How Heathrow Runs Britain's Biggest Workplace | CEO Thomas Woldbye

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0:45Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up required, compatibility and availability varies 18+. Welcome to Jimmy's Jobs of the Future. In 1930, the land for Heathrow Airport was acquired for£15 ,000 from a local vicar. 96 years later, it's the world's busiest airport. It is a remarkable story. It now is the biggest single-site employer in the United Kingdom, employing 76 ,500 direct jobs and around 114 ,000 indirect jobs. It is amazing. It's like a small town. With people going off on holiday over the next few weeks, we take you behind the scenes with Heathrow's CEO to talk about all the things that happen, how it's like a small town, how it has its own fire brigade and so on.

1:44It was a fascinating insight into Heathrow, the world's busiest airport. Thanks very much for listening. I hope you have a great summer holidays wherever you're going. On to today's episode. Thomas, welcome to Jimmy's Jobs of the Future. Thank you very much. So tell us, what's the biggest difference between running Heathrow Airport than Copenhagen? I used to say that apart from the fact that we get aircraft in and out, or up and down if you like, nothing else is the same. And the reason for that is that Heathrow is a very different place. It's also quite a unique place as far as airports come.

2:23It's super densely utilized. It has a unique mix of traffic, high transfer share, very high share of long haul. It's split into four different terminals, has three underground railway stations. So really putting all that together makes it quite a different place also from Copenhagen. Now of course there are similarities, lots of stuff like radar systems, international rules on how to manage aircraft and so on. They are all the same. But also for example the stakeholder landscape is quite different. And also the regulation which is an important part of how we are managed is somewhat different. So there are many differences.

3:05Now there are also learnings, also things you can draw learnings from either way by the way. But there are many, many differences. And just give us a sense of the size and scale of Heathrow when it comes to jobs, because it's pretty extraordinary. It is the biggest single site of employment in the UK. Potentially actually in Europe, I'm not 100 % sure, but we employ whichever way you define it between 80 ,000 and 100 ,000 people on site. of those Heathrow Airport has about 10 ,000 as the company Heathrow Airport Limited and then of course there's enormous amount of people in the area that has the outcome from Heathrow and work in you know in secondary industries and the supply chain and so forth.

3:54And with the addition of a third runway there could potentially be another hundred thousand that's according to the government's figures. Yes, I think if you take the full effect, that would be right. That would not be on site only. That would then be, as I said, in the next tier of employment. But yes, absolutely. I think potentially if you really take the nationwide impact and take supply chain and what it means for exports and imports and so on, it might be even bigger than that. And just give us an idea of some of those jobs that we might not be aware of, because I'm sure we all know the people at security we all know the the pilots and the people that check you in etc but there's so much that goes on behind the scenes right and i think that's a really good question because i love to talk about that because there is so much going on and we employ people from architects to art uh to to marketing people to engineers to doctors to nurses on site that have various jobs we have almost So there's doctors and nurses on site then?

4:53Yes, absolutely. I mean, we have mobile nurses on mobile bikes roaming there all the time. So that, don't forget, this is like a small city. People get heart attacks and other injuries. I think we have about two heart attacks a month on site. So there's a lot going on that you would compare to a small town or a village, or even a big one. It's 200 ,000 people a day going through. And, of course, things are happening. So we have a fire brigade on site. We have lots of IT people. So I think people tend to forget that airports are in high-tech industry. We have a lot of relatively low-tech jobs, yes, but all the machinery, the tech that we have on site, baggage systems, radar systems, warning systems of all thoughts, security systems of all thoughts, all need to be maintained and installed and renewed.

5:46and all of this is happening most of it with our own people or a closed supply chain and of course all of that is then overseen by monitoring systems lots of IT and more and more obviously IA right yeah and so it's so interesting thinking as a small well as I said yes small city large town at a hundred thousand people working there and 200 000 going through um what's what happens with people like the fire brigade and so on because you don't have fires often i mean obviously the incident earlier this year etc which i'm sure lives in the memory but what um what else so how does how does that work that's a good point and and what we normally say is that this is the best trained fire brigade in the world, hopefully never to be employed in real life, on real life situations, because they train a lot.

