BAA/6/B
Case Reference No: 2032278
StanstedAirport Generation 1 Inquiry
PROOF OF EVIDENCE SUMMARY
BY: STAN MAIDEN
Traffic Forecasts
April 2007
Stansted Generation 1 – Traffic Forecasts
Summary
1.Introduction and Scope of Evidence
1.1My name is Stan Maiden and I am Research Director of BAA Ltd, a post I have held for 19 years.
1.2The core of my evidence explains the basis of the forecast advice upon which BAA has framed its case for lifting the annual limit of 25 million passengers (condition MPPA1) and 241,000 air transport movement (condition ATM1) at Stansted.
1.3It concludes with a reference to the most recent review of forecasts for Stansted and the implications for the most likely date that 35 mppa might be reached.
1.4In its forecasting evidence BAA has examined two main cases, i.e. the 25 mppa case and the 35 mppa case, but it has also conducted sensitivity tests which consider the separate impacts of a fleet mix containing a higher proportion of larger aircraft, the annual passenger total reaching 40 mppa and different assumptions concerning the ground origins of air passengers.
2.Statement of Common Ground
2.1While no Statement of Common Ground between BAA and Uttlesford DC existed at the time this Proof of Evidence was prepared, it is BAA’s belief that certain public comments made by both UDC’s advisors on traffic forecasts and its own planning officers indicate a broad measure of agreement.
2.2In essence BAA considers that UDC have accepted its forecasts as providing a reasonably sound basis on which to assess the various environmental impacts of the 35 mppa case. Even where its advisors pointed to specific differences of view (over the proportion of long haul passengers and the ground origins of passengers) they also described the differences as being insubstantial.
2.3BAA has, nevertheless, prepared sensitivity tests which take both these different viewpoints into account.
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3.Past Growth in Passengers at South-East Airports
3.1Although the pattern of growth has been uneven, with periods of rapid increases interspersed with events such as major oil price inflation, regional conflicts and terrorism, air traffic in the South East has grown in 32 out of the 36 years since 1970.
3.2Within the compound average growth of 5.2% p.a. Stansted has significantly increased its share of the total using the currently three largest airports, from 1.8% in 1990 to 19% by 2006.
3.3The implication of Stansted being limited to 25 mppa by condition MPPA1 is that its share will gradually recede, to about 17% by 2014/15.
4.The Forecast Approach
4.1In its medium and long term forecasting work, that is when looking at periods more than 5 years ahead, BAA relies heavily on a methodology which uses econometric modelling techniques to predict air passenger demand and contrasts this with any foreseen constraints on airport capacity to obtain a predicted level of throughput. Where it is considering one or more airports which may be competing for passengers within a given system or region then it also has to consider the process of passenger choice between airports.
4.2In both the use of econometric models and a top-down system approach BAA’s forecasting methodology is similar to that used over many years by bodies such as the DfT and CAA.
5.Forecasts of Unconstrained Demand
5.1Using BAA’s knowledge of the various market segments which make up the observed base level of passengers, it applies to each of the segments a series of economic drivers and other factors which influence demand. These include growth in UK and World GDP, the prospects for international trade, future trends in air fares, the degree of market maturity, the effects of rail competition and development of air services in the regions.
5.2Informed by historic relationships and expectations about future trends, BAA takes a view on the sensitivity of each passenger segment to changes in the main drivers influencing demand for air travel over the forecast period.
6.Airport Capacity
6.1The key components of airport capacity are: runway capacity, apron capacity and terminal capacity, with any single airport’s capacity governed by the most limiting of these components. Surface access and airspace capacities are also to be considered but seldom found to be the critical determinant of overall capacity.
6.2In the case of Stansted in 2014/15 BAA judges that its single runway would be the most limiting physical element of capacity. Calculating this capacity is done in two stages. The first establishes the maximum reasonable number of aircraft movements carrying passengers which might be achieved annually, having regard to the number that can safely be handled at peak hours and the extent to which the theoretical annual capacity can realistically be utilised.
