11. Appraisal of Initial Short Term Options
11. Appraisal of Initial Short Term Options
Introduction
11.1. This Chapter provides a high level appraisal of options developed as part of the study. The appraisal is based on the principles of STAG 1. The approach adopted reflects the scoping nature of the study and the resources available for the various parts of it.
11.2. In line with the STAG process we have identified problems and opportunities. This was used as the basis for setting transport planning objectives which also took cognisance of the established policy directives described at Chapter 6. The objective setting included input from Transport Scotland.
11.3. We then generated a series of options. Through a sifting process a number were identified as meriting appraisal. Others were rejected at that stage. Again, Transport Scotland had input to this process.
11.4. We appraised the remaining options in terms of their performance against:
- Transport planning objectives;
- The five STAG criteria;
- Established policy directives; and
- Feasibility, Affordability and Public Acceptability.
11.5. Reflecting STAG, this took the form of a qualitative appraisal based on the likely impacts of the options. For the transport planning objectives, STAG criteria and policy directives this uses a seven-point assessment scale that considered the relative size and scale of impacts. For Feasibility, Affordability and Public Acceptability a qualitative written analysis was produced.
11.6. Finally, we identified a number of options that are worthy of more detailed (Stage 2) appraisal.
Problems and Opportunities
11.7. The report has dealt extensively with the problems and opportunities facing Dundee Airport. Based on the synopsis provided in Chapter 9 these can be summarised as follows:
11.7.1. Problems
Infrastructure and operational constraints associated with the airport's categorisation - notably that these serve to limit the type of aircraft and thus the range of markets that can be served from Dundee.
Current high operating losses at the airport - which reflects the high fixed costs associated with providing fire-cover, air traffic control and security when there are relatively low scheduled passenger volumes and the predominant traffic (i.e. General Aviation) can sustain only modest airport charges.
A schedule of services that is not attractive (in terms of prices and timetabling) to large parts of the market - consequent upon the small size of aircraft used and competition from other airports, most notably Edinburgh.
Limited ability to generate ancillary revenues - either from non-passenger related aviation activities or from non-aviation property-related activities owing to the physical constraints imposed by the location and configuration of the site, the costs and environmental sensitivities of expanding it materially and the difficulty of securing commercial returns from such activity.
11.7.2. Opportunities
Reduce operating losses by increasing passenger throughput - with little impact on capital costs or the largely fixed elements of operating costs.
Claw back some of the significant leakage to other Scottish airports - supporting development of both domestic and international passenger services.
Potential to increase passenger traffic as a result of the forecast growth in the catchment population - the presence of high PTF businesses and sectors, identified growth sectors and current and planned investment in the centre of Dundee.
Increase revenue from Business Aviation, Helicopter and GA traffic - and some limited property development related to service these activities.
Utilise the facilities at Perth to complement activities at Dundee Airport where during very busy periods such as major events, there is insufficient room to cater for all the activity wishing to use Dundee itself.
Transport Planning Objectives
11.8. On this basis, the following airport specific transport planning objectives were developed in discussion with Transport Scotland for use in this appraisal:
- Significantly reduce the level of operating losses at Dundee Airport - a key objective in the short term;
- Remove or reduce infrastructural and operational constraints facing Dundee Airport;
- Increase Dundee Airport's contribution to the catchment and Scottish economies;
- Increase passenger numbers using the airport by improving the quality and number of scheduled services using Dundee while seeking to minimise the environmental impacts of increased activity;
- Improve public transport access to the airport; and
- Whilst giving Dundee Airport primacy, have regard to the potential to utilize the various aviation assets in the catchment area optimally to the benefit of the economy of the area and Scotland.
Development Scenarios and Options
11.9. In order to provide some structure to thinking about the future prospects for Dundee Airport, four 'action-orientated' strategic scenarios were developed in the Interim Report based on:
- our analysis of the key challenges set out in Chapter 9;
- the development options for the airport itself, outlined in Chapter 10; and
- the potential role of other airfields nearby, discussed in Chapter 10.
11.10. Within each of these scenarios we then subsumed a number of alternative options, as described briefly below.
Scenario A: The Closure of Dundee Airport
11.11. Under this scenario, it is assumed that Dundee cannot attract sufficient scheduled traffic or ancillary aviation related activity to bring its need for subsidy in line with what the Scottish Government can afford or it considers represents value for money. A decision is therefore taken to terminate the current HIAL operation and close the airport, either permanently to allow re-development of the site (as is planned at Filton near Bristol), or by mothballing it to see whether circumstances change to allow it be re-opened (as is currently the case at Plymouth).