6:40We have just installed a brand new fire rig, which is the size of an A380, because we need to be able to train on a fire rig that looks like the biggest aircraft will be required to handle, and that is an Airbus A380. We are just commissioning it, so we have just invested in that brand new rig. It can do all sorts of things. you can put fires all different places you can put different fires there are there are seats inside it's all made of metal of course because you have to be able to lit it like it light it up but it has seats inside it can simulate all sorts of various accidents or fires that can happen and our fire brigade train on that all the time wow so how many people in the fire brigade uh you can't hold me to a number but it's about 100 something 110 20 people wow okay Don't forget they are on a 24 hour shift so they're always on.

7:36So it'll be about a fourth of those people are on all the time. The remaining people are circulating. And the whole place must be 24 hours pretty much. Because what time does the first flight go? Around 5 o 'clock. And what time does the last one land? 11 o 'clock. So it's actually not that long between them anyway. No, and there's lots to do in the hours in between. lots of maintenance, lots of other challenges needs to be dealt with. We try to do our, at least the passenger near maintenance, we try to do at night so we don't disturb passengers on their journey. It's not always possible, but we do what we can to make the noisy stuff during night.

8:22There's also aeronautical maintenance, so stuff we can only do when there are no aircraft landing or taking off. I mean, a good example is last year we resurfaced the northern runway, and this year we're going to resurface the southern runway. That happens every 10, 12 years. And that is an enormous operation. You won't imagine if you see it. I've been out there a few times. Literally at 11 o 'clock, everything is lined. You have 120 vehicles lined up in a long row waiting for the responsible airport manager to say, okay, the runway's closed. then you'll see all these vehicles go out. And this is trucks and specialty vehicles, and they will scrape off 10 centimeters of tarmac.

9:05You'll then have cleaners coming in. You will have machinery to lay down new tarmac. And they will manage to do about 100, 110 meters at best during one night. Yeah. And then they'll all vacate, you know, half an hour before or in good time before the first aircraft is landing. And, of course, we have to make sure the tarmac is actually operational so that it's hard enough. And imagine scraping off 10 centimeters, 10 centimeters, quite a lot that you need to do and then relay that in a very, very accurate way, right? And then vacate. And then you do this next thing. So this goes on from June to September every single night because there's 3 ,500 meters of runway.

9:48And if you only do 100 meters a night, you can imagine it's going to take a long time before you're done. So stuff like that, People don't see that, but I can show you some amazing video from what happens and how everybody's just ready like a military operation on the word go. But I bet it's like one team type thing, isn't it? How interesting. And those must be probably quite specialized people as well. I mean, talk to us about the tarmac generally. I think it's quite interesting because, you know, people will know that the third runway is you know it's been a long process going back to the 1980s and you know talks about 50 billion for it to kind of come in and obviously that's some extras around the hangars etc and so on that have to be completed as well but it seems a lot of money for a runway so just talk as well it's I think the important thing to understand and And remember, it's not all about tarmac at all.

10:48I mean, laying the runway itself, we say, is about 21 billion. Now, a third of that is pretty much purchasing the land. Another third of that is preparing the land. So if you take two-thirds out of that, you're left with about 7 billion for actually putting the runway in. So I think people forget that when you compare with other countries, many other countries have the land reserved or it actually already belongs to the airport. We have to pay for it. We then need to get people to vacate it. That takes an enormous amount of money off this project. And then we have to put it in a runway and tarmac, and that is maybe a third of that, of the 21 million.

11:30Then we have another about 12 billion put in for building new terminals and so on. Don't forget, London will not just get a new runway. It'll get a totally renewed airport. and that's the 33 billion we're talking about. I know they're talking about 49 billion, but that is work inside the current two runways that fundamentally is governed by a different process. Now, it's been mentioned that number because every year we invest about a billion pounds in the existing infrastructure and that will continue and that is on the 20-year horizon. So those numbers are not really comparable and they will be governed by the regulation I spoke about earlier.

12:05So they're not super relevant in this context, but the 33 is. okay and what give us a sense of where everything is at because it's gone backwards and forwards so many times now where are we to the sort of average business listener who is probably uses heathrow semi-regularly where are we with a third runway we are at a point where discussion will be going back and forth obviously the the airport commission did a a big piece of work to determine which option was the best one. And there are many considerations there. There's climate, there's community, there's, of course, operability, buildability and so on.

