IMPROVING SCOTLAND’S AIR CONNECTIVITY – THE CHALLENGE AND
OPPORTUNITY
Introduction
The Scottish Government believes that devolution of air passenger duty (APD) will
provide the opportunity to put in place new arrangements which better support our
objective to improve connectivity to Scottish airports, generate new direct routes and
increase inbound tourism.
The strategic context for our aims can be found in Scotland’s Economic Strategy
(March 2015) which sets out our ambition to create a more cohesive and resilient
economy that improves the opportunities, life chances, and wellbeing of every citizen
in our country. Internationalisation is one of the four priorities for sustainable growth
identified in Scotland’s Economic Strategy and we are looking to explore with you
how we can better support our objective to improve connectivity.
Where we have come from
Reviewing the landscape of progress in Scotland’s international air connectivity since
2000 can be described as a case of rapid growth followed by a period of more
modest gains, consolidation and then a return to growth.
Prior to the introduction of the Scottish Government’s Air Route Development Fund
(ARDF) in 2002, Scotland had experienced a situation not untypical to countries
located in northern Europe with modest population levels where supply and demand,
longer sector lengths allied to the relative proximity of a global hub airport (at that
time in dual ownership with Scotland’s big 3 airports) had stymied the ability to
significantly improve the direct international service offering.
The ARDF brought about a step-change in Scotland’s direct international
connectivity. During its tenure, it supported 52 new services with passenger
numbers on these services growing from around 280,000 in 2004 to around 1.9m in
2008. It helped open up Scotland to exciting new destinations in North America and
the Middle East and over the piece, achieved an estimated Net Present Value (NPV)
of £406m.
The scheme’s raison d’etre was straightforward. It enabled the Scottish Government
to work with airlines and Scotland’s airports and provide cash incentives to airlines in
return for the introduction of routes deemed to be of strategic importance in
economic terms.
The scheme challenged hub and spoke convention as the dominant means for
people to get to and from Scotland. As a consequence, whilst it was good for
passengers and the airlines which benefitted, it could not be said to be universally
popular in the industry. Subsequent reform of the EU start-up aid rules in 2006
meant that the ARDF could no longer continue.
Scottish APD Stakeholder Forum – 060815
Connectivity
- Paper 2 - Improving Scotland’s Air
Page 1
Where we are presently
The momentum created by the ARDF ensured that Scotland’s international air
network continued to grow in the years after its withdrawal. In 2005, Scotland had
27 (all year round) unique city destinations. By 2008 this had grown to 47 and by
2011, despite the global economic crisis, it had slipped back only by 1. By 2015
however, it had slipped back further to 39.
Analysis shows that there has been good progress from the relatively low base of
short and long-haul direct services in 2002 to a point where Scotland is now
performing only slightly below peer country competitors in both categories.
Connections to short-haul destinations of economic importance however is an area
where Scotland is somewhat below the peer average.
Since the ARDF’s withdrawal, the main means of Team Scotland support for new
routes has been cooperative marketing partnerships with airlines where the
destination is marketed. Whilst this method of support provides less flexibility for
airlines, it has proved attractive in its own right and has helped contribute to some
high profile successes in the last 2 years including new Middle East services from
Edinburgh and to North America from Glasgow.
Where we want to be
The initial challenge is to push ahead of peer countries in all categories with
particular attention to destinations of economic importance both short and long-haul.
Scotland’s direct connectivity will continue to be hampered by aspects such as the
lack of a home based carrier and the modest connecting opportunities at the Scottish
end. The enduring attraction of Heathrow and the unrivalled connections it offers
and the continuing growth of the Middle East carriers hold clear benefits for Scotland
but could also serve to limit Scotland’s ability to serve a larger number of globally
recognised destinations. The question is how do we square the success of
Scotland’s Middle East connections with the desire to break-in to direct Chinese and
Indian markets and with ever evolving aircraft technology in mind, should Scotland
also be looking at new direct service opportunities westwards, such as West Coast
USA, as opposed to continuing to rely on the tried and tested hub and spoke
method?
We need to contemplate an approach which is ambitious for Scotland and pragmatic.
We want the best of both worlds and to enhance our connections to a number of
global hubs as well as increasing direct international options from Scotland’s
airports. This dual approach recognises that Scotland’s population level alone will
be unable to achieve self-sufficiency in direct air travel from Scotland’s airports.
How do we get there?
Firstly, we need to be alive to the constant and fast moving change in the aviation
industry. In particular, the evolution of the Middle East market is changing how the
global industry operates and the emerging economies of China and India have not
yet fully mobilised in response. The long-haul opportunities westwards are also a
Scottish APD Stakeholder Forum – 060815
Connectivity
- Paper 2 - Improving Scotland’s Air
Page 2
fluid picture and the success or otherwise of the low-cost model being promoted by
Norwegian will be being monitored by other carriers. Evolving aircraft technologies
mean that very little remains off-limits for direct connectivity from Scotland in
distance terms and the environmental aspects of increased air travel are being more
sensibly addressed. Change is happening in short-haul markets too. Traditional low
cost carriers are increasingly seeing the benefits of mixed business models with
movement toward primary airports. Despite the Airports Commission’s recent
conclusions, additional runway capacity in the south east of England could be a long
way from settlement. The forthcoming departure of Virgin Little Red from Scotland
once again emphasises the challenge of maintaining our Heathrow links.
Secondly, we need to continue working with all our airports fairly and equitably to
ensure that the new competitive spirit is maximised and focussed for the benefit of
the airports and for Scotland. We believe that there are exciting new opportunities
for all Scotland’s larger airports which would be of strategic benefit to Scotland and
Team Scotland is committed to working with the airports in a confidential manner to
achieve our shared objective.
And clearly, we need to make the financial conditions right for airlines to come to
Scotland. Team Scotland support in recent years has worked well to complement
the airports’ offerings. It is important to remember that the airports lead on proposals
and are not constrained in the same way as government in terms of what they can
do with airlines. We need to strive collectively to put the best offers on the table, to
keep the competition and what it is doing firmly in view and seek to influence airline
decision making by demonstrating our long-term commitment to growing Scotland’s
international connectivity. The Scottish Government’s plans for a devolved APD are
a significant step forwards but there is much more which needs to be done to give
Scotland a competitive edge on a global stage. We all have a stake in making that
happen.
Questions for forum members:

What continue to be the main impediments to route development in Scotland
and how can government and industry best work together to remove these?

Are there examples of progressive practices amongst our European and
global competitors which Scotland can learn from in seeking to entice more
airlines to come to Scotland and improve our international air connectivity?

What do we anticipate Scotland’s international connectivity to look like in the
year 2030 and where would we desire it to be?

How could a devolved APD help Scotland achieve our international
connectivity objectives?
Scottish APD Stakeholder Forum – 060815
Connectivity
- Paper 2 - Improving Scotland’s Air
Page 3