HIGHLANDS AND ISLANDS

AIRPORTS LIMITED
OPERATING AIRPORTS THAT DELIVER VITAL
ECONOMIC AND SOCIAL BENEFITS FOR THE REGION

Corporate Plan 2005/2015

Highlands and Islands Airports Limited
Contents
A PLAN FOR DEVELOPMENT
AIRPORT OPERATIONS IN THE
HIGHLANDS AND ISLANDS
KEY AIMS AND OUTCOMES
FUNDING AND INVESTMENT
DIRECTION, MANAGEMENT
AND CONTROL
PRIORITY DEVELOPMENT PROJECTS
PROGRESS IN PARTNERSHIP
CORPORATE DIRECTORY
H
ighlands and Islands Airports Limited (HIAL) was formed as a
private limited company in 1986 as a subsidiary of the Civil
Aviation Authority. Ownership transferred to the Secretary of
1 State for Scotland, now the Scottish Ministers, on 1 April 1995.
HIAL is sponsored by the Scottish Executive through the Enterprise,
2 Transport and Lifelong Learning Departments Transport Group and
receives subsidies from the Scottish Ministers in accordance with
Section 34 of the Civil Aviation Act 1982.
4
The company operates 10 airports in the Highlands and Islands of
6 Scotland; more airports than any other UK civil operator. The airports
are located at: Barra; Benbecula; Campbeltown; Islay; Inverness;
7 Kirkwall; Stornoway; Sumburgh; Tiree and Wick. In 2004/05, the 10
airports handled more than one million passengers, ranging from 6,000
at Tiree to almost 565,000 at Inverness.
8
HIAL is responsible for providing airport infrastructure, facilitating
9 lifeline air links, developing air traffic in the region and supporting
economic sustainability and social inclusion in Scotlands remoter
9 communities.
TIER ONE
Inverness Airport
TIER TWO
Kirkwall Airport
Stornoway Airport
Sumburgh Airport
TIER THREE
Barra Airport
Benbecula Airport
Campbeltown Airport
Islay Airport
Tiree Airport
Wick Airport
 Corporate Plan 2005/2015

A Plan for Development

A
ir travel is the only mode of transport which provides quick access to key regional This plan clearly defines our strategic priorities
centres within the Highlands and Islands and to the rest of Scotland, the UK and and the actions that we will undertake to achieve
internationally for business, leisure and social welfare travel. the targeted outcomes of passenger growth and

Set against this background, HIAL has delivered significant benefits for the region and enhanced scheduled air connectivity. To do this
Scotland as a whole over the past decade, including new air routes and frequencies, we will maintain fit for purpose airport
improved airport infrastructure and enhanced services for both our airline customers infrastructure and make the revenue and capital
and passengers. investment necessary to bring about service
enhancements in line with the opportunities
HIALs corporate plan is prepared annually and sets out the strategy for the development
available to us. This clarity is fundamental to
of our operations and business for the decade ahead. The plan continues to reflect our
transition from a position of service delivery on behalf of Government to one of meeting HIALs development and provides the catalyst for
market needs and applying commercial principles to our business. innovation and dynamism within the company.

A key element of this plan is the ongoing process of business transformation to ensure The vision driving this strategy is for our airports
that we meet the expectations of our shareholder, the Scottish Ministers, by providing a to continue to play a vital economic and social
value for money operation and prioritising our resources in line with both Scottish and role in the life of the Highlands and Islands;
UK aviation policy direction. enabling communities and businesses to prosper
through benefiting from an effective network of
HIAL operates as a single company and makes investment strategically amongst all 10
airports. There is no geographical bias, nor is there any policy to equalise spending scheduled air services. We will achieve this
across the airports. Investment is prioritised according to operational and regulatory through the strategic delivery of airport services
requirements and where the best economic and social outcomes can be achieved for the and investment and by working in partnership
region as a whole. The difference between expenditure and revenue in our operations is with our many stakeholders in the public and
funded by subsidy from the Scottish Executive. private sectors.

ALEX MATHESON OBE

CHAIRMAN

1
Highlands and Islands Airports Limited

Airport Operations in the

Highlands and Islands

H
IAL provides the majority of the infrastructure necessary to
support the Scottish Executives desire to see the social and
economic viability of the Highlands and Islands sustained
and enhanced by air services.

