BAA’s Magic Solution to Airport Pollution Shown to be an Illusion

The world’s first airport without any planes

BAA’s Terminal 5 case is based upon the claim that an additional 30 million passengers per year can be accommodated at Heathrow with negligible environmental harm. To achieve this, BAA has discovered the magic solution to airport pollution: the world’s first airport without any planes. According to BAA, this massive addition of capacity, equivalent to building an airport the size of Charles de Gaulle in Paris or Amsterdam Schiphol on top of the existing Heathrow, will generate hardly any additional flights. Since flights barely increase there will be no noticeable increase in noise pollution.

This theory was first outlined in detail in BAA’s first official submission in relation to its Terminal 5 planning application, its Environmental Statement published in February 1993. This explained how the advent of larger aircraft would create the miracle of pollution-free airport expansion:

The proposed development would increase the passenger handling capacity of Heathrow in 2016 from 50 million passengers per annum (mppa) to 80 mppa. This would be achieved on the current pattern of the existing runways, and by a marginally greater number of passenger air transport movements (patms). The forecast annual number of patms with Terminal 5 is 420,000. This exceeds the 400,000 patms forecast without Terminal 5 by 5%. The greater numbers of larger aircraft in the with Terminal 5 case allow a similar number of movements to carry a significantly larger number of passengers. (BAA Environmental Statement para 2.48, page 17)

The easy way to do environmentally friendly forecasting

This forecast has been superseded (see analysis below) but it is instructive to examine it for the light it sheds on the reliability of BAA’s forecasting. The chart below shows this forecast in graph form. The actual figures for flight numbers at Heathrow for the ten years prior to 1993 are also shown.

You do not need a PhD in airport economics to find this forecast wildly implausible. BAA stated that over a 24 year period during which Europe’s third largest airport would be built at Heathrow, flights would increase by about 40,000. In the preceding ten years, with no addition of terminal capacity, flights had increased by approximately 140,000.

Having made this forecast, the impressive looking 700 page, two volume Environmental Statement examined the consequences of building Terminal 5 and, amazingly enough, found that the proposed terminal would have little environmental impact. BAA offered the tempting prospect of having the environmental cake of no additional pollution, while eating the economic cake of expanding the airport.

Dramatic failure of BAA’s forecasts

Unfortunately, this fairy tale has already been proved to be an illusion. The chart below shows the actual figures for flight numbers since 1993.

Instead of taking 23 years and a fifth terminal for flight numbers to reach 420,000, they reached this level in August 1996, taking three years with no new terminal in sight. As the chart shows, flight numbers have simply continued their previous trend rate of increase. The miracle of larger aircraft failed to take place as planned. It is a certainty that, if a fifth terminal was built, flight numbers would be well in excess of those on which the Environmental Statement is based. Therefore, most of the Environmental Statement and its claims of minimal environmental impact are worthless.

Forecasts produced to order rather than to fit reality

This episode raises the important question of how much credibility can be given to BAA’s forecasts in relation to Terminal 5. There are two possible explanations for the dramatic errors in BAA’s Environmental Statement. The first is that BAA’s forecasting team are hopelessly incompetent. We find this an unlikely explanation. The Environmental Statement forecast defies the accumulated knowledge of how Heathrow operates. Although it is true that the history of forecasts of flight numbers at Heathrow is one of consistent underestimates, we find it hard to believe that BAA’s forecasting team are unaware of this record, particularly given the fact that the team’s members made many of the earlier inaccurate forecasts. The second possible explanation is that BAA’s forecasters were given a brief by their superiors to produce a set of numbers which, although they bore no relation to reality, would support the company’s application for the highly profitable expansion of Heathrow by suggesting that this could happen without environmental damage. This appears to us the only credible explanation. It should be remembered that BAA expected the Public Inquiry to have been completed some time ago so that its forecasts would not be subject to test in the light of experience. In practice, the start of the Inquiry was later than expected and it is famously taking longer than expected to complete.

BAA’s second attempt

Given the delayed start to the Inquiry, it had become obvious to BAA when it came to prepare its formal Statement of Case 20 months later in December 1994 that its Environmental Statement forecasts would be ridiculed. Therefore it increased its forecast. It is a familiar pattern at Heathrow that forecasts follow on limping behind reality, rather than predicting the future. The new forecast, which still stands, is as follows:

The forecast number of patms at 80 mppa with Terminal 5 is 453,000, exceeding the forecast number of patms at 50 mppa without Terminal 5 by 36,000, or 8.6%. Greater numbers of larger aircraft with Terminal 5 allow a significantly larger number of passengers to be carried on a larger number of movements without any extension of the operating day or pressure otherwise to increase movements in the night hours or to abandon the present operating regime. (BAA Statement of Case para 10.7, p. 76)

Readers will notice that although the numbers have changed, the story remains the same. Within a period of 20 months, the forecast flight numbers for Heathrow with Terminal 5 had increased by 33,000. However, reality is already running ahead of this revised forecast, a further 20 months later. Flight numbers at Heathrow reached 422,000 in October 1996. Therefore BAA is predicting that over the next 20 years, with a massive fifth terminal, there will only be an additional 31,000 flights a year, a smaller margin than the increase in their forecast within 20 months. HACAN has predicted that on current trends, flight numbers at Heathrow will reach 453,000 by the year 2000, before a fifth terminal had even opened. This forecast has been supported at the Inquiry by the forecasting witness for the CAA, who forecast 456,000 flights by 2000.