11.11.1. Option A1: Alternative Airports/Perth and Fife
This option would see the airport's General and Business Aviation activity forced to relocate, most probably to Perth or Glenrothes Airports. The commercial passenger base within Dundee Airport's core catchment area would be forced to rely on alternative airports for access to scheduled air services, perhaps facilitated by improved long distance coach connections and some improved timetabling of trains stopping at Gogar for access to the tram to Edinburgh Airport.
11.11.2. Option A2: Alternative Airports/Perth and RAF Leuchars
This option is similar to Option 1, but also assumes the retained RAF presence at Leuchars and the in-juncture on them to seek commercial income, will mean that Leuchars competes with Perth to provide a visiting facility and home base for General and Business Aviation Traffic.
11.11.3. Option A3: Perth Developed for GA and Scheduled Commercial Traffic
In this case, Perth is encouraged to invest in lengthening its runway and build a passenger terminal to compete with other airports for the East Central Scottish aviation market in addition to developing its offer to the Business and General Aviation markets.
Scenario B: Dundee Closes to Commercial Scheduled Traffic
11.12. This scenario is designed to reflect circumstances where a decision is reached that maintaining access for commercial scheduled services at Dundee is too expensive to justify given the commercial and economic returns they generate and that the airport should revert to its historic status as a GA Aerodrome. This would allow fire cover and security to be significantly downgraded and many other areas of cost savings identified. It would also allow the terminal building to be used to provide improved facilities for Business and General Aviation and this kind of activity to be substantially expanded.
11.12.1. Option B1: Remains as a HIAL Operated GA Airport
Although Dundee has the highest number of Business and General Aviation movements of any HIAL airport, it is questionable whether its remit would (or should) allow it to continue operating an airport without any intention of attracting passenger services. Moreover, whether its corporate structure would allow it to do this at a cost that could be borne by GA and Business Aviation traffic alone. This option will examine these issues.
11.12.2. Option B2: Lease/Contract a Third Party to Operate as a GA Aerodrome
The alternative to Dundee remaining within HIAL's portfolio is to look for an alternative operator to run the airport either under a long-term lease or as a tendered management contract, assuming the City Council would be unwilling to sell the airport freehold.
Scenario C: Maintain the Status Quo Position
11.13. Any option appraisal requires a 'do nothing' case for comparative purposes. In this case, this would amount to maintaining the status quo (i.e. passenger traffic levels between 30,000-70,000 per annum and existing ancillary activities in their current spatial configuration, with the Scottish Government continuing to subsidise the airport's operating losses but investing little in marketing the airport to build traffic throughput closer to 150,000 or developing the airport estate to increase ancillary revenues.
11.13.1. Option C1: HIAL
Under this option, the operating responsibility remains with HIAL.
11.13.2. Option C2: Contract Out
Under this option the operation is market tested, with potential operators invited to bid for the least level of subsidy with incentives for enhance performance, but once again no material investment is made in enhancing the airport's ability to increase traffic volumes or develop ancillary income.
Scenario D: Grow Dundee
11.14. This scenario examines the case for seeking to either reduce or eliminate the current operational subsidy by pro-actively seeking to grow revenues and reduce costs per WLU handled. It is accepted that such a strategy will require some limited capital investment and support to market the airport effectively to airlines, passengers and ancillary users alike.
11.14.1. Option D1: Invest in Dundee to Achieve 150k pax and Increase Ancillary Activity Where Possible.
This option considers the initiatives and investment required to grow the airport within its current terminal capacity, existing site boundaries and tight capital spending limits. Since the airport terminal is estimated to be capable of handling some 150,000 pax per annually without major investment, any expenditure would be limited to the minimum required to bring unused land or buildings into commercial use. The primary focus is on the airside infrastructure enhancements that may be needed to achieve this and on rationalising the layout of the rest of the site to attract additional ancillary revenue based on the proposals set out Chapter 10.
11.14.2. Option D2: Invest in Dundee to Achieve +150k pax and Optimise Use of the airport for Ancillary Aviation Activity.This option considers the investment agenda for a more ambitious optimisation of the airport estate to maximise ancillary revenues alongside making full use of the terminal capacity, based on the re-configuration proposals set out in Chapter 10.
Option Sifting and Development
11.15. The forgoing amounts to a relatively large number of options for appraisal and so following submission of the study's Interim Report these were sifted in consultation with Transport Scotland with, in some cases, revisions being made to the original specification of some options in order to leave a manageable number for evaluation during the Stage 1 appraisal. Table 11.1 shows the options that were retained for the STAG Stage 1 assessment.
