Special Reports » 

Up in the air

Published: 21/05/2008 - Filed under: Archive » 2008 » June 2008 » Special Reports » Features » Features » Special Reports »

• Print
• Send

From the advent of Open Skies to a possible sale in the pipeline, Gatwick is in a state of flux. Gary Noakes reports.

A soothing voice on the North Terminal transit used to proclaim Gatwick as the British Airways "hub without the hubbub". Less than a decade later, London’s second airport has changed radically. Step onto that same transit today and the message is still from BA, but it has changed to one about the attractions of checking in online, not about Gatwick’s importance as a major BA hub.

In many ways, this year ought to be one of celebration for Gatwick. In June, the airport marks its 50th anniversary, but the rise of the no-frills airlines, the decline of charter flights, 9/11, Open Skies with the US and BA’s restructuring have led to the airport becoming a very different place.

British Airways

The way Gatwick looks today can be dated to just before the September 11 attacks, when BA, which was – and still is – crucial to the airport, abandoned plans to use Gatwick as an overspill hub from Heathrow. The two airports were, in hub terms, simply too close together. The fleet of Boeing 747s serving South America and West Africa has long since returned to Heathrow, and at Gatwick BA’s long-haul flying is now mainly to leisure destinations on smaller Boeing 777s.

When BA’s short-haul network then came under attack from no-frills carriers, the carrier slimmed its mainline Gatwick operation, and last November dealt another setback to Gatwick’s status when BA boss Willie Walsh declined an offer to buy its former franchisee GB Airways. It went instead to Easyjet, which replaced the Union Flag tail fins with a vulgar shade of orange.

GB’s sale signalled the end of a BA-branded presence on more than 20 Gatwick routes, including all its former Morocco services, but also meant Easyjet leapfrogged BA to become Gatwick’s biggest carrier. Andy Flower, Gatwick’s managing director, said: "We’ve seen some fairly significant changes that I don’t know that we fully expected. I think that pace will continue."

Open Skies

Most notable of those changes was the start of US-UK Open Skies in March, prompting a gold rush to Heathrow, which several US airlines were previously barred from.

The decision by American Airlines, one of Gatwick’s anchors, to quit the airport was a major blow. It moved its final Gatwick service to Heathrow in April after 26 years at the airport. American is Gatwick’s only US carrier to fully shut up shop, but Delta, Continental and Northwest have scaled down operations, either in terms of routes or aircraft size, with some transatlantic services now on narrow-bodied Boeing 757s.

Good news

So how can Gatwick move forward? In part, it can profit from Heathrow’s problems. Lack of capacity at London’s main hub and the rise of the budget carriers meant Gatwick passenger numbers reached a record 35 million last year. In these terms, at least, the airport has fully recovered from 2001, after which it took four years to regain its pre-9/11 total of 31 million.

The 35 million figure is all the more remarkable because, as Flower points out, Gatwick has only one runway. Indeed, it is the busiest single-runway airport in the world. He said: "People are fascinated by how we manage to get nearly 52 movements an hour. It is a unique operation."

Moreover, although the airport may be smarting from not having BA as its prime carrier, a comparison with the airline’s figures of four years ago tells a different story. Currently, BA offers 59 routes from Gatwick, three fewer than Easyjet but 16 more than in 2003/04. BA has 11 long-haul routes, two more than 2003/04 and 43 European services, an increase of 14. BA may no longer have the top spot, but it is still bigger than a few years ago, and unless Heathrow gets Terminal 6 and another runway, BA needs Gatwick to keep some destinations.

Another shot in the arm for Gatwick will be the return of BA’s New York service in October. The JFK flight, axed after 9/11, offers connections of sorts from nearly 20 BA destinations not served from Heathrow.

Gatwick can also take heart that this year’s reshuffles are probably the end of major changes for a while. Flower said: "We’re probably in better shape than some had forecast." He believes Gatwick will keep its main carriers, especially those from the US: "We have not seen a wholesale departure. The economics of flying between London and the US are going to be tested. What none of us yet know is what will happen to yields from Heathrow. I think it will take a year or two for the market to settle."

One key carrier is Delta, which serves Atlanta, the world’s busiest airport, as one of its three routes from Gatwick. Delta admits to searching for more Heathrow slots, but Glen Hauenstein, the airline’s network chief, said Delta would remain at Gatwick "forever". He said: "We are historically a Gatwick carrier, American Airlines is not. We have a lot of flexibility with the 757."

Another consolation is that Gatwick still has good links with the Middle East, the world’s fastest growing aviation hub. Dubai in particular is important, as it is now the second-biggest UK long-haul route after New York. Emirates alone offers around 70 useful connections from Dubai. Vic Sheppard, Emirates’ vice-president UK and Ireland, said: "Our commitment to Gatwick is as strong as ever."

There are other plus points. Gatwick has successfully attracted carriers from emerging markets like Russia. It has also gained the new breed of budget long-haul airlines like Zoom, although the demise of Oasis Hong Kong Airlines, which went into liquidation in April after only 18 months, was a setback.

Oasis planned to develop Gatwick as a "virtual hub", deriving feeder traffic from Gatwick’s budget short-haul airlines. On board surveys confirmed that one in five Oasis passengers from Gatwick had joined from another flight, while a partnership with Taiwan’s China Airlines offered through-ticketing to Taipei.

Oasis was defeated by spiralling oil prices and its use of Hong Kong’s expensive airport, but when or if fuel prices settle, there may be scope for another foreign carrier to explore the "virtual hub" concept, particularly one that has its own short-haul network in India or Asia-Pacific. Perhaps it will be this model that replaces BA’s former attempt.