More passengers means more flights means more noise

The reality, as those half a million of us who live under the Heathrow flightpaths are painfully aware, is very simple: more passengers means more flights which means more noise and other pollution. The relationship follows as night follows day.

If the reality is that Heathrow will reach the flight numbers BAA forecasts for Terminal 5 even before the terminal was built, then adding capacity for 30 million passengers can only mean a massive increase in flights. HACAN estimates that flight numbers with a fifth terminal would be between 550,000 and 600,000. In itself this obviously means more noise. But as we all know, Heathrow is already operating at the full capacity of its runways under current operating procedures.

Therefore more flights can only be accommodated by providing additional runway capacity. This can only be achieved by the following three mechanisms, and most likely by all three simultaneously:

  • additional night flights;
  • ending runway alternation;
  • a third runway.

Time to stop wasting public money chasing illusions

Sir John Egan of BAA chooses to avoid appreciating what is happening on the ground at Heathrow. He recently repeated a well-worn line in a speech to the Aviation Club of Great Britain:

“Unless we build an additional terminal by the year 2013 runway capacity will outstrip terminal capacity at Heathrow to the point where we would be wasting capacity for 30 million additional passengers.” (Sir John Egan, 16 October 1996)

Perhaps Sir John Egan actually believes the figures his staff are required to produce. If so, he is living in a fantasy world. There is no spare runway capacity at Heathrow and a fifth terminal could only mean another turn of the cycle of expansion to create the runway capacity to service the new terminal.

However, while BAA has millions to spend on its Terminal 5 application, it is costing substantial amounts of money and time for hard-pressed local authorities and anxiety for local residents. The application is clearly flawed throughout. The possibility of a fifth terminal was exhaustively examined at a Public Inquiry from 1981 to 1983 and rejected. There is something seriously wrong with a planning process which allows a company to place such a burden on the public by taking a hopeless gamble that a thoroughly unworkable and indefensible application will get through the system.

The leading Plc which has lost all credibility

Dermot Cox, HACAN’s Chairman, commented:

“I have never before seen a leading FTSE 100 Plc which has so completely lost the trust of the people of London. BAA persists in trying to force through its Terminal 5 proposals in the face of the nearly unanimous opposition of the people, as expressed through the democratic procedures of the Public Inquiry, their local councillors, MPs and residents groups. BAA plc is a young company, having been established for only ten years. You would never find more mature and responsible companies which operate ëdirty industries’, such as ICI or BP, behaving in this arrogant and confrontational manner. They know that long-term business success is dependent upon working with the community rather than attacking it head on.

“Now we can also prove the implausibility of the claims on which BAA has based its Terminal 5 proposals. Their underestimates of the environmental impact of building what would be Europe’s third largest airport on top of the existing Heathrow would be laughable were not the threat to our quality of life so deadly serious.”

Market pricing solution to pressure on Heathrow

Who owns the slots at Heathrow?

HACAN (Heathrow Association for the Control of Aircraft Noise) today called upon both leading political parties to take up its constructive proposals for solving the problem of pressure from airlines to obtain access to Heathrow Airport. HACAN’s policy document, published today, proposes that market pricing for take-off and landing slots be introduced, either through slot auctions or by market-based airport charges set by a new independent regulator: OFAIR.

HACAN argues that when Heathrow and the other South East Airports were privatised the true value of Heathrow slots was not properly appreciated and the question of who owns the slots was not addressed. This vacuum has been filled by the airlines who assert that their so-called ëgrandfather rights’ give them property rights over the slots they are currently allocated. Robert Ayling, British Airways’ chief executive, recently said that for the airline to be required to give up any of its slots would be:

“wrong, irrational, unfair, potentially corrupt and against the public interest.” (FT 30th August 1996)

Slots are a public asset

HACAN argues that, on the contrary, Heathrow slots are a public asset and that the public interest requires that all airlines should pay a licence fee for both existing and any new slots of at least the price which they would command in an open market. This is how other valuable scarce national assets such as broadcasting frequencies are allocated.

