Manchester and Stansted set new passenger records as ministers risk taxing growth out of the skies

Manchester and Stansted have spent the past year doing what British aviation has become adept at since the pandemic: absorbing shocks, improvising around constraints, and still finding a way to grow. Both airports have posted record passenger totals, consolidating their places behind Heathrow and Gatwick as the country’s third and fourth largest hubs. Yet the figures arrive with a warning attached. Their owner, Manchester Airports Group, says a looming surge in business rates threatens to turn a recovery story into a slow squeeze on investment, at precisely the moment ministers talk most loudly about growth.

In the year to March 31 Manchester handled 32.3 million passengers, up 3.6 per cent. Stansted reached 30 million, a more modest rise of 0.4 per cent but still a new high. They remain some distance behind Gatwick, with 43 million, and Heathrow, with 84 million, but their trajectory matters because it says something about how travel demand is rebalancing across the country, and about the shifting politics of infrastructure in a Britain that has promised much to the regions and delivered unevenly.

The group that owns both airports, also running East Midlands, reported a 12.8 per cent increase in revenue to £1.5 billion for the year, while operating profit rose 15.5 per cent to £303.9 million. The figures reflect a sector that has regained its confidence, although it continues to operate under the shadow of geopolitical disruption, including hostilities in the Gulf that have complicated flight patterns and fed periodic spikes in cost. That these airports have still managed to set records is evidence not only of pent up leisure demand but of a structural change in how Britons, and the airlines that serve them, are using regional gateways.

Manchester’s performance has long been the most significant of the regional airports, in part because it sits at the centre of a large, densely populated catchment and in part because it has pursued, with mixed success over the years, the ambition to be more than a local departure hall. If Heathrow is Britain’s global front door, Manchester has increasingly tried to become a second entrance, capable of sustaining a long haul network and drawing traffic from across the North, the Midlands and parts of Scotland and Wales. The airport has been undertaking a decade long transformation of its terminals, a programme that has improved capacity and passenger experience but has also tested the patience of regular travellers, and of the businesses that rely on smooth access.

Stansted’s story is different. It has grown into a major airport in passenger terms, and its approval to handle up to 51 million passengers a year suggests still more expansion is planned. But it remains heavily shaped by the economics of short haul travel. Ryanair is its anchor tenant, accounting for more than two thirds of passengers, and the challenge for Stansted has been to build the kind of intercontinental network that turns an airport into an international hub rather than a high volume point to point machine. Airlines with global route maps still prefer Heathrow when they want London, and that preference reflects a decades old concentration of slots, corporate travel patterns and alliance networks that are difficult to dislodge.

MAG’s case is that the country should care about these airports not only because they move holidaymakers, but because they are increasingly important industrial assets. Manchester and Stansted are substantial employment sites, with about 21,000 jobs at Manchester and nearly 15,000 at Stansted. East Midlands, while carrying only about 4 million passengers a year, is the second largest freight hub in the country after Heathrow and handles more cargo than Manchester and Stansted put together. For a government that claims to want more exports, more inward investment and higher productivity, that cargo capacity ought to matter at least as much as the passenger numbers that make headlines.

It is in that context that MAG’s warning about business rates carries political sting. Ken O’Toole, the group’s chief executive, says the fiscal environment is now the critical variable in whether the airports can continue to make the long term investments that enable growth. The group’s business rates, he argues, have already more than doubled, with no clarity on where liabilities will land in the next period. MAG says it faces a 110 per cent rise overall, with the bill increasing from £34 million this year to £71 million by 2029, taking rates from roughly 7 per cent of annual revenues to about 15 per cent.

Business rates are an old argument in British industry, often framed as a complaint from firms that would rather pay less tax. Yet airports occupy a peculiar position. They are capital intensive, heavily regulated, and unavoidably visible. They are also, by their nature, tied to fixed assets that the business rates system taxes most aggressively. When the valuation office agency revalues major infrastructure, it can produce sudden, large changes that feel less like a marginal adjustment and more like a shift in the operating model. MAG is not alone. Similar frustrations have been voiced by Getlink, the French group that operates the Channel tunnel. The question is whether ministers want to treat these assets as cash cows, or as part of the national economic platform that requires predictable, investable returns.

Behind the dispute is a familiar British pattern: the state urges private and quasi public operators to invest, while leaving policy and taxation uncertain enough that boards hesitate. Airports are especially vulnerable to this because their investment cycles are long and their revenues exposed to downturns that arrive with little warning. The pandemic was the most dramatic example, but it was not the only one. Terror incidents, volcanic ash, fuel price swings, airline failures, and geopolitical shocks all land at airports first. A tax shock, unlike a crisis of demand, is self inflicted, and the industry will argue that it is the easiest to avoid.

There is another layer to MAG’s story, one that blends economics with the politics of place. Manchester airport has long been presented as the aviation counterpart to the North’s broader quest for better connectivity. Its leaders have argued that the airport’s catchment will broaden significantly if Northern Powerhouse Rail is built as promised, linking northern cities and providing a direct connection to the airport, and if HS2 is extended north beyond Birmingham. The vision is of a superhub where high speed rail and air routes intersect, allowing businesses to reach global markets without the detour through the South East.

