As Howard Davies, chairman of the inquiry, prepares to give his first speech on the expansion of our airports, he may find himself already boxed in
As the reality dawned last week that Britain’s most powerful force in aviation, Heathrow, had convinced regulators it should squeeze its customers a little more, the irate boss of British Airways owner IAG pondered the unthinkable. Could the national carrier decamp elsewhere?
But Willie Walsh’s fury was stoked by his impotence. In this “abusive monopoly” there was, he conceded, no alternative in the UK – yet.
On Monday Sir Howard Davies, the man appointed a year ago by David Cameron to deflect the toxic political question of expanding London’s airports, gives his first public speech. With more than two months left until the airports commission issues its interim report, on a carefully planned timetable stretching past the next general election, the chairman may not wish to give too much away. But the audience is unlikely to be satisfied without a clear indication of Davies’s thinking.
To Davies’s credit, the commission – widely regarded as a device to kick aviation’s thorniest issue into the long grass – has kept the debate ticking over. A series of pertinent questions has forced the industry to justify its assumptions. Can we trust forecasts for growth? Is Britain lacking connections? Do some airports have a special hub status? When the commission’s work is done, it will doubtless leave a powerful body of evidence in its report.
And then, according to Walsh, that report will gather dust in Whitehall. The politicians who struggle to sell HS2 to the nation will have little appetite to launch another unpopular battle. But the rail line (so far) has cross-party backing. The Conservatives’ decision in 2010 to scrap the planned Heathrow third runway now looks ever more an opportunistic electoral pledge, when the party’s environmental cloak has been discarded.
The first sign of how seriously the coalition intends to take the commission’s final report will come in December, when Davies sets out proposals for short-term measures to boost aviation capacity in the south-east. Early noises indicate no rapid action is anticipated. That suggests that either Davies does not believe capacity is a problem, or the only remedies proposed – such as removing limitations on runway use at Heathrow – are beyond the pale.
Or that the government was, is, and will be dodging the question.
Nonetheless, the passage of time does flush out some interesting developments in people’s thinking. Some of the backbench Tory MPs who cried aloud for Heathrow expansion have thought twice since new runway and flight path proposals were published by Heathrow’s owner.
And London mayor Boris Johnson has started to sound a little more subdued about his Thames estuary plans, as no one – bar paid lieutenants – echoes his idea for a brand new hub.
BA’s threat to leave Heathrow sound more like the barbs of a wounded partner than a real statement of intent. But only BA’s willingness to move can really make a new hub more attractive and more realistic. If Heathrow expands now, the airport’s dominant position will be entrenched for good. That is not a prospect which entices its airline customers, politicians or local residents.
Davies must first be convinced that bigger airports and more flights will bring benefits that outweigh the ill effects. Then the central argument is whether a successful aviation sector depends on the existence of one central hub airport, with enough transfer passengers to make ever more long-haul routes possible. Davies has a chance to recommend that an alternative be built. But in a country where recent history is not on the side of such upheaval, he might well conclude that, like BA, he has nowhere to go but Heathrow.
3 a crowd in telecoms
The map of Europe’s mobile networks is slowly being redrawn. Country by country, the number of big operators is falling from four to three and, if mergers in Ireland and Germany are given the green light, Britain could be next.
Speaking off the record last week, one European network boss said small member states would shortly have two operators, and the bigger nations “two plus one” – a couple of big players and one challenger network.
There is every sign that the European competition commissioner, Joaquín Almunia, believes three is company and four may be too much of a crowd to encourage investment in the 4G high-speed mobile data networks that are already carpeting America.
Speaking to reporters in Lithuania last week, Almunia said he had “no concerns” about Telefónica’s proposed takeover of E-Plus, a move that would reduce the German market to three competitors. In Ireland, Hutchison Whampoa’s 3 network wants to buy O2′s local business, a deal that would also leave a choice of three.
Brussels wants Europe to look more like China and America – a single economic region with a few large players. America has four big mobile networks for a population of 313 million. Europe has 500 million inhabitants and maybe 100 networks (although many of them are owned by a handful of large companies).
A once hot industry has been chilled by recession, regulated cuts on call prices, and the internet’s ability to offer for free the calls and written messages that once cost real money. Our calculations show the UK’s four networks earned less than £19.5bn in 2012, £680m less than the year before.
Vodafone, while in third place, is newly enriched by its Verizon deal and in no mood to sell up in its home market. It wants to spend its money building a 4G network that matches or betters that already being rolled out by the UK’s largest operator, EE.
The most likely candidates for a merger are 3 and O2. But for years 3 has argued the UK should be a four-player or even five-player market, saying its presence keeps rivals’ prices in check. It argued vociferously for special treatment in the recent government spectrum auction. A merger now would involve an almighty public U-turn.
Queen’s bank could be next sell-off
The City still awaits the outcome of the Treasury’s review into whether to split up Royal Bank of Scotland into good and bad banks.
The chancellor, George Osborne, knows that the investors who own the 19% of RBS shares that are not in the hands of the taxpayers will take some convincing about a carve-up they would have been happy to see five years ago, when the bailout was taking place.
As it is, investors have watched assets such as the commodities trading arm Sempra and the money transmission business WorldPay sold under instruction from the EU as the price of £45bn of state aid. The spinoff of 314 RBS branches to a consortium involving the Church of England is also at Brussels’s behest. Ditto Direct Line.
That is not to say that there is nothing left for new boss Ross McEwan to sell off. The Queen’s bank, Coutts, could be next, some believe – if the price is right.
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