism Success and wider economic This document seeks to assist in the broad The price for Government inaction and the lack
success is supported by aviation accessibility p12 discussion with Scottish Government Ministers of planning now may well be a greater one than
and officials, the aviation industry and its we pay in 2021. As in sport – when you gift
wider stakeholders on the restart and recovery a determined competitor a head start, there
4. Recovery in 2022 is not assured – Route development of aviation – and the rebuilding of Scotland’s is little or no way to catch up.
is difficult and competition is fierce p16 connectivity – following the pandemic.
If we are serious about not losing hard won
This discussion can only be of value if those connectivity that benefits and enriches
5. What are the required responses? p18 participating agree the true starting position Scotland, and on which many jobs and
– where we are now. This document clearly industries depend, the Scottish Government
defines that, and it highlights that Scotland is must act with purpose in concert with the
in a position that is not only worse than our aviation industry on the measures set out
competitors in Europe, but also those in other in this document.
parts of the UK.
To do otherwise would see Scotland become
Decisions on travel and the Scottish less competitive globally and will only serve
Government’s approach to the aviation industry to frustrate our economic development,
have left Scottish airports with a difficult task aspirations and growth – and undermine
to compete for and win back capacity that our place in the world.
might otherwise be lost for several years.
The scale of this challenge should not be
underestimated. Recovery in 2022 is far from
assured and the damage done by the slow
recovery in 2021 further jeopardises Scotland’s
competitive position, with airports, nations
and regions moving faster and with greater
purpose.
3
strength in attracting
uncertainty airlines;
around Brexit, geographical disadvantages, high aviation tax and wider economics
demonstrating
• 2019 (immediatelysome Scottish level
pre-Covid): market
Overall fragility.
central Scotland market down with airline failures and
The Importance of Aviation to Scotland’s Economic Success. The Importance
uncertainty around Brexit, geographical disadvantages, of Aviation
high aviationtotax
Scotland’s
and widerEconomic Success.
economics
demonstrating
Since the some Scottish
GFC central Scotland level market
passenger numbersfragility.
have grown from 20m to 25m passengers (+25%)
and 141% of that growth has been delivered at EDI where GLA was roughly flat and Prestwick
experienced
Since the GFCmajor contraction.
central Scotland passenger numbers have grown from 20m to 25m passengers (+25%)
and 141% of that growth has been delivered at EDI where GLA was roughly flat and Prestwick
experienced major contraction.
1.
Overview of
Pre-Covid Growth
Patterns
Figure 1: Central Belt two-way passengers 2000-2019; Share of passenger growth 2007-2019 (source: Civil Aviation Authority)
Figure 1: Central Belt two-way passengers 2000-2019; Share of passenger growth 2007-2019 (source: Civil Aviation Authority)
Figure 1: Central Belt two-way passengers 2000-2019; Share of passenger growth 2007-2019 (source: Civil Aviation Authority)
Over the period 2000-2019 central belt • 2019 (immediately pre-Covid): Overall central
airports (Edinburgh (EDI), Glasgow (GLA) and Scotland market down with airline failures
Prestwick (PIK)) grew passenger numbers from and uncertainty around Brexit, geographical
14m to 25m, a growth of over 75%. This growth disadvantages, high aviation tax and wider
showed four distinct trend periods: economics demonstrating some Scottish level
market fragility.
• 2000-2007 (pre-global financial crisis (GFC)):
growth at all airports with EDI growing Since the GFC central Scotland passenger Figure 2: Annual post-GFC passenger growth 2012-2019 (source: Civil Aviation Authority)
ahead of GLA/PIK in line with population and numbers have grown from 20m to 25m
economic indicators between east and west passengers (+25%) and 141% of that growth Figure 2: Annual
Figure post-GFC
2: Annual passenger
post-GFC growth
passenger 2012-2019
growth (source:
2012-2019 Civil
(source: Aviation
Civil Authority)
Aviation Authority)
coasts of Scotland and where EDI is naturally has been delivered at EDI where GLA was
better located between two major cities; roughly flat and Prestwick experienced major
contraction.
