While much of Scotland’s economy is returning to something close to normal as restrictions lift, airports and airlines are still grappling with uncertainty about where people can fly to and what precautions must be taken when they land.
Edinburgh Airport, the nation’s busiest, recently reported that during the pandemic, its passenger numbers fell to the lowest levels since 1995.
It’s chief executive Gordon Dewar has been outspoken in his calls for more government support, a clearer roadmap to recovery and a speedier vaccine rollout to help the industry.
Insider spoke to him to find out what the airport and its partners are doing to survive.
Insider:Despite restrictions beginning to lift, airlines and airports are still having a hard time – what’s the current situation?
Dewar: We’re still pretty much in lockdown, operating at just over 5% of global demand – so we’re still really in the middle of the crisis.
When you get new and changing information for well over a year, we don’t know how we will recover and when people are likely to travel again, but we are still at pretty much at zero demand.
So, we open for a few hours of the day, we schedule, we have maybe 10 flights. Commercially it’s ruinous, we’re losing huge amounts of cash operating like this.
All we can hope for is that the green list is expanded as quickly as possible and we get back into something that is close to normality. We see a huge response whenever the opportunity arises, as there’s a massive pent up demand for travel.
Insider:Have continued cargo flights helped compensate for the lack of commercial air travel?
Dewar: The fundamental thing has been cost control, so they just don’t spend anything for the last year. We’ve cut our running costs by well over a half, which is actually the benchmark. So we’re ready to go again when the recovery does come.
Of course, things like cargo and Royal Mail have kept up. They’ve been pretty buoyant actually, so that’s helpful, but it’s always been a very small part of our business overall.
We are looking at further investment in cargo for the coming years, but we’ve got to build facilities and infrastructure. So it’s basically a dependable, small, revenue stream to grow. But it’s never going to be a major part of our business, because the passenger side of it dominates.
Insider:Coronavirus has clearly been the main problem, but what kind of an impact has Brexit had this year?
Dewar: We don’t really know. I think the whole Brexit thing has been hidden within the coronavirus so far.
There’s always a reasonable upside if you’re in an airport duty free environment, but at the same time the government banned tax free shopping for all international visitors, which actually goes farther than the airport and into the high streets of Edinburgh and London as well, so that kind of cancels each other out.
Insider:What has the support been like from the Scottish Government during the last year or so?
Dewar: The government has been more cautious around travel restrictions, has been less coordinated and has been hopeless in communication.
I’ve not had a single minister or senior civil servant at the airport since the start of this crisis, despite the fact that we’ve lost 2,000 jobs.
We’ve had to implement significant control changes, like hotel quarantine for example. The UK Government talks of implementing it and the Scottish Government implemented it with less than 48 hours notice, but with almost zero preparation.
It was an absolute car crash. Government doesn’t have a clue how to run anything. That’s the problem, they’ll write a policy that they don’t really understand the implications of and expect it to get implemented in five minutes notice.
Insider:If there is another lockdown, how much will that affect Edinburgh Airport?
Dewar: It would be catastrophic. With every month that goes by we’re losing huge amounts of cash.
Thankfully we’re a long-term asset backed by our large infrastructure company, GIP. We have got cash that gets through to the end of 2023 with no revenue.
We’re not failing but there were several thousand people working at the airport and only around 10% of them work for us. The rest provide essential facilities for the airlines and passengers that don’t work for us. So how many of these companies will survive or will fail is a really the bigger question.
Insider:How long will it take to get back to the level of job numbers that you had before the pandemic?
Dewar: If you assume that the jobs come back with the passengers, which is probably a pretty decent assumption, then we’re forecasting to get back to 2019 levels at the earliest 2023 and possibly 2024.
I think we’ll quickly see a return to two thirds to three quarters of what it was, because a lot of that is pretty essential travel. We confidently predict we’ll get back into cash positive next year, because cash positive for us is only about 50% recovery.
What I do know is that the recovery across the world will be competitive. And what I mean by that is we’ll be competing not only with other UK airports, but all European airports to win the reduced capacity that’s there.
