A recent Lib Dem voice poll asked ‘Do you support or oppose building a third runway at Heathrow airport?’ and it was not surprising to me, knowing the history of Liberal Democrat aviation policy, that 79% opposed this proposition. But this jumps the gun. Firstly, what is a hub airport and why is it valuable to the UK? Secondly, we need to understand if there is a problem to solve, and to define that problem. And then finally, what are the realistic options on the table that should be explored that will solve the problem.
A hub airport is an airport where local passengers combine with transfer passengers to allow airlines to operate flights to destinations that could not be supported by local demand alone. Put simply, it is the most efficient way of connecting many different destinations. Typically, passengers from short-haul flights combine with passengers from the airport’s local catchment area to fill long-haul aircraft. It is this network of flights, transfer passengers and direct passengers that makes a hub airport special. They allow the UK to connect to countries where it wouldn’t sustain a direct daily flight itself. To put the importance of transfer passengers into context, on routes such as Heathrow to Hyderabad and Heathrow to Chennai, over 70% of passengers are transfer traffic. Without those transfer passengers, these direct routes which allow UK firms to export to fast growing markets, will be lost.
So with no spare hub capacity in the UK – what does this mean for the economy? New research from Frontier Economics shows the lack of capacity at Heathrow airport is already costing the UK up to £14bn a year in lost trade and this figure could rise to £26bn a year by 2030. In the medium term, the emerging markets will start creating large numbers of multi-nationals and these firms will look for EU bases. Where will Chinese firms choose? Seven destinations in mainland China – Chengdu, Hangzhou, Wuhan, Xiamen, Nanjing, Shenyang or Qingdao – now have direct flights into other European hubs and not into the UK. Why would the firm from Wuhan set up an office in the UK when it can fly its executives directly into Paris?
The connectivity gap is costing the UK economy dear, and is growing. So what are the options?
The new report out from Heathrow today is clear – the Government have three options: do nothing and let the UK fall behind; add capacity at Heathrow; or close Heathrow and build a new hub airport elsewhere.
What about split hubs? Hubs must have an efficient – and quick – way for passengers to transfer between flights. Research in the report shows why a ‘Heathwick’ type solution would be uncompetitive.
And the dual hub theory – perhaps Stansted operating to the East and Heathrow to the West? A dual hub using Heathrow and Gatwick was tried by BA in the ‘90s. It didn’t work. Our report contains examples from New York to Japan illustrating why dual hubs do not provide the connectivity required.
The task facing the Airports Commission, under the chairmanship of Sir Howard Davies, is not an easy one. That is why Heathrow is proposing 12 criteria against which the different options for future hub capacity could be assessed: a competitive hub, commercial deliverability, sufficient capacity, safe operation and airspace design, economic benefits, timing of delivery, environmental impact, noise, location for passengers, surface access, land use & urban development, and transition.. We hope that our document is useful to the Commission as they start their work. The UK deserves an aviation policy based on evidence that supports growth. Cross-party support is key to developing a long-lasting solution that provides the connectivity, jobs and growth that the UK needs.
* Nigel Milton is Director of Policy and Political Relations at London Heathrow
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13 Comments
a valuable contribution to LDV. thank you.
Where will Chinese firms choose? Seven destinations in mainland China – Chengdu, Hangzhou, Wuhan, Xiamen, Nanjing, Shenyang or Qingdao – now have direct flights into other European hubs and not into the UK.
Remind me, are we a net exporter to or a net importer from China? If the latter, isn’t what you are asking for here really just to enable the Chinese to take our money away even quicker than they do now?
A copy of the report is available here One hub or none and a BBC news report with commentators here Heathrow report.
Tim Leunig’s earlier report can be found at Bigger and Quieter and the Lib Dem Autumn 2012 conference motion here A Sustainable Future for Aviation .
Richard Westcott, the BBC transport analyst, says in his sidebar analysis:
“I’ve just looked back through my notes from the start of the year.
“Dead and buried” was the phrase a senior person at the DfT used to describe to me a third runway at Heathrow. Just a few months after that Justine Greening, the Transport Secretary at the time, effectively told me that she was against the idea.
What a difference a few months and some expensive lobbying makes. Justine Greening has been unceremoniously shunted out of the way and the idea is now firmly back on the table. It’s also backed by some big hitters across the business world, unions, aviation bosses and many politicians.
But don’t let that fool you into thinking the diggers will move in any time soon, if ever.
First, there’s the rabid opposition it would face from the likes of London Mayor Boris Johnson, the Lib Dems and the hundreds of thousands of Londoners who’d be affected by the noise.
Second, Sir Howard Davies might not actually recommend it when he reports back in 2015, and even if he does, the next government will have to back it. If it clears all those hurdles, Heathrow’s owners then say it will take at least eight years to get planning permission and finally build the thing.”
“on routes such as Heathrow to Hyderabad and Heathrow to Chennai, over 70% of passengers are transfer traffic. Without those transfer passengers, these direct routes which allow UK firms to export to fast growing markets, will be lost.”