• 2008-2012 (GFC period): EDI showing static
passenger numbers and strong resilience Conclusions:
against European passenger reduction and
significant west coast Scotland reductions;
1.1 P
re-Covid there was strong overall central 1.3 E
ven pre-Covid PIK offers few, if any,
• 2013-2019 (separate ownership of GLA belt aviation growth prospects for passenger growth
and EDI): EDI rapidly accelerating its growth
and making significant market share gains 1.2 M
ore than 100% of growth has been 1.4 T
he Scottish market pre-Covid was fragile
as EDI free to compete against GLA and delivered at EDI where its superior as a result of longer flight-sectors and
utilise its natural market strength in attracting geographical positioning, its status as a adverse tax and Brexit issues
airlines; and Capital City and the relative economic
strength of Edinburgh makes it the
natural focus of airline investment
in central Scotland
4 5The Importance of Aviation to Scotland’s Economic Success. The Importance of Aviation to Scotland’s Economic Success.
2.
We are already
falling behind
our Competitors
The UK continues to operate some of the • UK and Scottish governments both actively
highest travel restrictions in the World and talk down and discourage international travel
Scotland continues to have higher levels
of restrictions than the rest of the UK. • There has been no sector specific support for
aviation in comparison to major investment
• UK operates a strict traffic light system in Europe – rates relief is welcome but is not
with few green list countries a support package
• UK is not yet participating in the EU wide • There is no clear plan to encourage aviation
scheme for vaccine status and coordinated recovery in 2022 or beyond
testing approaches
• Scotland has a high cost testing regime
for green and amber countries
Figure 3: International capacity recovery % by European country, Jun 2021 vs 2019 (source: OAG Schedules)
Figure 3: International capacity recovery % by European country, Jun 2021 vs 2019 (source: OAG Schedules)
6 7The Importance of Aviation to Scotland’s Economic Success. The Importance of Aviation to Scotland’s Economic Success.
This inevitably feeds through into travel Therefore, meaningful recovery will be pushed
demand and a poor comparative performance into 2022 and cause Scotland to compete for
for UK versus Europe and Scotland versus rest capacity from a far weaker position than other
of UK. These patterns of under-performance regions, where the recovery will be far more
have a high risk of becoming long term or advanced. It will be a long and difficult process
even permanent. to win back capacity.
Airlines have already moved some capacity Forecasts based on market intelligence and
to other regions (e.g. easyJet have moved ‘on-sale’ airline services indicate that EDI will
capacity from the UK to Berlin, and Delta has continue to fall behind other European capital
relocated its’ EDI-JFK service to serve European recoveries and increase the gap going into
routes, where demand is far stronger due to 2022, if restrictions in their current form
restriction-free travel). If the peak summer (in Scotland and in Europe) persist.
travel period is missed, then it is likely routes
will be cancelled for at least the rest of the
summer season, and in many cases for the
winter as well (since this is a far weaker and
riskier time to re-start routes).
European market share change (% points)
Largest European markets, Jun 21 vs 19
2%
1%
3%
er
ce
y
n
s
n
ce
y
y
K
nd
ke
io
ai
an
al
U
th
ee
an
Sp
It
-1%
at
la
r
rm
O
Gr
Tu
Fr
er
er
Ge
d
h
Fe
et
N
an
-2%
i
ss
Ru
-3%
-4%
-5%
Figure 5: European market share change (of international capacity in percentage points) of the largest European markets, Jun 21 vs 19
Figure
Figure 4:4:International
International capacity
capacity recovery
recovery % by European
% by European capital city,capital city,
Jun 2021 vs Jun 2021
2019 vs 2019
(source: (source: OAG Schedules)
OAG Schedules)
This inevitably feeds through into travel demand and a poor comparative performance for UK versus
Europe and Scotland versus rest of UK. These patterns of under-performance have a high risk of
becoming long term or even permanent.
8 9The Importance of Aviation to Scotland’s Economic Success. The Importance of Aviation to Scotland’s Economic Success.
Figure 6:6:Projected
Figure comparative
Projected comparative recovery,
recovery, Jun-Dec
Jun-Dec 21 vs21
19vs 19uses
(Jun (Junactuals
uses actuals
from OAGfrom OAG Schedules;
Schedules; for Jul-Dec itfor Jul-Dec that
is assumed it is assumed
80% of
thatcurrent
80% ofplanned
current planned international
international capacity
capacity will operate will operate
for open forEU,
markets e.g. open
andmarkets e.g. EU,
25% for closed and e.g.
markets 25%UK)
for closed markets e.g. UK)
The above chart shows predicted recovery of international traffic under current restrictions.
