North West views: Manchester Airport MD Ken O’Toole on the Northern Powerhouse

With the government’s vision of creating a Northern Powerhouse commanding the attention of the North West business community, particularly in the wake of the UK Northern Powerhouse International Conference & Exhibition, at Bdaily we’ve decided to run a new series of interviews to establish just what the region’s business leaders think of the plans.

Is the North West set for an overhaul in the coming years – one to turn the region into a true example of economic empowerment through business growth, job creation and prosperity?

Today we caught up with Ken O’Toole, the managing director at Manchester Airport.

What does the Northern Powerhouse mean to you?

For us at Manchester Airport, the Northern Powerhouse is about rebalancing the UK economy and creating a strong and vibrant North that is competitive on the global stage. It is about ensuring the North enjoys maximum benefit from its key assets, including Manchester Airport.

Are there signs of the Northern Powerhouse starting to bear fruit in the region?

There can be no denying some good progress has been made since George Osborne first gave his Northern Powerhouse speech 18 months ago.

There is increased recognition around the world that the North is both an attractive place to visit as a tourist and invest in or do business with.

There was no better illustration of that point than when we welcomed His Excellency President Xi Jinping of China to Manchester Airport last October as part of his state visit to the UK. For 24 hours, the eyes of the world were on Manchester and, as a result, the wider North.

The formation of Transport for the North is another positive step and we have been encouraged by their intention to prioritise connectivity between the North’s major cities and Manchester Airport through Northern Powerhouse Rail.

It was also pleasing to see that in last month’s budget, there was a commitment made to HS3 between Manchester and Leeds following the National Infrastructure Commission’s recommendations. It is an important first step towards reducing journey times across the North.

We are also positive about the devolution of powers from Whitehall to the Greater Manchester Combined Authority.

Has the government done enough to convince you of its commitment to Osborne’s vision?

Whilst progress has been made, we believe the government can and should be doing more to make it a reality.

In our own sector, it is widely accepted, including by government, that air transport connectivity and in particular, long-haul connectivity to high-growth markets, is key to this country’s long-term prospects.

It is central to attracting inward investment, tourism and stimulating trade - both imports and exports.

Indeed, it is estimated our new Beijing route alone will deliver an economic impact of £250m to the UK economy, with the bulk of that benefiting the North.

But it feels that too much of the debate surrounding aviation focusses on the congested South East and whether Heathrow or Gatwick should get a new runway.

When that decision is eventually taken, it will still take up to 20 years before a new runway can be built and so if the UK truly wants to attract new long-haul services, it needs to create an environment that makes airports with spare capacity – like Manchester – as attractive as possible in the eyes of airlines.

One of the key ways it can do this is ensuring UK aviation taxation policy does not make UK airports uncompetitive against our European and world peers, peers that we compete with daily for the limited aircraft that airlines have to deploy.

One of the main reasons for this is the tax that passengers have to pay on their air fares known as air passenger duty.

This tax adds £142 to a long-haul business class ticket and these are the highest levels of aviation taxes in Europe - more than double the rate seen in Germany.

Of course, this drives up costs for businesses and, as a result, can be a barrier to trade.

But another key point surrounding APD is that airlines - particularly long-haul airlines - from the US, from Asia, from the Middle East have a wide range of alternative European destinations they can serve instead of the UK where no equivalent taxes exist.

And the record of the last 10 years shows that UK airports have lost out, because APD makes new services to UK airports less attractive.

Short of abolishing APD, which we appreciate is unrealistic, there’s an opportunity to offer airlines starting new long-haul services an exemption from APD for a period of time, something we’ve referred to as an APD holiday.

Put simply, as this relates to new long-haul services the UK doesn’t currently have, the Exchequer would not see its tax take from APD reduced. It can’t lose out on revenues it doesn’t already collect.

On the contrary, such a measure would provide a huge boost to the competitiveness of UK airports seeking to grow long-haul services, and as a result, strengthen global connections right across the country.

In the long run, the Exchequer would benefit not only from more air services paying APD, but also from the more productive economy that it would help create.

Transport improvement is intrinsic to the Northern Powerhouse. Do you believe that spending billions on infrastructure will improve Northern productivity?

Transport is the bedrock of any economy - national or regional.

We are investing in our future with a £1bn project to transform Manchester Airport and we will continue to work hard to secure new long-haul services for the North, as illustrated by the announcement Virgin Atlantic will fly directly to San Francisco and Boston from March next year.

Add to that the launch of a direct service to Beijing with Hainan Airlines from June this year and new routes to Los Angeles and Boston with Thomas Cook and you can see how we are doing our bit to help Northern businesses grow by accessing global markets.

But unless access between the major Northern towns and cities and assets like Manchester Airport is also improved, the North will not fully benefit from our growth.

To draw a comparison, Gatwick Airport sits 30 miles from London and it takes 30 minutes to get there by train. Currently, Manchester is the only city you can get to within 30 minutes of Manchester Airport, which is ludicrous given how close it is to many of the great cities of the North.

But with that sort of journey time to Leeds, Liverpool and Sheffield, there would be three times as many people able to access Manchester Airport from their front door within two hours as currently do.

And the bigger our catchment area, the more attractive we are to airlines looking to launch new services and, in turn, the better connected to the world the North is.

Are there any other areas which you believe money should be spent on, ahead of transport?

We have long been of the opinion that making it easier to get around the North is key to driving up productivity and unlocking the potential of the ‘Northern Powerhouse.’

Currently, around 90% of people in Northern Cities live and work in the same city region; if transport links between these cities are improved it will act as an enabler for other projects across the North and provide a boost to the Northern economy.

While Manchester is a key city in the government’s vision, do you think enough is being done to cater for other important North West towns and cities?

We very much see ourselves as the global gateway for North as opposed to just Manchester. That is why we’re so passionate about improving access to the airport for all Northern cities.

As I’ve touched on previously, we’re spending £1bn on our facilities to ensure we can provide the world class facilities and gateway the North provides. We would like to see the government doing similar across the North of England.

In the time the South East has seen the development of the Olympic Village, Channel Tunnel Crossrail One, Terminal Five and Terminal Two at Heathrow, Thameslink, the Jubilee Line extension and widening of the M25- all valuable schemes - there has not been a single billion pound project in the North.

Without that level of ambition and investment, the Northern Powerhouse dream will not become a reality.

For all our latest Northern Powerhouse news and views, click here. Share your views and get involved with our latest interview series by contacting North West editor Richard at richard.bell@bdaily.co.uk