The Economy is not dependent on a 3rd runway at Heathrow.
Here’s the evidence.
Heathrow Airport is more honest than many of its supporters when making the economic case for a third runway. They acknowledge that it is not the only game in town. The issue was highlighted last week when DeAnne Julius, a former member of the Monetary Policy Committee of the Bank of England and British Airways chief economist in the 1990s, wrote a piece in the Financial Times (No one answer to the London airport question, 14/2/14 – http://on.ft.com/1c4OyKj) suggesting that a two-hub solution may be best for London’s economy, i.e. a second runway at Gatwick rather than a third runway at Heathrow.
I will return to Julius’s case for Gatwick in a moment but first to acknowledge there is merit in Heathrow’s argument. Their case is well-known. The Airport argues that, unless a third runway is built, London will have fewer direct flights than other European hub cities (Paris, Frankfurt, Amsterdam and Madrid) to the key business destinations in emerging economies like China, India and Mexico. And that this matters because there is evidence that direct flights are an important tool in attracting business.
Heathrow argues that it is only a major hub airport which can provide those flights because the transfer passengers which a hub attracts provide the extra passenger numbers which make frequent flights to these destinations commercially viable.
Organisations like the Independent Transport Commission support this view. Peter Hind, author of research they commissioned and highlighted in the Financial Times (16/2/14), said “Regular long-haul routes need transfer passengers to supplement those starting or ending journeys locally. Hosting a hub will remain key to sustaining and or developing global aviation connectivity.” He added: “More UK passengers already transfer via Schiphol and Charles de Gaulle hubs than through Heathrow. Amsterdam, Paris and others are able to compete with London by hosting growing networks.”
Boris and the backers of an Estuary option make a similar argument but go further. They are arguing for a mega-hub (4 or more runways, 24 hour operation) that would give London the hub airport in Europe. It would be in the super league alongside Dubai and the fast-expanding airport in Istanbul. Paris, Frankfurt and the other European hubs would be left behind.
The argument Julius makes is different. Here’s how she put it in the Financial Times:
“There are clearly advantages to large hub airports, especially for cities with small domestic markets. For Singapore or Dubai, it is imperative to have an airport large enough to attract transfer traffic on which the small domestic market can piggyback. But London is the very opposite of Singapore or Dubai. It is the quintessential international city. It has a big domestic market of business and leisure travellers who want to fly from London. It also attracts large numbers of business and tourist visitors from other countries who want to come to London, not transfer through it. The larger this so-called ‘origin and destination’ traffic is, the smaller will be the benefit to a city of attracting transfer traffic. According to the Airport Commission, London is the largest aviation market in the world (in terms of passenger numbers) and the largest ‘origin and destination’ market. In other words, like New York, London is both large enough and international enough to support two international airports. It does not need to consolidate capacity in a single mega-hub – whether at Heathrow or in the Thames estuary – in the hope of attracting more transfer passengers”.
Her argument rests on this key fact: more passengers (business people and tourists) terminate in London than in any other world city. Because London is the magnet, Heathrow does not need to expand as a hub in order for transfer passengers to provide sufficient numbers of people to fill flights to destinations across the world that would not otherwise be commercially viable. If airport capacity is provided – at whatever airport – people will flock to the capital in even larger numbers, drawn by the magnetic pull of London. London is the hub.
It is becoming clear that the economy is not dependent on a third runway being built at Heathrow.
Britain’s aviation future will depend on a three-runway hub airport, says a leading transport think-tank, lending weight to the option of expanding London’s Heathrow.
Only such a hub would allow airlines to provide an extensive network of long-haul routes, according to research by the Independent Transport Commission.
Heathrow has been shortlisted by the body set up by the government to study how best to increase the UK’s flight capacity. Gatwick airport has also been shortlisted in the interim report from the panel, chaired by the economist Sir Howard Davies.
Adding its voice to many in the aviation industry who have urged the government to take action to expand flight capacity, the think-tank warns the UK is already falling behind its European rivals.
“Regular long-haul routes need transfer passengers to supplement those starting or ending journeys locally,” said Peter Hind, author of the ITC research.
“Hosting a hub will remain key to sustaining and or developing global aviation connectivity.”
He added: “More UK passengers already transfer via Schiphol and Charles de Gaulle hubs than through Heathrow. Amsterdam, Paris and others are able to compete with London by hosting growing networks.”
Paris, Frankfurt and Amsterdam offer many times better connectivity to emerging market destinations such as Brazil, Russia, India and China, and especially to those such as Mexico, Indonesia, Nigeria and Turkey. Direct flights to these destinations would prove valuable to companies looking to export or extend business to those countries.
The research points out that Heathrow now serves fewer destinations than in 2005. Without new capacity, airlines would be likely to focus on safe routes to mature markets, it noted.
Heathrow is operating at virtually full capacity, with Gatwick also close to that point.
A hub airport, such as Heathrow, offers transferring passengers a wide range of connecting flights to onward destinations and contrasts with airports that offer so-called point-to-point flights.
The research does not explicitly recommend Heathrow over an option such as the London mayor’s Thames estuary hub, however, the estuary hub was not shortlisted by the panel and Boris Johnson has fought to keep the idea alive.
The Davies commission will make its final decision next year.
The findings go against Gatwick’s plan to add another runway, in its dispersed hub model.
John Strickland, an aviation consultant, said: “A three-runway hub is certainly what’s needed. There are no cities in the world where hubs are split into fragments, because the idea will not work.”