11.16. Two points should be noted in relation to this table: First, what was pre-sift Option C1 is now the "Do Minimum" option for the continued operation of Dundee. Previously there was no such "Do Minimum". Rather, there was what was effectively a "Do Nothing" (Options C1 and C2), the only difference being who managed the airport. However, in discussion with Transport Scotland it was agreed that "Doing Nothing" was not a realistic option for the future operation of Dundee because if 'nothing' is done, it is very likely Dundee would soon lose its remaining scheduled service and that annual operating losses would rise as a result well above the current £2.7 million per annum. Like Transport Scotland we do not believe that this is a tenable approach that the Scottish Government could allow to continue indefinitely. Hence we have re-designated Option C1 as a "Do Minimum" under which scheduled passenger operations continue rising to closer to the 70,000 they achieved in 2009, rather than the figure of less than 30,000 that is currently expected for 2013.
11.17. Second, the "Do Minimum" assumes HIAL continues to manage Dundee Airport as opposed to having that role contracted out. This is because we consider a change of management would have only a modest impact on the airport's short and medium term prospects in the absence of additional investment. As such, the difference between C1 and C2 was a nuance based on delivery mechanisms rather than a materially different version of the same core scenario.
11.18. Table 11.2 shows the options that were rejected during the sifting process and the reasons for rejection.
11.19. In discussion with Transport Scotland, it was agreed that were Dundee Airport to close, it is not certain that RAF Leuchars would be willing to accommodate a substantial volume of the GA traffic that would be looking for a new home as opposed to a limited number of business jets as now. This led us to discount Option A2.
11.20. Were Dundee to revert to being a GA only facility (i.e. this role became permanent, rather than as a temporary measure while passenger operations were still being sought), then it would not be appropriate for the airfield to continue to be run by HIAL, especially when there appear to be a range of private options available and it would be competing with Perth and Fife Airports which receives no public subsidy. There is certainly no precedent for such an arrangement in the HIAL network, which was set up and is supported by the Scottish taxpayer to provide airport facilities for passenger services to parts of Scotland that would otherwise be underserved with such infrastructure. On this basis Option B1 was eliminated. As the Table explains, we could simply see no scenario in which the capital cost of the reclamation envisaged in Option D3 would generate sufficient financial or economic returns to justify that level of expenditure.
11.21. Based on the modest potential impact of who runs the airport in the absence of any financial investment in it, it seemed sensible to retain Option C1 (in which HIAL continues to run the airport) as our "Do Minimum" option rather than assume a change of operator. Hence Option C2 was dropped.
Appraisal Process
Transport Planning Objectives
11.22. Table 11.3 appraises each of the options against the transport planning objectives. This is based on a seven-point assessment scale as follows:
✔ ✔ ✔ strong positive impact
✔ ✔ good positive impact
✔ some positive impact
/ neutral
x slight negative impact
xx negative impact
xxx strong negative impact
This scale is also used in subsequent appraisal tables.
11.23. In terms of significantly reduced operating losses at Dundee the best performing options in the longer term are those that result in the closure of Dundee (i.e. A1, A3, B2) or those that could achieve reduced operating losses based on increased scheduled passenger numbers (i.e. D1) and ancillary activity (i.e. D2).
11.24. Clearly, the most positive impact on increasing Dundee's contribution to the economy is through an expansion in scheduled passenger services and traffic to make better use of the existing terminal capacity (i.e. D1) alongside investment to optimise use of the residual estate (i.e. D2). In contrast, the options that would see the closure of Dundee to scheduled traffic have a strong negative impact.
11.25. Similarly, options D1 and D2 have the stronger/strongest impact in terms of increased passenger numbers/services. The options where Dundee closes are assumed to have only a slight negative impact given the current low levels of activity at the airport. The only option that materially addresses the infrastructure and operating constraints under which the airport currently labours is D2, which improves the amount of apron available for aircraft parking. The need to minimise environmental impact is effectively taken as a given for all options. However, it would need to be built into relevant options taken forward for detailed STAG 2 appraisal.
11.26. All of the options have a neutral score on optimise public transport access to Dundee. This reflects that some involve the closure of the airport; while none of the other options explicitly contains this element-although it would be equally possible under each of them. Again, ways of optimising public transport access could be included in relevant options taken forward for detailed STAG 2 appraisal.
11.27. Finally, those options that assume some expansion of scheduled services (i.e. D1 and D2) score best under maximise the potential of aviation assets in the catchment area. A3, in which Dundee is retained for GA, scores better than the remaining options because Dundee continues to operate. This is because of the uncertainty, noted earlier in the report, around the ability of Perth to serve the core catchment as well as Dundee (potentially) can and the ability of Fife Airport to accept a significant proportion of Dundee's GA traffic.