Most scheduled air services in the region are provided on a

commercial basis. Since 2000 the number of passengers using
HIALs airports has increased by more than 30%, exceeding one
AIR LINKS ENHANCE ENORMOUSLY THE
million in the year ending 31 March 2005. This passenger growth is
ACCESSIBILITY OF THE HIGHLANDS AND
the result of our focus on route development with the greatest gains ISLANDS. WE WILL CONTINUE TO WORK
being achieved at Inverness. By working closely with airlines a WITH HIAL AND THE AIRLINES TO HELP
number of new air routes have been successfully established and the DELIVER AN AIR TRANSPORT NETWORK
frequency and capacity of existing services have increased. THERE THAT IS SUSTAINABLE IN THE
LONG TERM; SERVES SOCIAL AND
Inverness, Kirkwall, Stornoway and Sumburgh airports handled 90% ECONOMIC NEEDS; ENHANCES INTERNAL
of HIALs total passengers in 2004/05. All but five of the air routes AND EXTERNAL BUSINESS LINKS;
DEVELOPS OPPORTUNITIES FOR THE
currently serving the region carry less than 50,000 passengers per
PROMOTION OF INBOUND TOURISM; AND
annum. The exceptions are the four scheduled services to London RESPECTS THE UNIQUE ENVIRONMENTAL
from Inverness and the Aberdeen-Sumburgh service. Both the HERITAGE OF EACH LOCATION.
Inverness-Belfast and Inverness-Bristol services starting in July 2005 SCOTLANDS TRANSPORT FUTURE,
are expected to handle more than 50,000 passengers each year. SCOTTISH EXECUTIVE, JUNE 2004

Scheduled air services that cannot be justified commercially but

which provide lifeline links are supported by Public Service
Obligations (PSOs), funded by the Scottish Executive and the island
local authorities. The PSOs currently in place include routes between
Glasgow and Barra, Campbeltown and Tiree and inter-island services
in Orkney, Shetland and the Western Isles.

2
 Corporate Plan 2005/2015

HIALs costs are met by three main sources of income: aeronautical

revenue earned from aircraft and passenger movements;
non-aeronautical revenue earned incidentally at the airports; and
subsidies from the Scottish Executive. HIAL also sources funding in
the form of grants from European, national and local bodies for
specific developments.

Much of HIALs revenue and capital expenditure is driven by the

airport industry regulators and operational necessity. More than 300
members of staff are employed directly by HIAL at its 10 airports and
head office. Staffing levels at the airports are largely determined by
two factors: the industry regulators and opening hours. Members of
the Airport Fire Service and Air Traffic Services make up more than
200 of the companys employees.

The majority of an individual airports costs are fixed rather than

variable. In 2004/05 the average revenue subsidy per passenger
required to operate the airports was 21. The airports at Inverness,
Kirkwall, Stornoway and Sumburgh, those with the highest volumes
of passengers, were more economic to run as the majority of an
airports revenue costs are determined by the opening hours and
operating category (set by the largest aircraft regularly using an
airport), which in turn dictate the operational staffing level. This
creates a fixed cost proportionate to the category and opening hours
that exist at an airport whether there are 5,000 or 500,000
passengers using a facility.

For example, in 2004/05 each of the 565,000 passengers at

THE CONTINUING AVAILABILITY AND
Inverness required revenue subsidy of 6 while the 6,000
DEVELOPMENT OF AIR SERVICES IS
passengers at Tiree each required 119 of revenue subsidy. Tirees
FUNDAMENTAL TO THE EFFICIENT
passengers were additionally subsidised via the Scottish Executives
OPERATION AND MANAGEMENT OF
ECONOMIC AND SOCIAL ACTIVITIES PSO on the route between the island and Glasgow, Tirees only
ACROSS THE HIGHLANDS AND ISLANDS; scheduled air service.
INCLUDING BUSINESS AND
The infrastructure required to operate an airport is in itself expensive
ADMINISTRATION, HEALTH AND
to maintain and develop. Although capital expenditure varies on a
EDUCATION, TOURISM, FREIGHT, MAIL
AND NEWSPAPERS AND FOR SUSTAINING
year by year basis there will be an ongoing requirement for
THE OVERALL QUALITY OF LIFE. investment to maintain operations across the 10 airports. Priority is
given to those projects which are necessary to maintain existing
THE FUTURE OF AIR TRANSPORT,
DEPARTMENT FOR TRANSPORT,
operations or that demonstrate a business case for service
DECEMBER 2003 improvement.