6.3The second stage examines the likely mix of aircraft types to serve the airport, and hence the number of seats offered, for each of the key markets. Applying load factor assumptions to each of the seat capacities generated in this way produces a forecast of the implied passenger capacity equivalent of the previously projected aircraft movement total.
7.0Distribution of Demand
7.1The next step in BAA’s approach combines the system demand forecasts with the capacity assessments outlined above. Forecast demand is distributed between airports according to their relative attractiveness to passengers, taking account of the capacity constraints of each airport and thus of the potential for destination coverage and flight frequency.
7.2To enable demand to be split between airports, BAA establishes the catchment area for Heathrow and Stansted using information provided by the CAA’s Origin and Destination surveys. The demand within each catchment is distributed by specifying the relative attractiveness of each airport. The process is carried out separately for UK Business, UK Leisure, Foreign Business and Foreign Leisure passengers.
7.3Comparing the level of demand for each airport with the assessed capacity reveals whether the demand can be accommodated. Any that cannot be accommodated at its ‘first choice’ airport is then reallocated to an alternative airport, or lost from system altogether.
8.Developing the 25 mppa Case
8.1The 25 mppa case assumes a continuation of condition MPPA1 which currently restricts the airport to a passenger throughput of 25 mppa. The analysis therefore concentrated on the expected evolution of traffic characteristics over the 6 – 7 year period that traffic throughput (in terms of annual passengers) is forced to stagnate.
8.2This implies a set of circumstances so far not experienced at airports elsewhere. As a result BAA’s approach examined the drivers influencing likely airline responses to the situation and the impact that this would have on the passenger make up as well as the number and mix of aircraft to be deployed. It also considered how it would respond as a business to the maintenance of a 25 mppa limit.
8.3The outcome was a series of projections which entailed a less than pro-rata reduction in aircraft movements as compared with the 35 mppa case, an increase in the proportion of business traffic and a slower growth in long haul passengers.
9.Aircraft Movement Forecasts
9.1Forecasts of passenger air transport movements, which comprise more than 80% of all aircraft movements at Stansted, are derived following the forecasts of passenger throughput by market segment. The process entails making judgements about the future mix of aircraft types in each segment, taking into account any available intelligence on operator and aircraft manufacturer intentions, and the anticipated load factors in each market segment.
9.2The key differences between the 25 mppa and 35 mppa cases in terms of passenger ATMs are that the 35 mppa scenario would provide greater opportunity and incentive for airlines to develop long haul services while the 25 mppa case would enable airlines to extract a higher unit price from selling the more limited number of seats. It would also offer them less incentive to increase the number of passengers per movement either through the use of large aircraft or the attainment of higher load factors.
10.Air Cargo Forecasts
10.1The overall demand for cargo at Stansted is expected to be the same, regardless of the annual passenger limit, and to be substantially influenced by the diminishing opportunity for growth in airfreight at Heathrow and Gatwick.
10.2However, the distribution of cargo between whole plane cargo movements and bellyhold capacity is expected to vary, with greater use of the latter in the 35 mppa case because of the expected introduction of more long haul passenger services.
11.Latest Forecasts
11.1In the normal course of events BAA regularly updates its forecasts to reflect changing circumstances. Its most recent review, undertaken in early 2007, has produced a reduction in the predicted rate of demand growth. This has been largely caused by greater pessimism about the future trend of oil prices and the adoption of assumptions concerning the level of environmental taxes which are more restrictive of traffic growth than those previously used.
11.2As a result BAA now expects that, assuming the planning conditions are lifted, Stansted will reach the figure of 35 mppa some 12 – 18 months later than projected at the time the ES was produced.
12.Conclusion
Although BAA has recently reviewed and slightly revised down its forecast for Stansted, it remains confident that the forecasts presented in Volume 16 of the ES remain its best view of the traffic characteristics associated with a 35 mppa or 25 mppa scenario at around 2015.
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