12:50And ended up concluding that a runway to the immediate south, sorry, northwest of the current two runways is the most efficient locations with all these factors taken in. Also, when it comes to how much noise will people in London be exposed to? and so on. So all these factors have gone in. So it's not just one factor, it's a multitude of factors. And government then last year asked for submissions of proposals to how to do that best, and that's what we did in September last year. And government is now considering our proposal and how that plays into the airport national policy statement, which is being reviewed.

13:30That was put in place about six years ago. That needs review in order to say, does it take in all the latest knowledge on the runway? That contains lots of conditions that we will have to live up to when we build it. Community, noise, climate, but also capacity, airspace modernization. This is a project that goes far wider than just building a runway. And that is due to come out in the middle of July and hopefully can bring a lot of clarity on, okay, so what is now the process going forward? That's as far as we are ahead of us. It's still, for example, airspace modernization. There's a big difference between operating a two-runway and a three-runway airport.

14:14Now, we have quite some years before it'll be operational, so we have time to put that in place. But that is a project in itself that will make flying in the UK much more efficient. Lots of the rule book for the current airspace is from the 60s. It's not up to date. So it's long overdue to get the airspace modernized. Then it itself could take out between 5 % and 10 % of fuel burned in there. And that's from the stacking? That's from stacking. It's from more efficient flight paths, particularly. We don't do much stacking anymore, but more efficient flight paths. Today you will see aircraft almost zigzagging because they are following paths that were defined by radio stations back in the 60s.

15:00that doesn't have to be done anymore but this is a really really complicated technical piece of work that government has now started that is relevant whether we build a third runway or not the challenge is that it's different whether you operate two or three runways you can't use the same airspace modernization for two runways as you can for three runways so you have to sort of decide what you want to do and this is something that has impact on all of the UK so where we are on the third one all of this work is ahead of us also the longer term regulation how is Heathrow going to be regulated in the future because the runway is not like a five or ten year build it's for the next 50 years how do we make sure that we get the best and most efficient financing for our customers for our airlines so they don't pay more than they can afford but also make a division case for our shareholders of course and there we talk about you know do we look at a 30 year 20 year horizon so there are many many technical things that still help us.

15:55But hopefully with the ANPS review coming out in the middle of July, we will get clarity on these issues so we can really start doing the more fundamental stuff. And talk to us about the shareholders as well as then let's go into the business model of how an airport actually operates and so on. Because again, I think it's one of those businesses that is perhaps not as well understood despite the fact that everyone pretty much uses them. But talk to about the shareholders who owns it etc. Heathrow is primarily owned by a number of sovereign wealth funds from from France from Asia from the East who have been most of them long term investors and are long term investors and who supported billions of pounds of investment into Heathrow over many years.

16:42And I think if you look at it quite successfully I mean in the last 10 years alone the passenger numbers have gone up by by 10 million without us actually having space for another aircraft that we've been full when it comes to aircraft movements for many many years but despite that we managed to put another 10 million passengers in cooperation with our airlines which is primarily about putting in bigger aircraft and putting more people on those those aircraft is that yes i was going to say how have you done that because you haven't had an extra runway no but but we are coming to the end of that uh and that's why we need a thorough runway And we are, if you ask me, too late in realizing that.

17:17We should have built it 20 years ago, so we would have a more sort of flattened out utilization curve. Now we will basically run until we're full, which will be about 10 years from now. If you look at our growth rate in the next 10 years, it will probably be around a percentage a year, 1 % a year, which means that we will lose market share when you compare to the average growth of maybe 3%, 3.5 % in the global aviation industry. So we already now know that we are going to be behind, which I personally find frustrating. But there is no more space. And if you look at the utilization of Heathrow, which is quite interesting, I think people don't realize that.

