|Paul Kehoe, Chief Executive|
Friday, 29 October 2010
Up, Up and Away – Birmingham Airport spreads its wings as a powerful driver of growth and jobs
“All the ingredients are starting to come together,” says Paul Kehoe, Chief Executive, Birmingham Airport – dubbed ‘London’s new airport’ by the Telegraph, thanks to plans for High Speed rail links(HS2) which could cut travel time between Birmingham and London from just over an hour at present to 38 minutes. This, coupled with the runway extension - cleared by planning and environmental scrutiny and with investment now in place - could have a transformational effect on the wider Midlands economy.
Having successfully lobbied for Runway 2 in Manchester when working for the CBI North West in the early 1990’s, the numbers from that region are demonstrating the vital impact this investment has had on their economy and - in particular - through the growth of highly valued knowledge economy jobs.
Birmingham Airport and the Knowledge Economy
The sad fact is that over the decade 1998 – 2007 Birmingham’s share of the UK private sector knowledge economy declined from 3.9% to 3.55% - one of only 3 of the UK’s 11 Big Cities whose private sector knowledge economy declined.
By contrast, Manchester’s share of our private sector knowledge economy increased. In fact according to The Work Foundation, who have carried out some detailed research into this area, Manchester stands out as the ‘success story’ of the Big Cities becoming, “more knowledge intensive at a faster rate than the national average, gain(ing) the greatest absolute number of new jobs in private sector knowledge services and increas(ing) its share of total private knowledge employment by the greatest margin of any of the Big Cities between 1998 and 2007.” Manchester’s share of private sector knowledge economy employment at 3.7% of the UK’s total employment (2007) in this category, is second only to London, with by far the biggest share of employment growth over the past decade coming from within the air transport sector.
When you look further into what has happened at Manchester Airport it’s apparent that the runway development, with resulting capacity increases, has been responsible for huge growth in the air transport sector - from a 3.9% to a 6.5% share of their private sector knowledge economy. The Work Foundation report, ‘Flat or Spiky: The Changing Location of the British Knowledge Economy’, April 2010, states, “This is commensurate with the growth in the number of passengers at Manchester Airport from 17,351,162 in 1998 to 21,219,195 in 2008 and with Manchester’s status as the busiest UK airport outside of London.”
Runway Extension and High Speed Rail
Transport, always one of the top lobbying priorities for anyone involved with business, doggedly pursued by many in the CBI, Chambers of Commerce and IoD has remained a painfully elusive goal for the West Midlands.
However, we could now be about to see plans that place Birmingham Airport at the heart of a (partially at least) integrated national network with the potential to leverage the surrounding M42 corridor assets by £11bn in GVA. In addition Centro is forecasting that HS2 will lead to the creation of an additional 22,000 new jobs in the West Midlands over the decade to 2026.
“We’re currently operating at around half our current capacity,” says Paul Kehoe “Birmingham Airport is a vital yet underused piece in the National strategic infrastructure. It is already the Midlands’ premier international gateway. In addition to this, the prospect of HS2 from Central London to Birmingham Airport will make journey times comparable with Gatwick, Heathrow or Zone 4 of the Underground and shorter than from Stansted and Luton. Given our additional capacity and the proposed link to high-speed rail we’re uniquely positioned to attract passengers from the over-heated South East. But, we will not just be another Airport for London as we have our own traffic and by providing a solution to the ‘Heathrow problem’ we will create jobs and help re-build the economy.”
Paul thinks that, thanks to a revised solution to building the Runway extension, they will be able to bring forward the opening to 2014, even though this means moving the A45. The 400m extension will be financed through a phased approach which Paul says has halved the original costs but will add an additional 2,500 miles of travel for each airplane using it.
“The Runway extension gives global connectivity, however, over a lifetime of 20 years we will be able to go out and market with more confidence to our key target markets, especially those in the emerging markets,” says Paul. “For example, there are 247 urban centres of greater than 1m people in China and they are currently building 94 new airports, so they represent huge potential for us.”
“It’s true that we have 8m people within one hour catchment of our airport - however there is a large international catchment of many millions wishing to visit the UK at some point. This is what motivates me and I will keep focussing on delivering this growth.”
When questioned about whether people will pay the costs of travel via HS2 Paul is quite clear they will. “People do adapt to higher travel costs. This is a question of higher fixed costs associated with living in London combined with lower variable costs through lower travel costs in comparison with living further away from London but having lower cost of housing (or fixed costs) but higher variable costs through higher travel costs.
“People are already paying a lot to get to London £250 return to London for a first class ticket on Virgin and £115 for standard class. In my view people discount the cost of travel after a time and adjust their living standards accordingly.”
Structure and Performance
With annual revenues of just over £100m Birmingham Airport employs 550 people directly with a total of 6,000 people employed on site. They are forecasting 8.7m passengers this year – down from last year’s 9.6m, due for the most part to the fragile nature of the recovery and partly a result of the Icelandic dust cloud.
Birmingham City Council and the 6 Districts of the West Midlands own the business, together with Airport Group investments (AGIL). Whilst Paul Kehoe sees local government owners as “in tune with the people who live, use and work at the airport that they have a stake in,” AGIL, to his mind, “brings a commercial imperative”. As a pension fund they have a longer term horizon and some real knowledge of the sector with their UK portfolio including Bristol airport.
