THE POTENTIAL CONTRIBUTION OF MANSTON INTERNATIONAL AIRPORT IN DELIVERING THE ECONOMIC STRATEGY FOR THANET To: By: Classification:

Ward: Airport Working Party 19 February 2013 Rob Hetherington, Economic & Regeneration Manager Unrestricted All

Summary:

Airports can make a significant contribution to local employment and economic growth. This papers sets out the theoretical basis for this and considers the potential for Manston Airport to contribute to delivering economic growth in Thanet.

For Decision

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Introduction and Background Although there has been an airstrip of some form at Manston for some considerable time it has only operated as a commercial civil airport since 1989. Over this time its commercial success has been somewhat mixed. Despite early policy that supported civil operations from the airport it has struggled to establish itself. The 2003 White paper on The Future of Air Transport" states that Manston "could play a valuable role in meeting local demand and could contribute to regional economic development." The government would support development in principle, "subject to relevant environmental considerations. This policy support prompted investment and development which culminated in the budget airline Eujet operating scheduled flights. Unfortunately these flights ceased in 2005 when Eujet ran into financial difficulties. Shortly after this (August 2006) the airport was sold to current owners Infratil. Under Infratils ownership and against a backdrop of a global recession Manston has established steady freight business and has had intermitted passenger flights. With the global economy forecast to struggle for some time and Infratil looking to divest themselves of airport operations there is question over the contribution Manston could make to the growth aspirations of Thanet and the wider East Kent area. The question is given further weight as national government looks to define its Aviation Policy Framework. Manston Airport is of regional significance. Whilst this is not currently at full capacity, data from 2011 indicates 37,000 passengers per annum and 27,000 tonnes of freight per annum. The Economic potential of Airports Airports are recognised as having significant potential to contribute to the economic and social regeneration of their surrounding areas. These impacts go beyond the direct employment linked to the airports operations. Airports can provide essential infrastructure to support economic growth. In broad

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terms the economic impacts of an airport can be grouped under four headings: Direct this is the employment that is related to the operations of the airport. Broadly speaking this would be the people employed directly on site linked to airport operations Indirect employment generated in the supply chains of the airport. These can be the wider range of goods and service required by a functioning airport (and the airlines that operate from them). Induced this is the impact of additional spending in a local economy due to the incomes earned by those directly or indirectly employed by the airport. Catalytic this is less tangible impact linked to improving business productivity, attracting investment and improving the business friendly image and reputation of an area. Increasingly access to global markets is seen as critical to businesses making location decisions. The extent of these economic opportunities depends on the success of the airport how many passengers or how much freight they move. The catalytic impacts can vary depending on the nature of the surrounding economy. Some industries are more air intensive than others - their markets or products are more reliant on air travel. For this reason many successful airports also have nearby business parks. Estimating the potential impact of an airport on a local economy is relatively straight forward. Airport operations are not unique, indeed international studies have found a great deal of consistency in the relationship between the size of an airport and the economic impacts at least as far as direct employment is concerned. On average around 950 on site jobs are support for every 1million workload units (every passengers or 0.1tonne cargo). Analysis of supply chain multipliers as a result of passenger growth can assist in understanding the wider benefit of a potential uplift in employment at the airport. A figure of 1,000 jobs is used to demonstrate how an increase or decrease in employment at the airport would affect the wider economy. The indirect (supply chain) impact of this job growth on Thanet is 1.05. So for every 1000 jobs created at Manston Airport, an additional 50 jobs will be created in Thanet through the industry supply chain. The induced (consumer effect) impact on Thanet could be as much as 1.2 so for every 1000 jobs created at Manston Airport, an additional 200 jobs will be created in Thanet based on additional income and spending. Delivering the Economic Strategy Thanets Draft Strategy for economic growth identifies two sectors for growth potential within the Thanet District, alongside a range of other measures: skills, business base growth and investing in assets. The sectors highlighted in the Draft Strategy are: 3.2 The Heritage, Culture and Visitor Economy: to rebuild our reputation as the UKs favourite visitor destination. Green Economy: to lead the transition towards a green economy, delivering sustainable growth and employment.

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Nonsense!

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Furthermore, the East Kent as a whole has also acknowledged both sectors as growth potential sectors. The Draft East Kent Economic Review identifies low carbon goods and services, renewable energy and tourism alongside a