17:56We operate 6.5 passengers per square meter of airport per year. Sounds a bit random. But just to compare, the busiest airport in Europe apart from us is Frankfurt. And they operate 2.75. We have three times more densely utilized than any other airport in Europe. And if you ask me, and it's not my doing, it was there before I came, that is a huge success. And I personally think people should be more proud of what's actually happening at Heathrow every day because it is magic. And I talked about the three underground railway stations, by far the best utilized two runways in the world. On top of that, three terminals, which also are run hugely efficiently.

18:43And that is, of course, why Heathrow is busy. And that is why we have less resilience than most other airports. You know, when something goes wrong, we're more compressed, so we have less time to catch up, right? It's because we are so densely utilized. So Heathrow is, in that sense, by far the most efficient airport in Europe. and I think people should be quite proud of how far Heathra has gone in that sense but we are just getting to the end of the possibility of that of putting in more and that's why a third runway is direly needed. And so what do the shareholders measure your job on though?

19:24They measure that on a number of things but a lot of it is customer focus so the satisfaction of of passengers. We measure that every single month quite in a quite a scientific manner with lots of responses so we know where we are. And luckily that has been improved quite notably in the last couple of years. They measure me on operational efficiency. They measure me on climate impact for which we have commitments that we need to live up to. They measure me on cost of course as well and financial results, no surprise. So those are the main factors, including, for example, security waiting times.

20:06Okay, you'll see who mentioned on that. Yeah, that's part of our passenger satisfaction. And that's one of the areas where you've seen the investment in new technology. And we're talking about skills and so on, and I might want to come back to that. but that has required a substantial skills upgrade to operate that new machinery, which is much more based on AI, but has also reduced flow times. I don't know when you were latest at Heathrow, but the waiting time, 98 % of passengers wait less than five minutes to go through security. That's absolutely world-class compared to anyone. You've also seen that our passenger satisfaction in that area has increased dramatically for that reason.

20:47But that's what new technology can do for you, amongst others. So, yeah, those are the main issues I'm mentioning. And so how does the business model break down then? Obviously, airlines pay for slots and so on. But what are the other… Airlines actually don't pay for slots. I think people think that if you want a slot at Heathrow, you can purchase one from another airline. But Heathrow doesn't make money on that, which is an interesting observation or interesting model in that we have actually built the infrastructure and owned the land, but we don't actually have the ownership of the slots. They are owned by the airlines.

21:32That's sort of a legacy thing that goes back many, many years, but it also means that slots are traded at Heathrow between 20 and 50 million pounds, but we don't make any money on that. that is entirely done between the airlines and there's some different airlines have different parts of the slots, they own a number of slots and they are time bound on the day and so on so we don't make any money on that and never did and that's also why I'm saying that when people compare us to a monopoly I would say yes in terms of our location, you know there's no other airports right here but there are definitely other airports in London but the scarce resource at Heathrow is in fact the slots and not the airport itself.

22:14The way we are remunerated is that the airlines pay a fee per aircraft coming in and a fee per passenger going through. And that's the main source of our revenues. Then we make income by offering. Explain that bit again to me, sorry. Yeah, the airlines... Per what? the airlines pay a fee per aircraft a fixed fee by the size of aircraft and then they pay a fee per passenger okay that whether that passengers slot is filled or no they simply pay per passenger we count the amount of passengers that go through the airport and they pay for that so that has nothing to do with the aircraft or how much have what the load factor of the aircraft is they simply pay for the passenger it's like you go to the cinema and you pay go through it's a pretty similar to that uh so so that's how we are remunerated and that's you know 50 plus percent of our income is from what we call airline charges then we make money by offering parking all the shops we have uh tendency we have we are quite a big you know uh uh real estate owner and we we let out uh real estate so so those are the main sources of our income.

23:33What complicates it all in a bit is that all of that money, even if we make it on parking or on shops, that's all put into one big pool that is then divided out to determine the price to the airlines. So we don't get to keep anything separate. If we make more money on parking, it goes into the big pot and actually helps reduce the overall price for the airlines. right okay that is um and that's the simple version it is it is hugely complicated because there are many uh other issues that are going into that calculation but the simple version is that definitely okay and i know a very popular question when i said that you were coming on was to ask how uh what shops decided that go in at airports why are there always you know sort of two wh smiths including WH Smith books and a luggage shop?