Paul Kehoe confirms that Birmingham Airport was not put up for sale, with shareholders happy with the current arrangements and any comments previously made on this topic now retracted.
When looking ahead to their growth plans Paul feels there is much to learn from Manchester’s strategic development approach.
“Manchester has managed to sell itself over 20 years through good team leadership at the City Council between their Chief Executive, Sir Howard Bernstein and their Leader Sir Richard Lees. They have created international links by appreciating that you can sell ‘Greater Manchester’ more effectively than Wigan, Salford, or Stockport on their own. When you get to use the Mercator scale map you can only see big places. Whilst Walsall, Dudley and Wolverhampton are very important they do not appear on that Mercator map. Together they may represent a 1m population block but we sell the opportunity that is the Midlands’ 1 hour travel time catchment more effectively.
“Given Manchester’s strong performance and leadership, I’m hoping that Birmingham can benefit by leveraging from the Lib-Con Coalition government mirroring our own City’s Lib-Con coalition in place over the past 6 years.
“We need to see the creation of a business and political block to deliver real growth meeting the wants and needs of our community – this is essential to sustainable and balanced growth in the West Midlands for the future. And looking ahead, if the total travel to work area around Birmingham had come together this could have been a better solution to LEP situation, but we are where we are.”
Paul first visited Birmingham in 1979 on a trip to see a friend at Aston University and he remembers thinking it looked tired and run down. Nearly 30 years later during a trip to the LG Arena he was struck by Birmingham as ‘a transformed city’. “We don’t shout about it enough. I’m now a big fan of Birmingham and I have a real sense of pride about what the City has achieved. There’s lots going for it. It’s great that our City Leader, Mike Whitby, has said we need a plan to take us forward with vision and give us markers to help us get better. We have great culture, great heritage but we do have areas of deprivation, however, if the whole is doing well then I’m sure it will be easier to fix those areas.”
Birmingham Airport Name Change
It’s perhaps ironic that as many airports get larger they see less need to call themselves ‘international’ with Luton, Bristol and Manchester all dropping the word ‘international’ from their names. On top of this, there is another Birmingham International in Alabama, USA. “We need to be different,” says Paul. “We’re looking to our future through our past. It’s very important to us - where we’ve come from. But we also need to bear in mind where we are and that we’re currently serving 140 routes through direct services and 400 via other connections. We don’t think we need to say Birmingham Airport is international any longer, it just is.”
So a full name change and re-brand is underway. The rather charming and by now familiar ‘dart’ will go along with the acronym ‘BHX’, with a new web address being launched: www.birminghamairport.co.uk.
“We put the brand re-design out to a national competition and a firm from Wolverhampton won this, ‘Connect’. Their brief sums up all those things about a confident future that Birmingham Airport is keen to project. This is being delivered in the context of service upgrade and re-design. Later in November the new brand will be unveiled, subject to our Board’s approval. This is about the re-positioning of our airport as an ‘entrepot’ to complement national strategic assets. Government has delivered us a lifeline by not developing Runway 3 at Heathrow, Runway 2 at Stansted or Gatwick.”
The past year has seen a continued focus on their ongoing investment programme which amounts to £350m since the restructuring in 1997. They have cut back on operating costs whilst not pulling back on marketing or investment in extensive building plans needed to “deliver the right infrastructure for our vision.”
They have invested £50m on a new international pier which is inter-operable between carriers. Ostensibly a shed on the outside - 240m long, 3 stories, 20m wide - inside it is comparable with any other best-in-class pier, furnished with marble, glass and Scandinavian-style wood finishings. Their car parks have been upgraded as the customer experience had been considered poor and they have recently completed a £14m investment in new car park facilities with wide ramps and other features, even being named as silver winner in the Best Airport Car Park category of the Holiday Extras Customers’ Awards 2010.
Their latest ongoing project involves merging Terminals 1 and 2, T2 will be connected to T1 by the enlarged ‘Millennium Building’ which will house all Arrivals on the Ground Floor, and Departure Security on the first floor, effectively merging the two terminals. We will be losing a Terminal, but gaining a bigger airport which will be operating at 40% capacity so there will be plenty of room for expansion.”
Paul studied geography – the physical sciences focussing on geomorphology and fluvial geography and meteorology. This was followed with an MBA from Warwick Business School taken 20 years ago. He’s worked in Civil airports pretty much continuously over the past 20 years, having run Belfast International, London Luton, Bristol and now Birmingham.
His background in geographical sciences has given him a strong belief in the need to address Climate Change issues urgently.
“Britain does fly more, but we are investing in trains. Planes are becoming cleaner technologies. This is a massive challenge – and whilst aviation is not the biggest C02 contributor, Climate Change is a huge issue and one I take very seriously.
“Within the aviation Industry we need to tell our story better and gain greater recognition for the value of aviation. When we had 6 days with no air traffic people certainly recognised the value of air travel then. We do have an extensive environmental programme at the airport, including a full process assessment resulting, for example, in the Continuous Descent Approach, allowing aircraft to descend using minimum power and delivering over 13,000 tonnes of C02 savings in the past 12 months alone.
“As I said, all the ingredients are starting to come together”.