number of other sectors: life sciences; higher education; transport and logistics; creative and media industries; and food production as sectors in which East Kent already has a strong presence or has the potential to develop. 3.3 A successful airport would help grow the specific sectors identified in the Draft Economic Strategy by opening up markets through increasing accessibility. But there are two additional areas where the airport can contribute. Firstly it is an economic entity in its own right: growth of activity and employment at the airport will contribute to the growth of the Thanet economy. But, equally as importantly, a successful airport will have catalytic impacts on the ability of the area to attract significant new investment. Potential for growth at the Airport A successful airport could be a significant contributor to economic growth in Thanet as long as environmental impacts did not reduce investment and economic activity in other areas. There is optimism that the airport can achieved the balanced growth that will have a positive impact on the Thanet economy. KLM Royal Dutch Airlines is due to commence twice daily flights from Manston airport to Amsterdam in April 2013 and are currently seeking to fill over 30 jobs. Not only does directly increase the operations at Manston with the associated direct jobs it also raises the profile of the airport and the strategic routes opened up from Amsterdam contribute to the global accessibility of Manston and could deliver the catalytic effects of making the district attractive to inward investment. The short-hp flights to Amsterdam increase the attractiveness of Manston for outward movements opening up global destinations from Manston. It also establishes Manston (and Thanet) as a global business destination. In addition access routes into Thanet have improved dramatically in recent years. The completion of the East Kent Access Road (A299) means that Manston is now accessible directly from the national trunk road network. The airport is less then 60minutes drive from the M25 London Orbital which significantly widens the catchment for the airport. Similarly, the introduction of High Speed Rail Links have improved access. Although the train services do not directly serve the airport Ramsgate and Broadstairs stations are not that far. There do however remain a number of challenges to growth which can make it difficult to predict potential. The continued challenging economy clearly will have an impact on growth opportunities, with airlines reluctant to invest. Connectivity remains an issue given the peripheral nature of Thanet and the close proximity to Gatwick Airport. There exists a negative perception of the area which may act as a deterrent to investors. In addition, the Coalition Governments aviation policy will impact on the airport and indeed airports across the UK. The Master Plan for Manston Airport sets out ambitious growth targets for both passenger and cargo volumes. Judging the validity of these targets is not easy. There is no natural level of traffic for an individual airport. Traffic levels will depend on how successful the airport has been attracting airlines that will serve the wider catchment well. Outbound traffic demand is usually a function of population size and wealth but other factors will also influence traffic demand: geographical location (isolated locations have greater requirement for air travel);

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How about comparing forecast with actual figures?

migration links (e.g. population with larger number of migrant workers or second generation immigrants often undertake substantial visiting friends and relatives travel); business mix (some industry sectors such as financial services generate particularly high levels of air traffic); and corporate structures of local employers e.g. multi-national companies often have high travel requirements.

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Low fare airlines can pull in traffic from a wide area some passengers are willing to use less convenient airports if it saves money. Nevertheless, the strength of the immediate catchment will have a significant influence on traffic levels, even if it is not the only influencing factor at play. Indirect supply side issues include airport infrastructure, cost of using an airport (for both airlines and passengers), surface access to airport etc. These factors clearly contribute to airline decision making on whether to serve an individual airport and if so, which routes. The success of any one airport will also depend on the level of competition from other airports. In most cases, there is a significant degree of overlap in the catchment areas of UK airports. In particular, larger airports are generally successful at capturing a significant share of local traffic demand from nearby smaller airports due to superior range of routes and higher service frequency. Airports also compete with surface access modes for journeys that can be completed by surface modes in 2.5 5 hours (typically fixed wing air services are not viable where surface journey times are below two and a half hours). A review of other Airports of a similar size and either in close proximity to larger centres or in a more peripheral location includes Newquay Cornwall Airport, which reported 216,249 passengers in 2011 and Durham Tees Valley Airport 192,410. If we therefore assume growth potential for Manston is in line with these less optimistic benchmarks of 200,000 passengers over the next five to eight years (note this still represents a five-fold growth in passenger numbers from the current level), this would equate to an additional 200 direct jobs, 10 indirect jobs and 40 induced jobs (including indirect figures) taking the potential total over the next 5-8 years to 240 jobs over the five to eight year period. But even at this size Manston would be one of the largest businesses in Thanet and make a significant contribution to the economic growth of the area. Most comparator airports have restriction on night time flying: for example Bournemouth does not allow flying between 11pm and 6am and Norwich has restrictions between 11.30pm and 6am. It is not immediately apparent that removal of night time restrictions would have a positive impact on the economic development of Thanet. Corporate Implications Corporate

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5.1.1 The role of working parties is fundamental to the work of the Overview and Scrutiny Panel. The working parties carry out more in-depth scrutiny which informs the decisions made by the Overview and Scrutiny Panel. 5.2 Legal 5.2.1 There are no direct legal implications arising from this report.

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Equity and Equality

5.3.1 There are no equity and equalities implications arising directly from this report. 5.4 Financial 5.4.1 There are no direct financial implications arising from this report, although as the report says, any growth of business at Manston airport would have a positive impact on the economic growth of the district. 6.0 6.1 7.0 7.1 Recommendations Members views are sought. Decision making process The Airport Working Party makes recommendations to the Overview and Scrutiny Panel. Rob Hetherington, Economic & Regeneration Manager, ext 7153 Madeline Homer, Director of Community Services, ext 7123

Contact Officer: Reporting to: Annex List None

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Background Papers Title None Where to Access Document N/A

Corporate Consultation Undertaken Finance Legal Sarah Martin, Financial Services Manager Harvey Patterson, Corporate & Regulatory Services Manager