St Helena Airport inquiry

It is staggering that the Department commissioned and completed the St Helena airport before ascertaining the effect of prevailing wind conditions on landing commercial aircraft safely at St Helena. For a project of this size, we would expect the Department to have applied a thorough concept design and risk management process in the early part of any engineering works to test assumptions and highlight potential operational issues such as wind shear. Wind shear is a well-known concept in airport construction and should have been identified as an issue for St Helena. The Department was unwilling to tell us who was responsible for this oversight ahead of its own review into where accountability lies and until it has decided whether it will take legal action against its contractors or disciplinary action against its officials. Recommendation: The Department should, as soon as it is completed, send us a copy of its review identifying who was accountable for the failure to identify this key issue.

The Department did not do enough to ensure it had the appropriate technical resources and competence to build the airport. Whilst the Department does have previous experience of building an airport (in Montserrat, which opened in 2005), this is not a core function of the Department. It therefore relied upon advice from external contractors to build the St Helena airport. The Department told us that it used a variety of sources to inform its decision-making, of which the feasibility study by Atkins was an important part. It did not, however, commission an independent advisor or seek support from other departments with the necessary technical expertise to corroborate or challenge this source of advice. The Department acknowledged the potential benefit of introducing more independent challenge to its processes in future. Recommendation: The Department should develop an independent challenge function and build it into its procedures for considering the feasibility of technically demanding projects outside its core business.

The Department has not yet determined the extent or cost of the remedial action required to bring the airport into commercial use. The Department is gathering data on the impact of wind shear through computer-based and physical modelling of weather conditions on the northern approach to the runway. It is also investigating air access using the airport’s southern approach where wind shear is less of an issue but which requires aircraft to land with a tailwind. Landing with a tailwind places additional restrictions on the aircraft’s weight, potentially reducing passenger capacity. The Department is in discussion with a number of alternative airlines to provide this service because Comair, the airline currently contracted to provide a weekly commercial flight, does not have an aircraft of suitable size for landing on the southern approach. As the Department is still collecting data on wind conditions, it has not yet established a timetable for or forecast the additional cost of possible solutions. The Department is also now in a potentially difficult position when it comes to negotiating the best possible deal with a new commercial air service provider, given the obvious need for it to have a new service in place as soon as possible. 6 St Helena Airport Recommendation: The Department should write to us by April 2017, and more regularly to the stakeholders of the airport, with an update on its strategy and forecast costs for bringing the airport into commercial use.

We are extremely sceptical about the Department’s projected tourism figures and the island’s ability to support such growth in the tourist industry. We fully recognise that the Government has an obligation to support and sustain the people of St Helena. An airport on St Helena should bring benefits such as improved access to medical services and employment prospects. In order for the island to achieve economic self-sufficiency, a significant growth in tourism is required. In its business case, the Department forecast that the number of tourists visiting St Helena annually would rise from just less than 1,000 to just over 29,000 by 2042. The NAO report highlighted the uncertainty over projections for tourist numbers, not least because in 2010 the Department reduced its original projection of 59,000 tourists to 29,208 to account for possible optimism bias without any new primary research. Over-egging prospective tourism growth may have made the business case stack up but, even then, the business case for building the airport was marginal at best. The projected expansion in tourist numbers also relies on air access for tourists, the achievability of which is uncertain given the current difficulties in landing aircraft safely. Recommendation: The Department should re-calculate its projected tourism figures to provide an updated assessment of progress towards economic self- sufficiency and the consequent reduction in the Department’s subsidy.

The reputational damage to St Helena from this fiasco could further hinder its ability to attract investment. The St Helena Government is relying on investors to build the necessary infrastructure to support tourism growth. The NAO report quoted a Departmental review which found that the investment climate in St Helena is not attractive and is not competitive internationally or regionally, in part due to factors within the St Helena Government’s control such as high corporation tax and importation duty. The St Helena Government established Enterprise St Helena (ESH) to lead and champion the island’s economic development. ESH has some way to go to improve the marketing for the island’s location and attractions. Negative press reports about the airport can only have aggravated St Helena’s problems in marketing its tourist potential. Recommendation: The Department should engage closely with the St Helena Government to secure real progress against the joint Memorandum of Understanding to remove barriers to inward investment. St Helena Airport 7 1 The impact of difficult wind conditions

