Things are going to have to change if Durham Tees Valley Airport's fortunes are to take off again, as chairman Robert Hough explains to Peter Jackson.

CHAIRMAN of Durham Tees Valley Airport (DTVA) Robert Hough takes a professional as well as a sporting interest in the London 2012 Olympics.

He was, after all, chairman of the Organising Committee of the Manchester Commonwealth Games from 1995 to 1999 and then its vice president and mayor of the Games Village during the games themselves.

He says: “The Olympics are an extraordinary opportunity and any scepticism will melt away and there will be an infectious pride on a huge scale and the ability to convey the nation in a splendid light that a billion viewers will remember for all their lives.”

Hough, a tall rangy man, seems, in appearance and manner, younger than his 67 years. His voice, which is underlined with a trace of a North West accent, is soft and unassuming, despite his impressive CV.

Just to select the highlights: he has been partner with a major Manchester law firm; chairman of the Manchester Ship Canal Company; director and deputy chairman of Peel Holdings; chairman of the Northwest Regional Development Agency; governor of the University of Manchester; board member of Northwest Business Link; member of the Learning and Skills National Council; High Sheriff of the County of Greater Manchester and Deputy Lieutenant of the County of Greater Manchester. He is currently chairman of Liverpool City Region LEP.

He is clearly a man who relishes a challenge, which is just as well for DTVA presents him with one of Olympic proportions, which we discuss in his office in temporary buildings at the far end of the airport car park.

DTVA, along with Liverpool and Doncaster airports, was originally owned by Peel Group, a company which invests in major infrastructure developments in large conurbations.

In 2009 it sold a 65% stake in its Peel Airports subsidiary to Vancouver Airport Services to bring in an investment partner. But at the end of last year Vancouver, which wanted to focus on Liverpool, decided DTVA was not core to its interests and put it up for sale.

This was a nerve-wracking time for DTVA, which has been particularly hard hit by recession and changes in the international airline industry which, for the airport, meant the withdrawal of its anchor operator bmibaby. Whereas it handled 900,000 passengers annually five years ago, it now serves just 165,000 and, on a turnover of £6m, makes annual losses of about £3m. The airport was staring into the abyss.

Fortunately, Peel Group, which had known the airport for years, was convinced it had a future and bought Vancouver’s stake.

Hough says: “I don’t think Vancouver recognised its capability and, given that their focus was on Liverpool, it became surplus to their requirements.

“It went into a formal sale process around Christmas that did not lead to anything. We were keen to see the opportunity preserved and taken forward because Peel understood the operation and recognised the economic scale of the conurbation and its future potential.

He adds: “We take comfort from the fact that this is a major economic region and 70% of companies in this sub-region operate internationally.

“The airport did handle 900,000 passengers five years ago and therefore is capable of handling that again and the world has not changed in terms of the demographics or the economic forces behind the region.”

But what has changed is the airline industry, with volume carriers such as Ryanair and easyJet finding the UK with its heavy air passenger duty (APD) a less appealing environment in which to operate and with the global downturn depressing leisure and business travel.

So while Peel has faith in the airport’s future, it is clear that things have to change.

“The model at the moment is clearly not satisfactory with this low number of passengers and continuing losses. We have to realign the business in a way which make it viable,” says Hough.

And there is a plan to do that.

“Aviation in this particular climate is far from straightforward, hence the need to adopt a broader strategy and develop other income strands from the business.

“Historically, airports have principally derived their income from the charges they receive from the airlines and that’s linked to the passengers on the aircraft, the tonnage they carry in terms of freight.

“Then there’s non-aeronautical income and that’s largely from retailing and car parking. Many airports typically get 30% of their turnover from car parking and retailing.

“In the absence of those passenger numbers there is a need to develop other income streams and that relates partly to a recovery in aviation income but particularly to identifying other income streams on the site itself and that will depend on what happens on Southside.”

The Southside project is to develop 150 acres of land to the south of the airport runway. The airport has submitted a bid for £5.9m from the Government’s Regional Growth Fund programme for the provision of highways and services infrastructure to allow the development of the land.

There is already planning consent for aviation-related employment in the Southside area and it estimated that the 10-year project will generate about 1,500 jobs.

“The fund bid is running through the process and October is the date when they will give a view on it,” says Hough. “It’s linking services and a road connection into Southside to open up that site in terms of its services and access. Given the size of the site, we hope that should lead to interest from a major operator in transport or logistics.

It has the support of the LEP and the Homes and Communities Agency. There will be competition for that funding and it won’t be straightforward. It’s very important that the airport has a commercially viable future and therefore this extra activity is essential to retain flexibility in the sort term for the airport and in the medium term to give it that commercial and financial underpin.”

And if the bid fails, is there a plan B? “I would not like to contemplate failure because I think it’s sure to succeed. It has the right hallmarks for success in terms of creating jobs and creating economic opportunity and that’s what’s essential here.”