11.28. Across the transport planning objectives as a whole Options D1 and D2 perform best. However, this reflects the concentration of the transport planning objectives on Dundee Airport and its catchment area that is inherent in the study brief rather than necessarily what might be the optimum solution if considered at a Scotland-wide level.
STAG Criteria
11.29. Table 11.4 provides an appraisal of each of the options against the five STAG criteria. Those options that involve any expansion of scheduled passenger activity (at Dundee or elsewhere) perform least well in terms of the Environment. As we discuss in Chapter 6, in the light of subsequent analysis, reports and the introduction of the ETS, it is questionable whether this policy is reflective of a true assessment of aviation's climate change impacts. However, as it represents extant policy we have utilized it as the basis for the appraisal. A1 and A3 are scored worse than a moderate increase in activity at Dundee in D1 and D2 because reliance upon alternative airports like Edinburgh for commercial services (as opposed to GA) will substantially increase surface travel, and therefore emissions, for passengers that would have otherwise used Dundee.
11.30. The scoring assumes that all options would need to be licensed/approved by the relevant authorities and hence they are all neutral in terms of Safety. There is a slightly higher incidence of accidents with GA compared with scheduled air movements but this would be reflected in features such as the Public Safety Zones, RESAs, safeguarding and safety procedures for the airfield.
11.31. The options with the greatest increase in scheduled passenger activity at Dundee perform best in terms of Economy. This reflects their greater contribution to economic activity and their providing reduced surface journey times by clawing back passengers who currently use other Scottish airports. The options involving Perth developing to take commercial traffic (i.e. A3) perform less well than those where there is an expansion of scheduled services at Dundee. This reflects the fact that such a relocation of scheduled commercial traffic would less clearly support future economic growth in the catchment's main city. Further, for many within the catchment the two alternative airports would mean a longer surface journey than would flying from Dundee.
11.32. The options encompassing significant expansion of scheduled services perform best in terms of Integration. This reflects the increased ability for passengers in the catchment area to fly to a greater range of destinations than now and in the case of Dundee use its already well-developed surface transport links to travel to/from the airport. Dundee is also an established scheduled passenger airport, unlike Perth.
11.33. Under Accessibility and Social Inclusion Options D1 and D2 offer the opportunity for a relatively large proportion of the catchment to fly from an airport that is quite near to their surface origin or destination and so perform better in this regard than the current "Do Minimum", Perth (A3) or options where Dundee closes to this kind of traffic. This reflects its better location in relation to the main population areas in the catchment.
11.34. Overall, Options D1, D2 and A3 perform best. This is because, while they have the most negative environmental impact, they score relatively well under the other criteria.
Established Policy Directives
11.35. Table 11.5 appraises each of the options against the established policy directives set out at Chapter 6.
11.36. The scores are very similar across each of GES, NTS and RTS. This reflects that each has similar themes, covering the economy, environment, accessibility and integration. This, in itself, reflects that:
- The RTS reflects the priorities of the NTS; and
- GES includes aspects of NTS under one of its Strategic Priorities.
11.37. Again, those options with the largest expansion of scheduled services score best. This reflects the more significant contribution to economic development, accessibility and integration, albeit offset to some extent by relatively significant environmental impact.
Feasibility, Affordability and Public Acceptability
11.38. Tables 11.6-11.11 show our assessment of feasibility, affordability and public acceptability for each of the options. In this context affordability is "cost to government".
11.39. It should be noted that no public consultations have been undertaken as part of this exercise. Therefore, the text shown under "Public Acceptability" reflects our stakeholder consultations plus our expectations of likely wider public response to each option.
