The aviation sector needs to be protected


THE AVIATION SECTOR NEEDS TO BE PROTECTED

writes Andrew Dakers, Chief Executive, West London Business

With the UK’s hub airport on our doorstep, local businesses can count ourselves exceedingly lucky. 

With easy access to global markets, it has meant attracting employers – large and small – to our region. With thousands of jobs on offer, from retailers to researchers, it has seen generations of families working at the airport. And with a commitment to the next generation, young people have been able to use the airport as a launchpad for their careers.

Just a few months ago, the industry was thriving – planes were carrying goods from our local businesses to markets all over the world, thousands of people had secure jobs in an exciting growth sector and Heathrow was continuing preparations to expand and create new routes.

But this is now all under threat. For an industry reliant upon travel, trade and tourism, the pandemic has hit the aviation industry harder than most and it is no exaggeration to say that this is the biggest crisis it has ever faced.

Our local communities are dependent upon a flourishing Heathrow; the consequences of the pandemic have therefore been disastrous.  A recent study suggests as many as 200,000 employees have been furloughed and around 4,000 made redundant from the seven boroughs around the airport.

The devastating impact on the local economy shows just how important the airport is.

The speed at which Heathrow recovers is therefore critical – people’s livelihoods depend on it and we need the Government to do all it can to help.

Heathrow has done what it can – waiving parking fees for airlines and car parking for passengers, while working with businesses located within the terminals to review their terms to ensure they are able to survive the crisis. It is clear that those within the industry are supporting each other wherever possible. But these are just short term measures and they cannot go on indefinitely.

When revenues have all but disappeared, it is fixed costs – made up of business rates and employees – that are devastating the industry. Heathrow is the largest business rate payer in the UK with an annual bill of £120m. This makes sense when planes are flying and airports are bustling, but it is a crippling sum when the airport is facing a 90% drop on traffic. If you don’t reduce one, then little option is left but to reduce the other.

In Scotland and Northern Ireland, the devolved Governments have taken action and cut business rates for airports by 100% for the next 12 months. The Westminster Government should do the same, enabling airports across the UK avoiding having to burn through their cash reserves and take more difficult decisions to cut their costs further. They have already done the same with a number of other industries such as the retail, hospitality and leisure sectors.

Just like in Scotland and Northern Ireland, a 12 month rates waiver for the aviation industry would ease some of the burden in the short term. Going forward, demand is also unlikely to return to pre-pandemic levels for the next few years. Airports would therefore be helped if the valuation methodology the Government uses to calculate business rates would take into account the financial implications of the pandemic.

Without such decisions being made, it is inevitable that airports such as Heathrow will have to continue to take difficult decisions which affect people’s livelihoods. The airport is left with little choice when it is crippled by fixed costs and a lack of demand. 

Instead we need the airport, with the pressure of business rates reduced, to have the resources to retain jobs and rebuild momentum around its push to deliver sustainable aviation and contribute to a green economic recovery.

That is why we are urging the Government to use the powers it has to protect not just the sector – but businesses, jobs and livelihoods.