Transport turbulence

Written by: David Craik Posted: 16/09/2019

BL64_TransportThe States of Guernsey is facing pressure from business to improve transport links, or become a support act to Jersey. So what needs to change?

2019 has been a good year for Guernsey Airport. Since January, it has recorded month after month of growth, culminating in the most recent Civil Aviation Authority figures demonstrating June passenger traffic numbers of 79,034, up 7% on the same time last year.  

However, it hasn’t always been like this. The growth has been particularly welcomed by the Institute of Directors (IoD), the Chamber of Commerce and the Guernsey International Business Association, which declared it the “first meaningful recovery in air traffic after a decade of decline”.

Between 2010 and 2018, Guernsey recorded a 9% drop in passenger numbers compared with a 24% rise in the Isle of Man and 15% in Jersey. 

This has hit Guernsey’s economy. A PwC analysis of 2017 tourism figures found that problems with connectivity contributed to the island missing its annual visitor growth target of 3%. In addition, the island’s business groups estimated last year that if the prevailing passenger trend continued, it could cut £100m per annum from Guernsey’s GDP by the mid 2020s.

“Businesses are locating themselves on Jersey rather than Guernsey,” says Tony Mancini, Chairman of the Guernsey International Business Association. 

“The two islands are fairly similar on measures such as taxation and regulation, so what determines where you are going to put your company? One is going to be transport, especially with the requirements for more business to be done on the islands as part of new economic substance laws. Jersey, with more airlines serving it, must be in a stronger position.”

Until recently, Guernsey had two main air carriers – the States of Guernsey-run airline Aurigny (flying to the UK, including Gatwick) and FlyBe franchise operator Blue Islands (also flying to the mainland, including London City). In comparison, Jersey is served by major operators such as British Airways and Easyjet. 

James Ede-Golightly, a committee member of the IoD in Guernsey, says: “In 2018, we were seeing a lot of frustration amongst our members about high fares, poor connections and a lack of choice. It was deterring business investment on Guernsey and proving to be a difficult place to reach for clients and prospective employees.”

The IoD identified air infrastructure as well as the lack of airlines as a major headwind. “If you look at the runway lengths of all UK airports with over half a million passengers a year, Guernsey has the shortest,” Ede-Golightly states. 

“The challenges of operating from Guernsey have contributed to the loss of major airlines over the last 20 years as they moved to larger aircraft. Moreover, in recent years a relatively restrictive closed skies licensing regime also limited the attraction of Guernsey to new operators and pressure on incumbent operators to offer competitive fares. Something had to change.”

Open skies

Last July, the States of Guernsey deregulated the industry, with all routes except the lifeline routes to Alderney and Gatwick being exempt from the need to hold a local air transport licence.

Both Aurigny and Blue Islands expressed concerns that ‘unfettered’ competition in ‘sub-scale markets’ would lead to less choice of routes and frequency of year-round services.

“One of the risks of open skies is that operators can cherry-pick the more profitable services and schedules, and if a licence is not dependent on a minimum service level, there is a potential loss of connectivity during off-peak times or slower, loss-making travel months, which business relies on,” says Rob Veron, Chief Executive of Blue Islands. 

“We believe there is a role for an authority to manage the sustainability of air and sea travel to and from the islands.”

Since open skies, there have been eight new routes added, including Blue Island flights to Southend, Logan Air flights to Edinburgh and a new FlyBe route to Heathrow. The latter – which initially covered the summer season and, if current discussions go well, will also cover winter – came with an £825,000 States subsidy.

“Southend has proven to be popular with business travellers because of its easy access to the City of London,” says Veron. 

The Heathrow route has also been praised by business. “The Heathrow plane is very full when it takes off in the afternoon and our members and their clients and customers have changed their meeting schedules around it,” says Mancini. “I used it to go to Luxembourg and found it much quicker than using Gatwick. That would take you all day.”

More needed

Ede-Golightly also welcomes the changes, but cautions that more needs to be done. “We need several years of this new competitive environment to create the confidence to build businesses and hotels and invest on the island as passenger numbers stabilise and grow.”

Evidence can be seen in the recent investment pledges of hotel groups Premier Inn and Travelodge to open in Guernsey. “It wouldn’t surprise me if they have looked at the willingness of public policy to support a recovery in passenger traffic,” says Ede-Golightly.

He believes Guernsey could also do more to attract the larger short-haul operators. For that to happen, the runway would need to be extended to 1,700 metres, as recommended in a PwC report into Guernsey’s air infrastructure last year.

