Reject Newcastle Airport’s loan request

Updated: Oct 13, 2021


Local Councils asked to reject Newcastle Airport’s loan request.

The 7 North East Councils are being asked to prop up an at-risk business which mostly enables people to take holidays and visit friends and relatives. People need holidays but we think a loan for this purpose is not an investment in the economic future of the north east. We also think it is environmentally short sighted and irresponsible and that the loan request should be rejected. If Newcastle Airport is in serious difficulty, adding to its debt burden will not help, a thorough review of the Airport’s finances and purpose would be a better approach to take if it is to survive in any form.


1. Newcastle Airport losses and financial state:

Newcastle Airport has suffered huge financial losses as a result of the pandemic with revenues falling by £46 million according to its 2020 Annual Report. The Airport continues to struggle and, as reported by ITV News on 5/10/2021 (https://tinyurl.com/s2s4h4mw ), it is asking for loan facilities to support its continued functioning.


The 7 North East councils, which own 51% of the Airport, are being asked to stump up a sum we understand to be £5.1 million pounds of taxpayers money. The Airport is also asking the 49% private shareholder, AMP Capital, for a similar sum (£4.9M). Councils are already struggling to provide core statutory services with further cuts to come and potential rises in council tax. They can ill afford to risk the loss of further sums to prop up an uncertain local business, any loss could mean a further reduction in services or jobs.


This loan will have to be added to existing historic, large-scale debt for which the Airport is already struggling to make payments. The major lenders have agreed to waive repayment requirements until the end of 2021 and the Airport is trying to extend this until the end of 2022 to prevent the airport breaching the existing loan covenants - this is a measure of how bad the situation is. The new loan facility will probably be used to fund the day to day running of the airport, let alone any repayments due.


2. Due diligence and investigation

Due diligence should be carried out by the 7 Councils before handing over this amount of taxpayers money to support their own 51% share in the ownership of Newcastle airport. This will surely reveal that aviation is in a poor state nationally and globally and that its future is precarious. Many economies are in a volatile state of flux and this has a direct effect on the UK which is also experiencing economic damage arising from Brexit. All this will negatively impact demand across the board including aviation. If made, this would be a high risk loan.


3. Global warming and the climate change emergency:

Diligence will also show that global warming and climate change are major and urgently pressing issues and there are huge costs to come to address them. The use of fossil fuels for almost any purpose is now massively in doubt. Aviation is totally dependent on these for the energy rich fuel that it uses. Electric aircraft are unlikely to be viable for a very long time, if ever. There is a finite amount of the minerals used in batteries in the ground, vehicle and other manufacturers are competing aggressively for this resource and the pollution impact of their extraction and processing is significant.


Sustainable fuels rely on setting aside vast tracts of land to grow the crops required to manufacture the energy rich fuels to replace those derived from fossil sources. This land would have to include land currently used to produce food for a growing global population if sustainable fuels were to be expected to support even current levels of activity, let alone any growth. At this scale. it could be a matter of fly (or drive etc.) and go short of food, even if we could ignore the environmental impacts of the growing of these crops.


4. Aviation’s unchecked growth:

Aviation, until the onset of Covid, was a rapidly growing unchecked contributor to global warming while servicing a small, relatively wealthy group of travellers (frequent flyers). All use of fossil fuels – including cars and gas heating - has to shrink rapidly and massively if catastrophic global heating and mass extinction are to be avoided. The recent report from the UN's Intergovernmental Panel on Climate Change makes this clear and reinforces what we can all see from the news: severe weather events are worse and more frequent everywhere, including in the UK.


Aviation does not pay VAT on fuel and is effectively exempt from meeting other environmental costs associated with its activity. It is massively subsidised to continue its damaging activities and, if the playing field were level and it were to pay taxes on travel costs like the rest of us do, it would cease to be an affordable mass transport option.

Aviation is coming under increasing pressure to reduce levels of activity.


5. Newcastle Airport – primarily a holiday and leisure facility:

Newcastle Airport claims to be a key driver of business in the North East. In practice, it is primarily a holiday and leisure facility – well over 70% of passengers use the Airport for this reason. UK holiday makers are net exporters of income and wealth, more than double of what comes the other way into the UK. This is true of many regional airports across the UK as well as applying to a lesser extent to Heathrow and the other London airports.

Increasingly, businesses are finding that meetings can be held electronically, saving travel time and eliminating travel costs, more people are working remotely/from home. Some countries are starting to ban short haul internal flights and the UK needs to adopt a similar approach and local Councils urgently need to consider pressing for this.


Cost of living rises, massively increased fuel costs and other financial impacts are already significantly reducing disposable personal and household income and, therefore, the number of people who can afford to fly and take holidays abroad for a long time to come.


Aircraft Noise Action Group calls upon the 7 Councils to reject the request from Newcastle Airport for such a high risk loan and carry out a thorough review of the Airport’s finances and purpose instead. They are also asked to consider other forms of transport for holiday and leisure purposes with much less environmental impact that could be supported, promoted and developed instead.


Resources:

Campaign for better transport: Call for internal flights of less than 5 hours to be banned. https://bettertransport.org.uk/media/11-oct-2021-ban-domestic-flights


Aviation Environment Federation: Climate change: the basics https://www.aef.org.uk/what-we-do/climate/


United Nations: IPCC report 2021: https://news.un.org/en/story/2021/08/1097362


Office For National Statistics: Travel trends 2019 including expenditure abroad on holidays by UK residents compared with expenditure in the UK by overseas residents

https://www.ons.gov.uk/peoplepopulationandcommunity/leisureandtourism/articles/traveltrends/2019