3
Highlands and Islands Airports Limited

Key Aims and Outcomes

HIAL MISSION STATEMENT:
TO OPERATE AIRPORTS THAT DELIVER VITAL
ECONOMIC AND SOCIAL BENEFITS FOR THE REGION.

ACTIONS FOR DELIVERY

H
IALs remit from the Scottish Ministers is twofold: to maintain
and operate 10 airports and to support economic A series of company-wide actions support the key aims. The actions
development and social inclusion. This fits with both Scottish for delivery are:
and UK policy direction regarding aviation in the Highlands and
To seek additional air services at the airports to enhance
Islands.
connectivity.
The principal outcomes that HIAL seeks to achieve over the period of
Focusing on scheduled passenger routes with airlines being
the plan are summarised in its mission statement and aims,
encouraged to introduce new routes and increase frequency or
supported by its strategic actions. These provide the basis for the
capacity on existing routes.
companys operations and are intended to meet the expectations of
the Scottish Ministers and benefit the communities and economy of To prioritise the development of Inverness airport as the regions
the region. principal air transport hub.
To apply commercial principles to the business operation.
KEY AIMS
Adhering to strategic investment tiering priorities.
Three key aims summarise HIALs overarching objectives and provide
Controlling expenditure by good business practice.
the rationale that drive the companys operations.
Achieving operating costs proportionate to the benefits
To operate airports in support of economic and social
provided by each airport.
development.
Developing income from new and existing revenue streams.
By providing fit for purpose airport infrastructure.
To operate to adopted standards of corporate governance in
By working to support existing levels of scheduled air
connectivity, including lifeline and welfare services. respect of:

By working with airlines and other stakeholders to develop new
scheduled air services and improved connectivity.
To use resources efficiently to achieve continuity or enhancement
of service.
Through rigorous analysis to achieve best value.
By prioritising outcomes with the greatest benefits for the
region.
To promote the vital role of aviation in the region in terms of:
Transport connectivity and strategy, and economic, social and
environmental sustainability.
Meeting regulatory requirements.
Health, safety and the environment.
Openness and accountability.
To seek additional funding and support through partnership
working.
By working with principal regional stakeholders in the local
authorities, Highlands and Islands Enterprise network,
HITRANS, VisitScotland and private sector.
By achieving maximum benefit for the region from available
European Union funding.