The above chart shows predicted recovery of Conclusions:
Edinburgh’s performance is impacted by quarantine on almost all international destinations, whilst this
international traffic under current restrictions.
doesEdinburgh’s
not apply in the European comparators.
performance is impacted by
The dotted
2.1 Tline
he UKforand
Edinburgh
Scotlandshows how
continue to recovery
have morecould
be transformed
quarantine onifalmost
quarantine were not applicable to mostrestrictive
all international destinations.
travel policies despite vaccine
destinations, whilst this does not apply in leadership and little sign of international
the European comparators. The dotted line alignment with EU or beyond or indeed
Conclusions:
for Edinburgh shows how recovery could be a clear plan for the coming months
2.1 transformed
The UK and Scotland continue
if quarantine to have
were not more restrictive travel policies despite vaccine leadership and
applicable
little
to mostsign 2.2 The
of international alignment with EU or beyond
destinations. orUK is already
indeed a clearwell
planbehind
for thethe European
coming months
recovery curve and has no direct sectoral
2.2 The UK is already well behind the European recovery curve and has no direct sectoral support
support committed to assist the recovery
committed to assist the recovery
2.3 Scotland is performing worst within the poor performing UK recovery
2.3 Scotland is performing worst within
2.4 There is risk that this under-performance in the recovery becomes
the poor structural
performing if sustained for many
UK recovery
months
2.4 There is risk that this under-performance
in the recovery becomes structural if
sustained for many months
3 Scotland’s Tourism Success and wider economic success is
supported by aviation accessibility
It is estimated that 229,000 jobs (source: Scottish Enterprise, 2019) are related to the Visitor economy
in Scotland1 making this the largest employment sector in Scotland. Many other sectors depend upon
connectivity including education, financial services, pharmaceuticals, energy and life sciences to access
their customers and markets. Many others require direct export capability to access their markets such
as food and drink.
1
Scotland's tourism industry facts - Scottish Enterprise (scottish-enterprise.com)
10 11The correlation between passenger growth and international visitor growth and spend is very strong.
The correlation between passenger growth and international visitor growth and spend is very strong.
The Importance of Aviation to Scotland’s Economic Success. Perhaps this is not surprising given access, and in particular direct access via direct Scottish flights, is a
Perhaps this is not surprising given access, and inThe Importance
particular of Aviation
direct to Scotland’s
access via Economic
direct Scottish Success.
flights, is a
major factor in the attractiveness of Scotland as a tourism destination.
major factor in the attractiveness of Scotland as a tourism destination.
3.
Scotland’s Tourism
Success and wider
economic success
Figure 7: Int’l visitors to Scotland, nights stayed and spend (source: VisitScotland) vs both Central Belt passengers (left; source:
Figure 7:Aviation
Civil7: Int’l visitors to Scotland,
Authority) and thenights
numberstayed and spend (source:
ofand
destinations VisitScotland)
with VisitScotland)
a direct flightvs vs Scotland
from both Central Belt passengers (left; source:
Figure Int’l visitors to Scotland, nights stayed spend (source: both Central (right; source:
Belt passengers OAG
(left;Schedules)
source: Civil
Civil Aviation Authority) and the number of destinations with a direct flight from Scotland (right; source: OAG Schedules)
Aviation Authority) and the number of destinations with a direct flight from Scotland (right; source: OAG Schedules)
is supported by EDI
58
growth
EDI growth
EDI growth in
new
since
58 new
in connectivity
inconnectivity
connections
it connections have
has operatedhave
has
connectivityhas
been
as abeen
been
hasbeen marked
beenmarked
delivered
stand-alone
delivered
since it has
markedsince
including
business. the
operated
delivered
it has operated
first links
including thecountries.
to
as a stand-alone
including
as a stand-alone
10 new countries.
first links to 10 new countries.
business.
the first links
business.
Anew
to 10 A total of
total of
aviation accessibility
A total of 58 new connections have been
It is estimated that 229,000 jobs are related The correlation between passenger growth
to the Visitor economy in Scotland1 making and international visitor growth and spend
this the largest employment sector in Scotland. is very strong. Perhaps this is not surprising
Many other sectors depend upon connectivity given access, and in particular direct access
including education, financial services, via direct Scottish flights, is a major factor in
pharmaceuticals, energy and life sciences to the attractiveness of Scotland as a tourism
access their customers and markets. Many destination.
others require direct export capability to
Figure 8: Additional direct connectivity at EDI since 2012 (source: OAG Schedules)
access their markets such as food and drink. Figure
Figure 8: Additional direct 8: Additional
connectivity at EDIdirect
since connectivity atOAG
2012 (source: EDI since 2012 (source: OAG Schedules)
Schedules)
A
A focus
focus on
on major
major international
international hub
hub connections
connections with globe.