The trouble is that these rail schemes have become symbols of national indecision. HS2’s second phase was abandoned by the last Conservative government, and Northern Powerhouse Rail, after more than a decade of planning, remains largely on paper. It is possible to see why airport executives cling to the vision. In a country that is both geographically compact and infrastructurally lopsided, the difference between an airport that serves its immediate region and one that pulls from hundreds of miles away can turn on minutes saved in surface travel. If the train makes it easier to reach Manchester, it becomes more rational for airlines to base planes there and for passengers to start journeys there. If it does not, the gravitational pull of Heathrow remains formidable.

That is why the article’s political aside, about a prime minister in waiting and the possibility of a northern pivot, is more than colour. If the next government were to revive the northern rail agenda, it could change the economics of Manchester airport’s ambitions. There is discussion that Andy Burnham, the Labour MP for Makerfield and former mayor of Greater Manchester, is expected to succeed Keir Starmer as prime minister within weeks. Burnham has long made the case that national growth requires the North to be treated as a priority rather than a rhetorical flourish. Should his government choose to make good on promises to relaunch HS2 and deliver Northern Powerhouse Rail, the airport would likely present itself as one of the clearest beneficiaries, and would argue that the returns are national, not merely regional.

Still, airports cannot build their business on a hypothetical railway. They must operate in the market as it is, and that market has been evolving in ways that favour well placed regional airports. The rise of low cost carriers has moved millions of passengers through places such as Stansted, where the model depends on high utilisation and rapid turnarounds. At the same time, the post pandemic recovery has been uneven across segments. Leisure travel has rebounded faster than business travel, and the mix of passengers matters because it shapes the routes airlines are willing to sustain. Regional airports can fill planes to Mediterranean destinations quickly. Filling long haul aircraft year round is harder, and it depends on connecting traffic, corporate demand and the confidence of global carriers that the airport can deliver predictable yields.

Stansted’s dependence on Ryanair illustrates both the strength and fragility of the low cost model. As long as that airline remains committed, passenger numbers can be large and stable. If the carrier adjusts its base in response to fees, regulation or strategic priorities, the impact is immediate. For Stansted to be resilient, it needs a more diverse airline mix and more routes that are not purely discretionary. MAG’s £1.1 billion transformation programme there is intended to modernise infrastructure and handle higher volumes, but the deeper question is whether Stansted can become something closer to a multi carrier hub without the slot scarcity and network density that make Heathrow so attractive to long haul airlines.

Manchester, by contrast, already has a broader set of airlines and a stronger long haul profile, though it remains constrained by wider forces in the aviation system. Heathrow’s dominance is not merely the product of history, but of how global airlines allocate scarce aircraft. When fleet capacity is tight, carriers deploy new planes where they can earn the most and where connectivity is richest. That often means the biggest hubs. Regional airports must therefore compete not only on local demand but on the credibility of their growth story and the reliability of their operating environment. A sharp rise in business rates is precisely the kind of signal that unsettles that calculus.

MAG’s ownership structure adds another twist. The group is owned by the people of Greater Manchester, with Manchester city council holding 35.5 per cent and the nine other local councils in the mayoral region holding a further 29 per cent. The remainder is owned by IFM, the infrastructure investment arm of an Australian pension group. This hybrid structure reflects a civic ambition: these airports are not merely commercial ventures but local strategic assets whose success is meant to feed jobs, investment and public finances. When MAG pays higher business rates, it is paying the state, but when it invests less, it also potentially constrains the growth prospects of the region whose councils are its shareholders. That creates a tension between national tax policy and local economic strategy that is rarely acknowledged in Westminster debates about airport capacity.

There is, of course, a counter argument that governments will make. Airports, they will say, are recovering, profits are rising, and public services need funding. Business rates are a broad based tax designed to capture value from property and infrastructure. If an airport grows, it can afford to contribute more. Yet this neat logic ignores timing and incentives. Raising the bill sharply over a few years, particularly when the sector is still normalising after extraordinary disruption, risks discouraging the very investments that would generate the next tranche of growth and, ultimately, tax receipts. The state, in effect, may be taking a larger share of a pie that is not yet fully baked.

There is also the wider question of what sort of aviation policy Britain wants. The country has long struggled to reconcile the economic argument for air connectivity with the environmental imperative to reduce emissions. Regional airports have sometimes presented their growth as a way to relieve pressure on London’s hubs and to reduce the need for domestic connecting flights. Critics reply that more capacity simply produces more demand. In this contested landscape, taxation becomes a proxy battle. A tougher fiscal regime can be framed as restraint by stealth. A more supportive regime can be framed as subsidising expansion. MAG’s complaint, however, is less about ideology than about predictability. Investors can price political risk, but they struggle when the ground shifts without warning.

The passenger records at Manchester and Stansted, then, read as both achievement and test. They show that demand for travel, particularly leisure travel, remains robust and that the regional airport model can thrive even with disruption in international airspace. They also expose the fragility of infrastructure planning in a country where rail projects can be promised for a decade and still remain unfunded, and where the tax treatment of major assets can change in ways that operators claim make long term investment harder. If ministers want airports to be engines of regional growth, the logic suggests a fiscal framework that rewards capital spending and provides clarity on future liabilities. If they instead treat airports primarily as revenue sources to be harvested, they may discover that growth is easier to announce than to sustain.