Flower believes we will see a partnership between a budget long-haul carrier and one of Gatwick’s short-haul airlines. He said: "There will be others. I suspect these models will be tested. Easyjet is now in the North and South Terminals and they are 22-25 per cent of our business. They will almost certainly want to build additional capacity."

The future

There may be further good news for Flower. Despite a second runway being ruled out until 2019, Gatwick has permission to grow to 40 million passengers. Heathrow is full and Stansted, at 23.5 million, will reach its cap of 25 million this year, although the result of a public inquiry challenging this is pending. Luton, with 10 million passengers, has plenty of room but its runway length does not permit the full range of long-haul services. Its owners, Abertis, have backtracked on plans for a second runway and terminal in favour of a slow-burn approach over the next 20 years.

Having watched Stansted and Luton mushroom, Gatwick is now arguably in a better position than it was, although Flower concedes he faces a challenge: "We are seriously capacity-constrained by the runway. A lot of flights follow a similar arrival and departure pattern, so our job is to fill late morning and mid-afternoon slots."

To cope with this, there are plans to spend £874 million on improvements over the next five years, aiming to reduce numbers in the 50-year-old South Terminal and grow the North Terminal. If Network Rail agrees, a new transport interchange will be built where the current rail station is. But Flower warned: "Over the next three or four years, passengers will be walking through a building site."

Ownership

A key question about the airport’s future will come if – or more likely when – Gatwick’s owner BAA is forced to cede control of it. Years of claims that BAA is more interested in retail profits than providing a service to passengers, and more evident concerns that BAA has a near-monopoly on the UK’s busiest airports, have finally prompted a Competition Commission inquiry. It is highly likely to force BAA, which also owns Heathrow and Stansted among its seven UK airports, to sell off a specific asset – such as Gatwick. "We would do that," confirmed a spokeswoman for BAA.

The Competition Commission will give its verdict in August. Given last summer’s security queues and T5’s disastrous opening, BAA’s detractors have a good argument that it has not invested in the most basic infrastructure. BAA will want to keep Heathrow, its biggest jewel; so if it is forced to give up any asset it is odds-on to be its second prize.

The Commission has already strongly hinted at its thinking, stating that BAA’s ownership in the south-east "currently shows a lack of responsiveness to the interests of airlines and passengers that we would not expect to see in a business competing in a well-functioning market".

Paul Charles, Virgin Atlantic’s corporate communications director, said: "It is not mincing its words." Charles believes BAA may trump the Competition Commission by selling Gatwick before it is forced to. He said: "If we were BAA, we would not want to be forced into a fire-sale – but then again it is a pretty tough economy to be trying to sell something like that."

Even without such compulsion, a sale of Gatwick is still on the cards. BAA was bought two years ago by Spain’s Ferrovial, which amassed a £10 billion debt to finance the deal. It has been asset stripping since to pay this off, raising £1.6 billion from various sales, but more cash is needed.

One of BAA’s fiercest critics is Tim Jeans, managing director of Monarch, Gatwick’s third-biggest carrier in terms of passenger numbers. Jeans is angry that BAA wants to raise Gatwick passenger charges by 21 per cent and wants a change in the way Gatwick is developed. He said: "The charges are all based on capital expenditure that airlines allegedly want. Gatwick is not a BA hub anymore. It has a different service delivery because Easyjet is a different model. We didn’t ask for marble halls."

The Competition Commission appears sympathetic. Its report highlights a claim by Easyjet that "BAA had not been prepared to discuss its particular requirements, including options for separate development or branding of facilities at Gatwick".

Carriers argue that airlines all pay the same fees but that their needs vary according to whether they are Ryanair, Easyjet or Emirates. Gatwick’s Flower said: "It’s not our intention to build airline-specific facilities. That’s still our strategy. We want to operate so that everybody gets a very good level of service." However, he concedes this may change if Gatwick falls under new ownership. If it does, parts of it may look a good deal more cheap, cheerful and, perhaps, orange.

Someone who cannot wait is Stelios Haji-Ioannou, founder of Easyjet and no fan of BAA, which he calls "a lazy, inefficient private monopoly owned by a Spanish company". He said: "It’s a private company charging a lot of money and offering a very poor service. So the more we can shake them up and get them to do a better service, the better."

Conclusion

All this will play out over the next few months, but when it comes down to it, who owns Gatwick may not really matter that much to the travelling public, because Gatwick already has one great selling point – simply that it is not Heathrow.

Many savvy business travellers use Gatwick in preference to Heathrow when flight connections are not paramount, as the travel time from central London is often comparable and, despite being the world’s sixth-busiest airport, it is generally more pleasant and less crowded.

Simon Evans, chairman of the watchdog Air Transport Users Council, said: "I would use Gatwick by choice – the North Terminal is one of the best airport experiences to be had in this country." And he should know.

Gatwick may not be a hub anymore, but pick the right time of day and in the North Terminal, at least, it is less of a bun fight. Perhaps it’s time for a new slogan…

Flying from Gatwick

• Air Malta
• Air Namibia
• Azerbaijan Airlines
• Bmi
• BA
• Brussels Airlines
• Continental 
• Delta Air Lines
• Emirates
• Flybe
• KD Avia
• Malev
• Monarch Airlines
• Northwest Airlines
• Olympic Airways
• Oman Air
• Qatar Airways
• Rossiya
• SAS
• TAP Portugal
• Ukraine Airlines
• US Airways
• Virgin Atlantic

Low-cost

• Aer Lingus
• Atlas Blue
• Centralwings
• Clickair
• Easyjet
• Estonian Air
• Norwegian.no
• Ryanair
• Sterling
• Wizz Air
• XL
• Zoom

ADD A COMMENT »