4

STRATEGIC OUTCOMES
HIALs intended outcomes are divided into two
categories: socio-economic and operational. The
differing pressures and opportunities that HIAL
faces mean that costs and benefits will often have
to be balanced against one another. These factors
will be addressed on an ongoing basis through the
management of the business and the delivery of
the strategy set out in this corporate plan.
HIALs targeted socio-economic outcomes are:
Sustained growth in the total number of
passengers using the 10 airports.
The development of Inverness to reach one
million passengers per annum by 2010.
Minimum growth of 4% per annum at
Kirkwall, Stornoway and Sumburgh airports.
Total passenger growth of 10% per annum for
the 10 airports.
Enhanced scheduled air connectivity for the
region.
New cross-border and international services
at Inverness.
Additional frequencies between Kirkwall,
Stornoway and Sumburgh airports and
Inverness, Aberdeen, Edinburgh and
Glasgow airports.
Direct air links between Scandinavia and
Kirkwall and Sumburgh airports and between
Sumburgh and the Faroes.
Corporate Plan 2005/2015
The successful exploitation of other commercial
opportunities within the network.
The development of Inverness Airport
Business Park.
Market value returns generated from rentals,
concessions and other third party activity
across the 10 airports.
Additional revenue generated by the
disposal of assets that are surplus to
operational requirements.
HIALs targeted operational outcomes are:
Sustainable operating costs that, where
possible, reflect the traffic levels, investment
tiering priorities and business development
opportunities at each of the 10 airports.
The safe and cost-effective provision of airports
to regulatory standards.
The development of airport infrastructure,
where appropriate, to support passenger
growth, enhanced connectivity and the efficient
operation of the business.
The use of best working practices and new
technology to enhance operational efficiency
and reduce revenue operating costs.
These outcomes will ensure that HIAL fulfils its role
as a catalyst for economic growth and social
sustainability in the region while providing a value
for money operation to the Scottish Ministers.
5
Highlands and Islands Airports Limited
Funding and Investment
I
n 2004/05 the total cost of HIALs
operation was 32.5 million. Receipts
from air traffic and other income
totalled 10.8 million. Subsidy of 21.4
million was provided by the Scottish
Executive. The subsidy was split 17.3
million revenue and 4.1 million capital.
Subsidy from the Scottish Executive will
continue to be divided between revenue
and capital costs and over the next three
years HIAL aims to hold its revenue costs
at the 2004/05 level, subject to
operational and strategic requirements.
This will allow greater levels of investment
to be made in both the physical
infrastructure that supports air services in
the region and the delivery of service
enhancements through route
development.
HIALs strategy is reflected in its
investment tiering policy which takes
account of the varying degrees of air
traffic, passengers and opportunity for
development that exist at each of the 10
airports. While all the airports provide
socio-economic benefits for their
communities these benefits are
proportionate to the number of flights and
passengers they handle and the relative
size and population of each area served.
HIAL takes account of the differing
operational and development needs at
each of the airports within a strategic
framework that seeks to exploit the best
opportunities for development across the
company as a whole.
Tier One. All necessary investment will
be made available at Inverness airport
to enable it to prosper and develop
as the regions most strategically
significant air transport hub.
6
Tier Two. The airports at Kirkwall, Stornoway and Sumburgh
will receive investment required to improve their facilities to
attract additional aviation revenues and enhance scheduled
air connectivity.
Tier Three. The airports at Barra, Benbecula, Campbeltown,
Islay, Tiree and Wick will receive investment necessary to keep
them fit for purpose and,
subject to the availability of HIALS STRATEGY IS REFLECTED IN ITS INVESTMENT
resources, achieve service TIERING POLICY WHICH TAKES ACCOUNT OF THE
VARYING DEGREES OF AIR TRAFFIC, PASSENGERS
enhancements.
AND OPPORTUNITY FOR DEVELOPMENT THAT EXIST
While traffic volumes are AT EACH OF THE 10 AIRPORTS.
relatively low at most of the
airports, investment and operating costs reflect the need to
conform to the standards required by the Civil Aviation Authority
and other regulatory bodies.
Capital projects will be prioritised with reference to investment
tiering, business risk and operational necessity to maintain the
operability of an airport. HIALs capital plan will be maintained
on a rolling three-year basis to deliver the companys priority
capital investment projects. Items which do not meet the priority
criteria will be deferred as necessary, subject to business risk.
The capital investment priorities for the company in 2005/06
are:
Upgrading Benbecula airport terminal building to meet
National Aviation Security Programme requirements and
provide an enhanced passenger facility.
Extending the 09/27 runway at Sumburgh airport.
Extending apron space at Inverness to accommodate
increased volumes of air traffic.
Providing additional car parking at Inverness airport.
Completing environmental works to treat run-off water at
Inverness airport in line with Scottish Environment Protection
Agency requirements.
HIAL is also subject to a wide variety of expectations from its
stakeholders and serves a diverse region with differing needs.
Consideration will continue to be given to stakeholder priorities
in the formulation of strategy. Regulatory and operational needs
are, however, given primary consideration in order to maintain
and enhance the delivery of airport services in the region.
 Corporate Plan 2005/2015

Direction, Management
and Control

H
IALs Board of Directors is responsible for
determining the business strategy of the
company, taking into account the Scottish
Ministers expressed policy to encourage the part
of aviation in the economic and social
development of the region.

The Board is composed of six directors appointed

by the Scottish
THE COMPANYS SENIOR MANAGEMENT
Ministers. These are
TEAM, LED BY THE MANAGING
DIRECTOR, IS RESPONSIBLE FOR the non-executive
IMPLEMENTING STRATEGY AND THE DAY chairman, the Conduct, which is derived from the Model Code produced by the
TO DAY OPERATION OF THE COMPANY. managing director Standards Commission of Scotland, together with recognition of
and four non- other published corporate governance guidelines.
executive directors. The Scottish Ministers are
The companys senior management team, led by the managing
represented by an assessor at Board meetings in a
director, is responsible for implementing strategy and the day to day
non-voting capacity.
operation of the company. The current management structure is
The directors operate under their formal adoption illustrated below. It is the formal route for all information and
in March 2004 of the HIAL Board Members Code of communication purposes.

7
Highlands and Islands Airports Limited

Priority Development Projects

I
n the coming years a number of major projects will be developed by HIAL, both in terms of physical
infrastructure which will offer service enhancements and work with airlines and others to deliver new
air services and exploit commercial opportunities.