9 additional
As onehubs addedthe
example to Qatar
the 8 existing
Airwaysin 2012
Doha
A focus
with 9 on major international
additional hubs added hub
to theconnections
8 existing with connectivity
9 additional hubs
opensadded
up to the
major 8 existing
Asian in 2012
connectivity
has further enhanced this connectivity through additional access to their wider trans-continental one-
has further
in 2012 hasenhanced this connectivity
further enhanced through additional
this connectivity that isaccess to their
important forwider
manytrans-continental
Scottish export one-
through additional access to their wider trans- sectors.
continental one-stop connectivity across the
1
Scotland’s tourism industry facts – Scottish Enterprise (scottish-enterprise.com)
12 13The Importance of Aviation to Scotland’s Economic Success. The Importance of Aviation to Scotland’s Economic Success.
stop connectivity across the globe. As one example the Qatar
Airways Doha connectivity opens up major Asian connectivity that is important for many Scottish export
sectors.
Figure 9: 1-stop accessibility via 9 new International Hubs since 2012 (source: International Air Transport Association)
Figure 9: 1-stop accessibility via 9 new International Hubs since 2012 (source: International Air Transport Association)
This growth in connectivity and passenger Capital investments of £253m since 2012
This growth in connectivity and passenger numbers has
numbers has driven major job creation at the anddriven major
of £61m in job
2019creation at theenabled
alone have airport and
this in
airport and in the wider Scottish economy with growth and again provided economic
the wider Scottish economy with 7,000 jobs on EDI airport campus and 28,000 across Scotland2 and stimulus
7,000 jobs
where otheronScottish
EDI airport campus
airports andsimilar
support 28,000relative in the Scottish supply chain. This has all been
numbers.
jobs across Scotland, with other Scottish airports achieved without public sector funding.
supporting similar relative job numbers.
Capital investments of £253m since 2012 and of £61m in 2019 alone have enabled this growth and again
provided economic stimulus in the Scottish supply chain. This has all been achieved without public
sector funding.
Figure 10: EDI Annual Capex Spend, FY13-FY19 (source: Edinburgh Airport Limited)
Figure 10: EDI Annual Capex Spend, FY13-FY19 (source: Edinburgh Airport Limited)
Conclusions:
3.1 C
onnectivity has been a major part 3.4 This connectivity has been won with
2
Biggar Economics Tourism success
of Scotland’s almost no public sector financial support
or investment required generating over
3.2 R
oute growth has driven major expansion £1.4bn of GVA per annum.
at EDI since 2012
Conclusions: 3.5 Loss of hard-won connectivity would be
3.3 C onnectivity is a major element of
3.1 Connectivity has been a major part of Scotland’s Tourismasuccess
major employment and wider economic
economic growth and job creation
3.2 Route growth has driven major expansion at EDI since 2012 in Scotland
and support
threat
3.3 Connectivity is a major element of economic growth and job creation and support
3.4 This Biggar
2
connectivity
Economics has been won with almost no public sector financial support or investment
14 15
required generating over £1.4bn of GVA per annum.
3.5 Loss of hard-won connectivity would be a major employment and wider economic threat inThe Importance of Aviation to Scotland’s Economic Success. The Importance of Aviation to Scotland’s Economic Success.
4.