Wind shear is evidently not unknown to those who have visited the island and it is reasonable to expect the Department to have considered it at an early stage. We asked the Department how, if Charles Darwin could have experienced and described the problem of wind shear on St Helena in 1836, it commissioned a £285.5m airport, paid for by the British taxpayer, without properly appreciating the danger of this effect. The Department told us that it had commissioned a feasibility study from Atkins for the airport build and acted upon its recommendations. It also had received advice from other sources, such as the Met Office and the relevant regulator, Air Safety Support International (a subsidiary company of the United Kingdom Civil Aviation Authority).7

Whilst the Department was responsible for the project to build an airport on Montserrat, which opened in 2005, building airports is not a core function of the Department and it relied on external contractors for advice.8 The feasibility study conducted by Atkins was the main source of aviation advice. Atkins expressed doubts about local weather conditions, including the amount of turbulence that could be expected on approaches. It recommended that before the runway design was finalised, a charter aircraft should test fly the approaches to the intended runway. Pre-construction flight testing consisted of a single flight using a propeller aircraft.9 The Department has entered into a three-year contract with Comair for commercial charter flights using a different type of aircraft (Boeing 737, a twin-engine jet aircraft) which is currently unable to land safely due to wind shear.10

The Department explained that it has begun a review to identify who was responsible for the decisions and actions that have led to this situation.11 When asked for a view on who was responsible, the Accounting Officer told us that “My legal advisers are telling me that it is really important that they have the time to go through the work, do the analysis, establish where exactly the contractual responsibility lies, and that one thing I should not do is rush to judgement here and now in a public hearing ahead of that legal work being done”.12 The Department did, however, indicate that it might initiate proceedings against third party consultants and that it has not ruled out disciplinary action against its officials, should the review find them to be responsible.13

On whether it had received independent advice on the quality of Atkins’ work, the Department told us that the quality control and review of Atkins’ work was one of the things its current review would examine.14 It acknowledged that it could learn lessons from the Ministry of Defence on its use of red team processes, a red team is an independent group brought in to challenge an organisation to improve its effectiveness.15 We also questioned the Department on why it had not sought advice from other departments 6 Q 9 7 Qq 10, 13, 19 8 Qq 32,33 9 Qq 16–19, 38; Atkins St Helena Access Feasibility Study - Final Report (January 2005), para 7.82 10 Qq 4-5; C&AG’s Report, para 3.18 11 Qq 9, 11 12 Q 14 13 Q 35 14 Q 39 15 Qq 75, 78 St Helena Airport 9 given the specialist nature of the project. The Department responded that the Air Safety Support International, which it described as “basically a subsidiary of the Department for Transport”, was heavily engaged with the airport build. The Department explained that it is now holding constructive discussions with the Ministry of Defence on how to resolve the St Helena airport problems.16 Rectifying the problem

The Department and the St Helena Government are currently considering options for addressing the impact of difficult wind conditions on landing the aircraft safely and the former has not yet forecast the additional cost of each option.17 The Department is working on finding a way for aircraft to land safely to meet the island’s access needs.18 Its priority is get what it described as “a decent service up and running” by developing the right mix of planes, schedules and routes to land on either the northern approach to the runway as intended, or its southern approach, which would involve landing with a tailwind (aircraft normally land into the wind where possible). The Department is currently collecting meteorological data to allow it to explore options for landing aircraft safely on the northern approach to the runway. This involves physical modelling (wind tunnelling), computer modelling and laser range detection (LIDAR). Air service providers, such as Comair, that want to use the northern approach will be supplied with these data.19

The southern approach solution involves landing with a tailwind which places restrictions on the aircraft’s weight and therefore its payload. The Department is considering options such as using smaller aircraft. We queried whether the Department could have built a shorter, less costly runway to support such a service. The Department told us that a shorter airstrip would not be suitable for scheduled commercial flights. Nor could a shorter runway accommodate the size of aircraft required to fly to St Helena (taking into account possible diversions to Ascension Island and fuel contingencies).20

We asked the Department whether there was an open cheque book or a limit on how much it would spend to make sure the airport works.21 The Department noted that, whilst Ministers would not want an open-ended commitment, it considered the best way for the Government to fulfil its commitment to the residents of the island to maintain access was through the airport. The Department agreed to write to us before April 2017 with details of revisions to its forecast of costs for the project. It also said it needed to provide updated information to the islanders and others on its progress.22 16 Q 74 17 C&AG’s Report, para 12 18 Qq 6, 44 19 Qq 25, 43, 52, 55 20 Department for International Development (SHA0004) 21 Qq 94, 96 22 Qq 90, 94–97 10 St Helena Airport 2 Economic growth on St Helena