Edinburgh has traditionally been incredibly strong, so unless something fundamental happens, then we should be in a strong place to outperform the market.
Insider: How long do you think we’ll have the traffic lights system?
Dewar: The biggest problem I’ve got is that we talk about the green list as though that’s the solution, but those countries still requires a test on arrival.
When you get back to the UK, quite often the receiving country has asked you for something else as well, whether it’s a passport or a test to go there, so that’s additional cost and will continue to be a reduction of demand until we get to what I call the ‘white list’, which is back to where we were at 2019 with no constraints.
Insider:Do you think pandemic has changed the travel industry for good?
Dewar: It’s hard to say; we’ve never faced anything like this in our lifetimes. We think different sectors of the market will return in different ways.
I think outbounds you know, Scots going on the holidays, is probably one of the fastest, with recovery like coiled springs in the summer.
But then you get into how welcoming will Scotland and Britain be to international visitors? Well, not very at the moment.
It’s a topic the government doesn’t seem to get. They consistently forget that most of the jobs in Scotland are in hospitality, its the biggest employer in the whole economy.
Will there be hotel beds for people to book next year? I don’t know. And it won’t be the same number there was in 2019, because businesses are going bust right now.
Insider:How is Edinburgh Airport investing for the future?
Dewar: We were planning on spending about £70m a year during 2021/22. We spent around £20m last year just finishing off all the projects that were in flight and we’ll spend about £10m this year and I suspect we’ll spend another £10m again next year.
We will clearly not be at capacity for a while. We have an airport that’s capable of dealing with about 80 million passengers and at the moment we’ve got less than four million. Even in 2019 we only had 15 million. So we’ve always had a capacity issue that would be maybe half of the overall investment in the year for new capacity.
We’re looking at a solar farm, because we want to be a lot more sustainable around our energy provision. So we’re not we’re not sitting around doing nothing. But clearly, we’ve got to justify the spend based on giving us a real meaningful return, despite having much lower passenger numbers.
Insider:Are there any plans to expand the flight routes or update the airspace?
Dewar: We’ve been looking at updating airspace for a number of years now, which is obviously quite a contentious issue for many.
What we can’t avoid is modernisation. The existing airspace uses old technology of beacons, which will be phased out in the coming years, and we’ll have to go on to the equivalent of sat nav for planes.
Even if the routes looked almost identical, we’d have to change them under legislation so that we can use new modern aviation technology.
We’ll be looking to improve a number of things, making sure that we’re flying in places that minimises noise and reducing fuel burn for environmental reasons.
Insider:Is the airport still considering adding a new runway?
Dewar: We’ve got a projection for a second runway on the north side, which has been in the planning process for decades.
Even before Covid, we thought we wouldn’t need it probably until the 2040s. But there’s clearly an awful lot more we can do on that single runway before we run out of capacity.
By 2040 there will be electric and hydrogen planes flying about. You might need to do different designs of airports to accommodate different technologies. Maybe they’ll be slower to get off the ground or they’ll be bigger; I don’t know.
Insider:What sort of other new technologies are you investing in?
Dewar: I think the whole customer experience is clearly accelerating to digital, even more so now people want less physical contact.
We can foresee an entirely digital journey where you never need to get your document from your pocket and any paper out. It will come in different stages and depends on what individual airlines want to do with their technology and so on.
Insider:What do you think needs to be done to ensure a smooth recovery for the airlines and airports?
Dewar: The government must create the conditions for recovery, not more handouts.
Those that do best at this will be the ones that offer trading opportunities for those that have survived. So let’s drop for a year air passenger duty (APD), which is the highest taxation in Europe, for a year. That would encourage airlines to come back to Scotland rather than to Germany or France.
We’ve got no new indication of whether business rates will come back next year or not. I know there’s a lot of uncertainty, but some sort of indication would be helpful.
I’d even be supportive of that being tied to some of the policy agenda. So you can have access to these relaxations on taxation, if you commit to halving your carbon footprint in five years or whatever. I can see a perfectly legitimate aspects of government in return for that, but that conversation isn’t even happening.
Don’t miss the latest headlines with our twice-daily newsletter – sign up here for free.