In fact, under such a system, efficient and profitable airlines such as British Airways could expand their operations at Heathrow, by bidding for slots currently held by inefficient operators, without any negative environmental consequences. HACAN proposes that an environmental limit is set on available slots at Heathrow of 450,000 a year, the maximum capacity under current operating procedures, which will be reached by the year 2000.

HACAN estimates that market pricing at Heathrow would raise between £250m and £500m a year for the public purse. HACAN argues that the current system of cross-subsidy whereby part of the massive returns BAA makes from its monopoly retail operations are used to cross-subsidise airport charges for airlines is squandering substantial revenues which rightly belong to the public.

The subsidy to airport charges at Heathrow creates a destructive web of distortions including:

  • the perverse result that airlines pay half as much to use Heathrow Airport as they do to use smaller foreign airports, such as Frankfurt, or UK domestic airports, such as Newcastle (Heathrow charges are 60% of those at Manchester or Glasgow)

  • the economic lunacy of cutting charges to use Heathrow despite the fact that the airport is full to overflowing, while charges at underused alternatives such as Stansted are increased (the recent MMC review recommends charges should be cut at Heathrow annually by RPI-3 and increased at Stansted by RPI+1)

  • rather than airlines paying for the pollution they cause when using an airport which requires them to overfly the capital, they are incentivised to do so by large state sanctioned subsidies

Benefits of market pricing

Open market pricing at Heathrow would introduce numerous benefits:

  • the public would receive part of the economic benefit from the use of what are probably the most valuable landing slots in the world

  • the public would receive part of the economic benefit from the profits made from the country’s most valuable retail monopoly: BAA’s ownership of all retail space at Heathrow and the other London airports

  • market prices would bring supply and demand at Heathrow into balance, ending excess demand from airlines for slots

  • the price mechanism would do its correct job of ensuring valuable assets are used efficiently – those airlines which best met customers’ needs would successfully bid for slots, many of which are held historically by inefficient operators

  • the UK could lead the world in adopting ëopen skies’ policies and demonstrate its commitment to putting the needs of citizens ahead of airline ëproducer’ interests

Need for new independent regulator

As part of this new structure, HACAN is also calling for the regulatory system applied to Heathrow to be reformed and the 1986 Airports Act to be replaced. Currently Heathrow’s economic regulator, the CAA regulates the airport only to meet the interests of airlines and passengers, the majority of whom are foreign. By law, the CAA cannot consider the environmental interests of London and over half a million UK residents directly affected by the airport. (See letter from the Head of Regulation at the CAA, attached, confirming this.)

Airlines support market in Heathrow slots — on their own terms

British Airways and American Airlines are now publicly supporting open-market trading of Heathrow slots, as part of their bid for approval of their transatlantic alliance, but on terms that they keep the sale proceeds. This supports our case that there would be no serious practical problems with open market government slot auctions. In fact, a black market already exists in Heathrow slots, endorsed by the CAA, whereby airlines do sell some of the slots they are allocated at no charge and keep the proceeds. But when did the government hand over free of charge to British Airways and American Airlines, or Lufthansa, Air France and Iberia, and their shareholders, many of them foreign states, permanent property rights to land at the capital’s major airport?

Dermot Cox, HACAN Chairman, said:

“It is ten years since Heathrow Airport was privatised as the only monopoly utility without a policy to create competition and encourage market forces. We can now see the inevitable distortions which result from letting the state determine prices in a commercial market, combined

“with a regulator which is required to ignore the public interest. Both major political parties now profess their commitment to keeping out of industry and allowing markets to operate. But the substantial economic surplus from operating the world’s busiest international airport is being used to subsidise airlines instead of being channelled into the many far higher priority areas where public funding is required. At the same time the huge stimulus from subsidised airport charges is leading to pressure for expansion at the airport which is already destroying the quality of life in large parts of London.

“British Airways can afford to pay its way at Heathrow. So should the many foreign airlines which use the airport. Now is the time for the Government to assert its rights over Heathrow’s slots, value them properly and obtain a fair share of that value for the public.

“At the same time we need a new independent regulator, OFAIR, to handle the South East Airports. Heathrow Airport is the largest single source of pollution in London. It is scandalous that the airport is regulated solely to meet the needs of airlines and passengers. The airport must also be regulated to take into account the national interest and the interests of the UK residents whose lives it affects.”

For more information please contact:
Dermot Cox, HACAN Chairman, on: 0181 392 2996
or Gideon Nellen, co-author, on: 0171 499 8122

Topic 1 Position Statement to the Public Inquiry into a Fifth Terminal at Heathrow

Having recently given evidence, HACAN’s position on many of the key forecasts is, I hope, reasonably clear. We consider BAA’s forecast of flight numbers with Terminal 5 in 2013 of 453,000 patms per year to be a dramatic and deliberate under-estimate…

This document is made available as a PDF file.
Download Topic 1 Position Statement to the Public Inquiry into a Fifth Terminal at Heathrow