The Department’s business case for the airport acknowledged the project had two key areas of uncertainty: forecast passenger numbers (given that the island was a largely untested tourist destination) and the extent to which St Helena will be able to maximise the benefits that could be derived from air access.23 The Department believes that investors are unlikely to want to take a risk on St Helena before the air service is operational.24 Tourism

The Department’s business case for building an airport on St Helena was based on a marginal benefit-cost ratio of 1.06, when potential spending by tourists is included as a benefit. The business case projected that the number of tourists visiting St Helena annually would increase from its base level of 959 in 2015 to 29,208 by 2042. The Department told us that the number of tourists visiting the island reached 4,000 in 2015–16, compared to almost 1,000 set out in its business case six years ago. It is unclear whether this comparison is on a like-for-like basis.25

In making its forecasts for tourist numbers, the Department looked at number of other islands where airports had been built. However the islands taken as comparators were the Solomon Islands, Easter Island, the Galapagos and Cape Verde, all of which had air access prior to their airports being upgraded. They are all also larger than St Helena, which increases their capacity for supporting a tourist industry. The Department told us that it did not think it was “completely preposterous” that its five-year tourist growth target of 7,000 annual tourists could be met when the airport is up and running. It explained that its initial projections were as high as 50,000 but were halved because it did not believe they were realistic. Neither the Department nor its consultants undertook any new primary research to confirm these revised projections.26

The Department’s business case predicted that tourists arriving by air would spend £65.8 million between 2011 and 2055. This projection was based on the assumption that each would spend £172 per day in 2016, increasing by 1% a year in real terms.27 In 2016, the Department’s research suggested that spending per day per tourist could range from £82 to £195. The Department’s marginally positive benefit-cost ratio is dependent on tourist spending towards the top of this range.28 Attracting investment

The Department agreed to finance the airport subject to the St Helena Government implementing reforms needed to open the island’s economy to inward investment and increased tourism. A Memorandum of Understanding between the Department and the St Helena Government in 2010 sets out their respective responsibilities in this regard.29 23 C&AG’s Report, para 2.17 24 Q 67 25 Q 70; C&AG’s Report, paras 2.8, 2.20; Figure 6 26 Qq 49, 62, 104; C&AG’s Report. paras 2.16, 2.19 27 C&AG’s Report, Para 2.22, Figure 5 28 C&AG’s Report paras 2.22–2.24, Figure 8 29 Q2; C&AG’s Report, para 3.3 St Helena Airport 11

In 2016, there were 150 tourist beds on St Helena, enough to accommodate the number of tourists the Department forecasts will visit St Helena in the first six years of the airport’s operation (assuming an even spread over a year).30 The Department told us that there would need to be a private sector response so that the supply of hotel places meets the Department’s forecast demand of 29,208 tourists projected to visit St Helena annually by 2042. At the time the NAO reported, the island was unable to attract outside investment. The Department said there is a plan, which the St Helena Government has been taking forward, to build the first of, potentially, a series of hotels.31

The St Helena Government established Enterprise St Helena (ESH) to lead and champion the island’s economic development. In 2014, the Department concluded that ESH’s potential impact had been affected by the St Helena Government’s policies and practices and that the island’s investment climate was not conducive to investment from large investors. There are numerous unfavourable factors such as high corporation tax and importation duty; an inadequately trained and small labour force; rigid planning and land control laws; expensive telecoms and electricity and slow, expensive internet.32

The Department explained that investors are unlikely to invest in St Helena ahead of there being a scheduled air service to St Helena. We agreed that whilst there was a link between investment and progress on the air service, there was a need to differentiate between this and what is within the gift of the St Helena Government to change.33

We asked the Department what it did to promote tourism on the island, given that fewer than 40% of respondents to a survey in January 2015 knew that St Helena was in the South Atlantic. In April 2015, the Department’s review of ESH’s achievements in 2014–15 concluded that it had moderately exceeded expectations for better establishing St Helena as a tourist destination. The Department told us that it had been working to develop a marketing strategy and ‘other things that need to be in place’ to maximise St Helena’s attractiveness as a tourist destination.34 30 C&AG’s Report, para 3.15 31 Q64; C&AG’s Report, para 3.13 32 Qq 66–67; C&AG’s Report paras 3.8, 3.9 33 Qq 66, 67, 69; C&AG’s Report paras 3.8, 3.9 34 Q 98; C&AG’s Report, para 3.21. 3.22 12 St Helena Airport