ROUTE DEVELOPMENT
The expansion of air services achieved in recent years has delivered major economic and social benefits
for the region. The development of new air routes and services will remain a top priority for HIAL and
involve detailed work with existing and new airline customers and stakeholders in the region. Inverness
will continue to be the focus for much of this activity as it has the greatest development potential of the 10
airports. HIAL will seek to derive maximum benefit from the Scottish Executives Route Development Fund
in the start-up of new cross-border and international services while also aiming to enhance Scottish
domestic services with incentive packages for airlines.

SUMBURGH AIRPORT RUNWAY EXTENSION

The 10 million extension of the airports main instrument runway has been the key aim for the members
of the Sumburgh Airport Strategic Partnership for more than two years. The partnership comprises HIAL,
Shetland Islands Council, Shetland Enterprise, and Sumburgh Airport Consultative Committee. The project
is also one of HITRANS strategic infrastructure priorities for the region. Funding commitments from the
SASP partners and the Scottish Executive via HITRANS are in place along with match funding from the
European Regional Development Fund from the Highlands and Islands Special Transitional Programme
2000-2006. Work on site started at the end of April 2005. The project has a target completion date for the
extended runway becoming operational by 31 October 2006. The lengthening of the runway will allow
larger aircraft to take off and land, improve the reliability of passenger services and make it possible to
develop new air routes and oil industry traffic at Sumburgh.

INVERNESS AIRPORT MASTER PLAN

Long term development plans for larger UK airports are now a Department for Transport requirement.
Inverness airports master plan has been drafted and will be subject to consultation with stakeholders
during 2005 for completion and approval by the end of the year. The plan outlines the development
opportunities and requirements for the regions largest airport over the next 30 years and will ensure that
it continues to play an increasingly important role in the regional economy as both a transport hub and
economic driver supporting wider business development.

INVERNESS AIRPORT BUSINESS PARK

This project is a joint venture between HIAL, Inverness and Nairn Enterprise, Moray Estates Development
Company and The Highland Council. It aims to realise the development potential of 256 hectares of land
around the airport by creating a high amenity park for business, light industrial, aviation, freight and hotel
and conferencing uses. Over a 30-year period it is estimated that the site will support as many as 5,000
full-time equivalent jobs. The construction of a new access road linking the airport with the A96 is a key
step towards facilitating the project and funding for the 4 million road is being provided by HIAL, INE, the
council and the European Regional Development Fund via the Highlands and Islands Special Transitional
Programme 2000-2006. Construction of the road is expected to start in May 2005 and take around 12
months to complete.

8
 Progress in Partnership Corporate
Directory
T
his corporate plan sets out HIALs vision for its operations and
development in the years ahead and the strategic actions that will
deliver benefits for the region.
MANAGING DIRECTOR
HIAL consults widely with its public and private sector stakeholders during Bob Macleod (retiring 27 May 2005)
the course of its work and progresses many projects in partnership with Inglis Lyon (27 May 2005 onwards)
these groups. Sharing goals and resources creates positive economic and
HEAD OFFICE
social outcomes. HIAL remains committed to working with its stakeholders
for the good of the region to ensure that air connectivity supports Financial Controller & Company Secretary
sustainable communities. Jane Thornton

In addition to its wide engagement with the people, organisations and General Manager Operations
businesses in the Highlands and Islands, HIAL also welcomes constructive Paul Clarkson
feedback on its strategy from all interested parties. Commercial & Marketing Manager
Any comments on this corporate plan should be addressed to: Alex Johnson

Human Resources Manager

Gordon McPhee
THE MANAGING DIRECTOR
Highlands and Islands Airports Limited Infrastructure Services Manager
Head Office Grant Dudgeon
Inverness Airport Public Relations Manager
Inverness IV2 7JB Nathaniel Anderson
Email: info@hial.co.uk
AIRPORTS
Inverness Airport Manager
James E Walton

Kirkwall Airport Manager

David Blackman

Sumburgh Airport Manager

Nigel Flaws

Regional Manager North (for Wick)

Angela Donaldson

Regional Manager West

(for Benbecula & Stornoway)
John Hay

Regional Manager South

DESIGNED AND PRODUCED BY HAMPTON ASSOCIATES, ABERDEEN.

(for Barra, Campbeltown, Islay & Tiree)

Roy Cartledge
HIGHLANDS AND ISLANDS
AIRPORTS LIMITED

Highlands and Islands Airports Limited

Head Office, Inverness Airport, Inverness IV2 7JB
Tel (01667) 462 445
Fax(01667) 464 216
Email: info@hial.co.uk
www.hial.co.uk