| Criterion | Assessment |
|---|---|
| Feasibility | Closure would be feasible. Enhancements to public transport access to other airports (e.g. Edinburgh) is likely to be slight given the low volumes currently using Dundee and general acceptance of the existing access. The overall effect would depend on the extent to which Perth and Fife Airports pick-up current Dundee GA traffic. |
| Affordability | Would remove ongoing operating loss of over £2.7 million. Overall impact would depend on the level of decommissioning costs of closing Dundee. These would vary depending on whether the airport was permanently closed or mothballed. It would also reflect whether any public expenditure would be required to facilitate increased GA activity at Perth and Fife Airports. |
| Public Acceptability | Adverse reaction from the Dundee business community to the complete closure of the airport. This would reflect the potential impact on the level of current and prospective investment taking place in the city's economy and the outputs it might generate rather than the additional time/cost of using other airports. |
| Criterion | Assessment |
|---|---|
| Feasibility | Closure would be feasible. Would depend on willingness of Perth Airport to make appropriate investment. It would also depend on the scale of passenger services that could be achieved given Perth's location in relation to the core catchment. |
| Affordability | Would remove ongoing operating loss of over £2.7 million. Overall impact would depend on the level of decommissioning costs of closing Dundee. This would vary depending on whether the airport was permanently closed or mothballed. Cost to government would reflect any public support required to "encourage" commercial passenger services out of Perth including investment in road infrastructure. |
| Public Acceptability | Adverse reaction from the Dundee business community to the complete closure of the airport. The reaction would reflect the amount of current and prospective investment taking place in the City's economy and the potential for air services out of Dundee to enhance its benefits rather than simply the additional time and cost of using other airports. We would expect positive reaction from some businesses and residents in the Perth area due to the increased activity at Perth and potential economic benefits. Some negative reaction could also be expected on environmental and traffic congestion-related grounds. |
| Criterion | Assessment |
|---|---|
| Feasibility | Would be feasible assuming there is market interest and that the lease/selling price was sufficiently attractive to the lessor/seller. |
| Affordability | Would remove ongoing operating loss of over £2.7 million. Otherwise affordability is dependent on terms of sale and lease for overall impact on cost to government. |
| Public Acceptability | Adverse reaction from the Dundee business community to the closure of the airport to scheduled services. This would reflect the level of current and prospective investment taking place in the city's economy rather than simply the additional time and cost of using other airports. |
| Criterion | Assessment |
|---|---|
| Feasibility | Initial analysis suggests that this option would be feasible. |
| Affordability | Initial estimate suggests capital cost of between £0.35-0.7 million plus annual operating loss of greater than £2.0 million. |
| Public Acceptability | Would be welcomed by business community (and some other users) even though the implied expansion in range of scheduled services and ancillary employment created is likely to be small. Might be some adverse reaction from those concerned about environmental impacts of the modest increase in scheduled activity. |
| Criterion | Assessment |
|---|---|
| Feasibility | Initial analysis suggests that this option would be feasible. |
| Affordability | Initial estimate suggests capital cost of up to £3.9 million with annual losses coming in well below £2.0 million per annum. |
| Public Acceptability | Would be welcomed by business community (and some leisure users) given the admittedly limited expansion in the range of scheduled services, reduction in fare levels and the new jobs that could be expected to be created elsewhere on the site. Adverse reaction might arise from those concerned about environmental impacts resulting from the increase in scheduled and GA flights. |
Conclusions
11.40. Having shortened the long list of options developed for the Interim Report following discussions with Transport Scotland, the remainder of this Chapter has focused on providing an objective high level Stage 1 appraisal of the options based on:
- Transport Scotland's agreed transport planning objectives in relation to HIAL and to Dundee Airport in particular;
- Standard STAG criteria;
- Established policy directives; and
- Feasibility, affordability and public acceptability.
11.41. The results are helpful in that they highlight the fact that retaining a passenger airport at Dundee appears to be a better option than closing it altogether, letting it become a GA airport or relying on Perth or Fife Airports to pick up the slack on GA traffic. This is certainly the case in the short to medium term while options for improving traffic volumes and reducing current levels of operating loss are explored. The airport is well placed in the catchment area, has existing passenger facilities that can be expanded at more modest cost than is likely at Perth to achieve the same service standards and is capable of generating material economic benefits.
11.42. Its principal downsides are that without increases in passenger numbers well beyond the short run target of utilising the existing terminal to the full, the current cost of subsidising the airport's operation will only ameliorate a little and indeed could increase (especially if Cityjet withdraws its London City service) without some targeted capital expenditure. Also, that higher air traffic volumes will bring some, albeit very modest, increase in noise and CO2 emissions.
11.43. Given that passenger related revenues form a higher proportion of total income at Dundee compared to many other small regional airports of its kind (primarily because of its location and size constraints), the turn-key issues moving forward are likely to be whether the potential market for air services from Dundee described in Chapter 5 can be realised, the impact this will have on operating losses and what capital cost and economic benefits associated with achieving higher passenger volumes than under the "Do Minimum" scenario.
11.44. Developing a sufficiently detailed understanding of these issues to allow properly informed decisions to be made requires further work to be done on marketing, facilities planning and costing and business planning so that the capital cost and risk of delivering lower revenue subsidies can be properly profiled. The appraisals and these considerations point to taking forward options D1 and D2 to the next stage of assessment against the "Do Minimum" baseline. In parallel, we consider it might be pragmatic for alternative uses for the site to be evaluated, in the event that the airport closed, as this would also give some idea of the value and benefits it might generate in non-airport use for comparison with economic and financial outputs from its remaining as an airport.