“The Isle of Man is served by British Airways and Easyjet, as well as other operators; there is no reason to suggest that Guernsey is too small,” he says. “The government could fiscally incentivise the operator to run the right type of services and frequency to meet the island’s needs and stimulate the economy.”

Tim Robins, an airline pilot and former council member of the Guernsey Chamber of Commerce, agrees that runway investment is still badly needed.

“There is an argument that the turbo props used by Aurigny and Blue Islands are adequate for Guernsey demand, but I feel we are almost excluding ourselves from a group of airlines that may want to fly here,” he says.

Willing operators

Easyjet withdrew an air licence application to run a route to Guernsey in 2014. “This followed a thorough commercial and operational evaluation, taking account of the continued uncertainty surrounding the States’ sole operator policy,” says Easyjet UK Country Manager Ali Gayward. “We work closely with the airport should there be new opportunities in the future.”

In contrast, it has flown more than two million passengers from Jersey since launching services in 2008. “Our Jersey capacity increased by around 9% last summer and we see the demand quite equally for both leisure and business travellers,” Gayward says.

Robins contends that both Easyjet and British Airways have made it clear to the States of Guernsey that they would consider running routes if the runway were 1,700 metres long.

This is backed up by Charles Parkinson, President of the government’s Committee for Economic Development. “If they had a runway they could operate off, they would talk to us,” he says. “We are willing to invest and put public money behind other routes, including into continental Europe. We are open to proposals from other airlines.”

However, this spring the States decided not to go ahead with PwC’s recommendation that a cost-benefit analysis of building such a runway extension be carried out.

Deputy Lyndon Trott declared that such an extension could require “bulldozing parts of St Peters”. It would lead to a “huge and complex” planning inquiry and enormous investment – £700,000 to complete the analysis – on which there may never be a return.

Robins describes it as a huge missed opportunity. “The States decided by just one vote not to continue. Withholding funding on vital airport infrastructure while continuing to pump millions per annum into a loss-making States-owned airline is a strategy many business owners have started to question,” Robins says. 

“There are two distinct camps in government: the pro-business lobby, who believe an extended runway and more competition is a no-brainer, and those who don’t want anything to change. 

“The latter camp had to be pulled kicking and screaming into supporting open skies. Some of those deputies now accept reluctantly that it has done some good things, but they still don’t really see the need for it to challenge Aurigny’s role.”

BL64_Transport2Aurigny divide

As much as there is a divide on a runway, there is equally a divide over Aurigny. Is the airline an economic enabler or detractor? According to its 2018 annual report, it posted a £4.4m annual loss, down from £5.2m in 2017. It also cited investment in aircraft, technology to ensure safer landings in bad weather, and new routes such as Southampton after open skies.

Despite this, Robins, who sat on the 2017 Aurigny Review Panel, believes that it has failed. “It can’t drive demand,” he says. “I understand why the States feel they need an airline to protect the ownership of the island’s slots at Gatwick. Aurigny has an important role to play in serving the routes that other commercial operators couldn’t, or maybe wouldn’t, operate year-round. However, it requires a disciplined and rational approach to ownership by the States as shareholder.”

As an example of what a new mandate would look like, he mentions links from the island to international airports. “Aurigny needs to engage in code share partnerships with other airlines to ensure smoother connections for travellers. However, they have never pushed this adequately,” he says.

A reform of Aurigny is necessary, given the changing environment, agrees Ede-Golightly. “We need more competition to sustain a recovery in passenger numbers, but accelerating this exacerbates the existing challenges to Aurigny’s business model, and the island still relies on it for a large proportion of its air links,” he says. 

“Aurigny has said that its costs per passenger are around £20 higher per one-way flight than British Airways or Easyjet would be on an equivalent Guernsey-UK route. To simply cover the difference, Aurigny needs some combination of premium ticket pricing and government support. It is a complex problem but it needs to be resolved.”

Parkinson believes that Aurigny should be operating as a commercial airline and not require public subsidy. “There is a divide in the States over transport issues,” he confirms.

Veron says opposing factions need to come together. “Like all social and economic policy, we must look at this in the round, considering the island’s tourism product and economic diversification plan. It is not simply a question of how people travel, but why a visitor might travel here,” he says.

Progress might emerge from the Guernsey election in 2020, during which transport is set to be a key factor. The 2020 Association, a new political group, has pledged to endorse candidates who support the new runway and increasing the size of Guernsey’s harbour.

Mancini sums up the importance of improved transport links to business: “If we don’t sort it out, there is a danger that we become a service sector to Jersey.” 


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