Route Development
• Airlines choose airports that best satisfy • Post-Covid environment expected to be more
all needs for establishing new direct routes competitive – more options for airlines
Recovery in 2022 • New routes stimulate inbound tourism,
new business connections and VFR traffic
is not assured –
n
Ca tim titi
io
ea pu nt
Co r te nv
Route development
Co
rr u ve
of ativ Siz lth lat
W po e
S e
m co- de iro
m
ie la e
m
es t
pe ex m n
cc or
ic ch
p
s
t a sp
ti is an me
hn at
ti te d n
Et C
or an
on n
ai e e
rp tr
Demand
ce
Two-way
se rn
Year-round
Ea lte
A
Yield potential
t
Growth potential
is difficult and Commercials
Airport charges
Incentives & support
Support & investments
New
Routes
Regulatory
Travel restrictions
Compliance costs
Traffic rights
competition is fierce
Sector length Taxes
Taxes
Operations
Slot availability
Opening hours & curfew
tio va ro e
Handlers Blue
ns ila ute
op a sh tur
y
lit
Ai
Comparable with or better than other European airports
er ity li fu
Scalability
O apa est e i g
bi
A e r rti e
rl Exp dv an
c n
ir el se
in e ic ce
th c ab n
e to en mi
po a
d i
rl me fi T
rt tio
Amber
A ist
As
Unfavourable compared with other airport options
s
Ai Ti Con
ns
c
Pink
in
Potential deal breaker
Winning new routes is a difficult job. Airlines Pre-Covid Scottish market weaknesses include
have many choices where they invest their the additional sector length associated with
very expensive assets and new routes often our geographical location at the fringe of
take a number of years to achieve profitability. Europe, high aviation taxes (APD) and modest Figure 11: Factors considered by airlines in route development, coded RAG to highlight EDI’s strengths and limiting factors
No airline is obliged to fly to/from Scotland, government investment in route development
and there is no home-based international flag support and wider tourism marketing compared
carrier. Airlines can place aircraft at the airports to European competitors. Conclusions:
which offer the best commercial proposition.
4.1 T
he Scottish market has geographical 4.3 P
ost-Covid much ground has been lost
Scottish market strengths include strong and policy/taxation disadvantages
two-way passenger demand (particularly at 4.4 T
he recovery will be fiercely competitive
Edinburgh) and the potential for reasonable 4.2 M
any moving parts supported by
airline ticket yields driven by a strong economy imaginative data presentation and airport
and balanced inbound and outbound demands commercial structures have been required
for travel across business and leisure. Scottish to achieve success despite these challenges
airports are not capacity restricted or subject
to curfews, and offer good operational and
commercial environments.
16 17The Importance of Aviation to Scotland’s Economic Success. The Importance of Aviation to Scotland’s Economic Success.
5.
What are the
required responses?
If the hugely valuable and hard-won benefits Short-term action requirements: Actions required NOW for recovery
of improved connectivity over the past decade in 2022 and beyond:
and more are not to be lost, then creating the • Meaningful engagement with the industry
conditions for recovery must be an urgent to seek optimisation of travel restrictions • Overt policy statement on wish to recover –R
emove quarantine for all vaccinated
policy response. and their relaxation passengers arriving from Amber
• Commitment to easing restrictions and destinations; exempt children under a
The industry is not seeking direct financial • A clear roadmap for the easing of restrictions alignment with international practice certain age from quarantine and testing
support but is seeking a clear position on as soon as practicable
creating the conditions for a competitive • A clear roadmap for the alignment with • Review of Amber quarantine period and
recovery and for communicating that approach EU/international travel requirements • A 4 nations approach to enable Scottish testing regime:
to the aviation sector as a matter of urgency. (testing and vaccine status etc.) airports to compete fairly with other
UK airports – Introduce “test to release” in Scotland and
Governments have made much of ‘engagement’ • Direct support for affordable testing when reduce time period to 2 days post arrival
with the aviation industry during the pandemic. required (adopt antigen testing for Green/ • Commitment to removing all travel (for non-vaccinated travellers)
The engagement has frequently taken the form Amber with PCR test only where a positive restrictions as soon as practicable (Green list
of government speaking at industry, with very result is obtained). Allow returning UK restrictions still major barrier, must have route –R
emove “should not travel” advice from
little, if any listening happening. This needs to residents to use NHS antigen kits or cheaper to ‘White’ list = 2019 situation) Amber destinations
change to maximise the recovery. providers of PCR
• Reduction/removal of APD for 2022 and • Recognition of third-party Digital Health
tapering return while restrictions still apply wallets/certificates
• Substantial increase in direct tourism • Recognition that secure airside transit/transfer
marketing that can be deployed at route via international hubs is not classified as
origins to support airline restarts having been in a red or amber list country,
(NOT match funding) if the hub is green or amber-listed
• Clarity on government support available
to route development in the recovery
• Recognition of vaccinated and recovered
passengers into the UK:
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