Monday 03 July 2023
The Committee for Economic Development has published a policy letter on the costs and benefits of extending the runway at Guernsey Airport.
A States Resolution of 28th November 2019 directed it carry out the work, following a the Requête titled "Development of the Business Case and Cost Benefit Analysis for the Extension of the Runway at Guernsey Airport to create a 1,700 Metre Runway". [1]
Considering the evidence presented on the costs and benefits, the Committee has concluded, by a majority, with Deputy Vermeulen dissenting, that any decision to extend the runway at Guernsey Airport should be a commercial decision taken by the States' Trading Supervisory Board. The Committee believes the STSB should take account of the cost-benefit analysis and supporting report presented in the policy letter in advance of the next planned resurfacing of the runway at Guernsey Airport (to take place in five to 10 years) or as part of the ongoing work on the Guernsey Airport Master Plan. These would provide relevant opportunities for this decision to be considered as a coherent overall investment decision.
Work carried out since the 2019 Requête
The Committee commissioned a cost-benefit analysis of a runway extension at Guernsey Airport from Frontier Economics, which concluded that an extended runway could lead to a reduction in air fares by an average of 39% and help to attract an additional 20,000 visitors per annum to Guernsey. Building on this analysis, the Committee's latest updated estimates are that a runway extension could deliver a total net economic benefit to Guernsey's economy, over a 40-year period of £109 million in total.
Extending the runway would undoubtedly involve a substantial capital investment, estimated at £79 million for a 40-year lifespan. Accommodating larger aircraft and higher peak time passenger numbers would also require an expansion of the terminal building and its facilities (including creating a third security lane), estimated at up to £23 million.
Jersey and the Isle of Man's experiences have also shown that Guernsey Airport would have to lower its fees and charges substantially, with limited scope to offset this through non-aviation revenues. The analysis undertaken by York Aviation suggests that the Airport's ongoing financial position would therefore worsen substantially.
It is also possible that any initial reductions in average fares for travellers may be reversed in the long term, once an external airline has established a dominant market position.
Further background and findings
The underlying premise of the Requête was that an extended runway would make the airport accessible to the short haul, narrowbody jet aircraft which represent the majority of aircraft used by UK and EU airlines, including low-cost carriers. This could facilitate the launch of new services and routes, potentially offering lower average fares, and could thereby increase visitor numbers as well as destination choice for residents.
Strategically, attracting new airlines with larger aircraft to Guernsey would require a significant shift in Guernsey's air connectivity policy, as currently set out in the Air Policy Framework, which the States approved in 2021. In particular, an extended runway is unlikely to attract new carriers without providing access to London Gatwick as an anchor route.
The introduction of competition on the Gatwick route would cause Aurigny to refocus its business away from Gatwick and onto UK regional routes, thus reducing the airline's profitability and economic contribution to Guernsey. This would also create a risk for the security of connection to Gatwick - one of the critical success factors of the Air Policy Framework - due to the fact that, in the event that an external dominant operator left the Gatwick route, Aurigny would be unlikely to be able to resume services at short notice.
Additionally, routes served by larger aircraft would see a reduction in service frequency, both on a daily basis and during quieter times of the year. And the introduction of low-cost services may have a knock-on impact on the numbers of passengers travelling by sea, a proportion of whom may switch from sea travel to air travel.
Deputy Neil Inder, President of the Committee for Economic Development, said:
'This policy letter sets out, in a balanced way, the potential economic costs and benefits of extending the runway, together with wider impacts on our strategic air connectivity, the States of Guernsey's finances, service levels for air passengers, and Aurigny' sustainability.
'Ultimately, the majority view of the Committee for Economic Development is that any decision to extend the runway at Guernsey Airport should be driven by the States' Trading Supervisory Board, taking into account the analysis and supporting reports presented in this policy letter.
'I committed to the States that I wanted an entirely open and transparent conversation and all reports are attached for public and Member scrutiny. We are recommending that this is neither the day nor the hour to spend significant amounts of public money on a project with some benefits but not without risk to our Islands' overall connectivity.'
Read the full policy letter here: Guernsey Airport Runway Extension Study - States of Guernsey (gov.gg).
[1] Requête, P.2019/105, Development of the Business Case and Cost Benefit Analysis for the Extension of the Runway at Guernsey Airport to Create a 1,700 Metre Runway. Available from: https://www.gov.gg/article/174627/Development-of-the-Business-Case-and-Cost-Benefit-Analysis-for-the-Extension-of-the-Runway-at-Guernsey-Airport-to-Create-a-1700-Metre-Runway