24:28Well, two things, really. We look at three things, maybe. But one, first of all, what do we think our passengers would like? Yeah. Because fundamentally that makes them buy things, which is the aim of this. So it's all sort of carefully curated based on what passengers are asking for. And that's why you have what we call travel essentials, because people do want to buy another charger or they do want to buy a suntan cream and so on, right? And of course, our obligation to what we call the overall till is actually that we get the best out of that. That also benefits airlines. So that's sort of our obligation.

25:08So the other consideration is fundamentally how can we generate the highest turnover per square meter? We don't have enough square meters, if you like. We would like to have more square meters to broaden out the offering that we have, if you like, to the benefit of passengers. You would have seen in most airports in Europe, for example, over the past 10 years, a shift from shops to food and beverage. More people spend more time and more money on eating and drinking than they did 10 years ago. Just to give an example. So you've seen a clear shift from shops, and the same at Heathrow, from shops to food and beverage restaurants.

25:44Why is that? Well, I think that is a trend that goes throughout society. I mean, if I go 20 years back and somebody proposed that I would be paying five pounds for a coffee latte, I would have probably told them they were crazy. And now I happily pay five pounds for a coffee latte, right? So I think the world has definitely moved from a more, you know, asset-based, if you like. People don't buy so many televisions and fridges and so on anymore. They buy much more experience. So we are moving towards a much more experience based sort of economy or at least a leisure economy. People are spending more on travel.

26:26They're spending more on experiences than they spend on things and stuff. And I think you probably recognize that in your own economy. And that is definitely a global trend. And that's also why you see people travel. And that's also why you see, I think, the travel market, so to speak, ever increasing. because everybody wants those experiences, and they are. And that's why when people ask me about the futures amount, I'm less concerned. There are about 3 billion people in the world, and about easily 2 billion people in Africa, a billion people in India, and about a billion people in China who have either never traveled or only traveled very, very rarely.

27:06We travel about three, four times a year. If you take all those people and say they also want to travel three or four times a year, the demand is enormous. So and that is not just business, that's definitely also leisure. And that means that the demand for airports, if we just extrapolate that, is actually quite high. And also why I think that we really need a third runway at Heathrow. The consequences of not taking that decision are much bigger than the consequences of taking the decision. because the economic growth, the skills, the innovation that we forego by doing that are enormous. I agree.

27:49It's a really good point around the traveling and the increase in it. And London is always going to be one of the world's top 10 visited cities. Exactly. So, yeah. Why do you think politicians have struggled with it for so long? Of all different stripes as well, like it's... it's of course i've not been here during all that yeah during that period but i have of course looked at it i think it is because it is complicated yeah you know uh it is difficult it's not easy and i can appreciate why it's not easy um uh because most places like amsterdam you know when they built the last runway which is not that long ago they had the land reserved you know everybody knew that sooner or later there was going to be a a a runway now that didn't mean that people didn't complain but but at least they didn't have the challenges that we have here where where we have to purchase the land, which is not a particularly pleasant aspect of what we're doing.

28:41I think what maybe have not been explained well enough are the consequences of doing, all positive mostly, and the consequences of not doing. Because the consequences of doing it is an enormous injection. I mean,£33 billion over 10 years, in addition to the£1 billion we already invest, We're looking at four billion pounds a year of investment into a 90 percent, 95 percent UK supply chain. So this goes all over the country. This is not about London because most of our supply chain, supplying all sorts of fences and concrete and steel and whatever, that's outside of London. So the consequence of building is an enormous injection.

29:28On top of that, you, of course, get the economic benefit of then having it in 10 years time. having the runway, meaning a percent, maybe it could be 17 billion, I think, a year value increase for the UK economy, which affects exporters, leisure, tourism, business, UK PLC. I mean, the financial services are critically dependent on connectivity. And if you don't do it, you lose all on all of that. Plus, you get a level of stagnation. So I think that maybe we have not been able to explain well enough to say this is a huge opportunity for the entirety of this country. And if you then look at skills and jobs, one is the amount of jobs that obviously goes into this.

30:14This is thousands of jobs every year, 10 ,000 jobs every year that is paid for by this. Because much of the supply chain is manual, if you like.