Not to mention the increased cost and inconvenience for leisure travellers. West London has a very large South Asian population who visit/host relatives in/from South Asia. If Heathrow ceases to act as a hub, their costs (and those of all air travellers) will rise.
@Matthew Huntbach: “are we a net exporter to or a net importer from China? If the latter, isn’t what you are asking for here really just to enable the Chinese to take our money away even quicker than they do now?”
Really, Matthew. Are we still doing mercantilism? I thought all that went out with the Scottish enlightenment!
The main point isn’t about what it does to the flow of trade (I’m sure the Chinese will continue to take our valuable money away and dump their worthless televisions, computers and clothing here, whether they are headquartered in London or Paris) but the positive externalities of having foreign companies headquartered in the UK, consuming local services.
@Joe Bourke: Thanks for pulling together some of the relevant documentation. I was a bit disappointed by the lack of links in Nigel’s article.
In reference to “the rabid opposition it would face from the likes of London Mayor Boris Johnson, the Lib Dems and the hundreds of thousands of Londoners who’d be affected by the noise”, two things should be borne in mind. Firstly, the current situation of under-capacity means that planes circle above West London for longer than they need to, creating unnecessary noise and air pollution (including higher CO2 emissions than would occur if there was sufficient capacity on the ground). Secondly, while some West London residents complain about the noise, it is likely that the presence of Heathrow actually increases house prices in the area – benefiting (compensating?) those who are effected.
I would add that the anti-Heathrow narrative focuses exclusively on middle class homeowners and ignores less well-heeled people in rented accomodation who work in, or near-and-because-of, Heathrow.
And finally, the experience of building airports is that cities tend to grow towards them like plants reaching for the sun. To use a bit of economic jargon, while people’s “expressed preferences” are for airports being further away, people’s “revealed preferences” are for living near the airport.
“The Government have three options: do nothing and let the UK fall behind; add capacity at Heathrow; or close Heathrow and build a new hub airport elsewhere.”
The fourth option would be to negotiate a global agreement to retard and reverse the growth in air travel by pricing in the costs of pollution, for example by taxing aviation fuel. Then the occasional flight to Chengdu could be accommodated in place of some of the multiple flights to New York which had become uneconomic. Heathrow would not need to expand, nor would Frankfurt or Schiphol.
That’s unrealistic utopianism, no doubt. Planning that civilisation should survive much beyond 2050 is, of course, something that only crazy utopians would want to bother with, in these enlightened days.
>Planning that civilisation should survive much beyond 2050
Personally, I don’t see aviation in its current form (dependent upon fuel obtained from oil) lasting much beyond 2030…
Over 3 years ago BAA were ordered by the Competition Commission to sell Gatwick and Stansted; it was ruled they had held back the development of these airports who would be better used as free standing units.
Gatwick is already under new ownership (GIP) and has developed nicely since being removed from the dead hand of BAA; they are shortly to put forward proposals for a second runway of their own to the Davies Commission.
Unforfortunately BAA have used the appeals process to circumvent the Competition Commission order to sell both Gatwick and Stansted within two years; because of this the sale of Stansted is now unlikely to take place until 2013. Until new owner(s) are in place we will not know how they want to develop Stansted in the long term.
The latest paid for report “One hub or none” appears to be a last desperate attempt by BAA Heathrow to get a third runway before either of their two sell-offs get a second.
Whilst I welcome Nigel coming on here, I am surprised by the lack of robust response to the report (which clearly serves its paymasters). I also think that Matthew’s critique is a very strange one – clearly, we do want to trade with important emerging markets.
In particular, I am surprised that nobody has challenged the idea that airports should follow the “predict and provide” rationale which so comprehensively failed with roads. We should stop seeing ever increasing airport capacity as a necessity or desirable. I welcome the idea of a comprehensive review but it should also take into account wider economic and political ends.
1. Heathrow is a terrible place for an airport and nobody would seriously suggest building it if it was not already there.
2. It still has lots of short-haul flights to tourist destinations. If they really want to make room for flights to cities in China and India, ditch all of those and make Heathrow a genuine “business” airport. Japan is starting to develop this model with Haneda and it is far too early to say that it won’t work. Heathrow could be better at this because it is already a genuine “hub”.
3. The supporters of Heathrow expansion are desperate to avoid any suggestion that there can be more than one “hub” because it would blow their rationale out of the water.
6. In fact, it would be perfectly logical and much more sensible from a long-term planning perspective to have a hub in Birmingham (which definitely wants to expand) or Stansted (which would certainly consider it) and high-speed rail links into London.
7. The “no” hub (at least in report’s terms) solution is also worth considering. We are not the place for a “super-hub”. That is the Gulf and already people are changing their approach to flying using regional airports such as Manchester to fly to the Gulf from where they can reach the whole of Asia and Australia.
8. Finally, we have recently had tons of economic data showing that London (and the South-East) generate huge and increasing amounts of our GDP. I agree that airports generate local economic activity – why don’t we use government policy to push it somewhere which spread growth more evenly. Again, that points to north of London or the Midlands as a “hub” if one is required.
In the report we have : “We could be missing out on up to £14 billion per year in lost trade due to poor connections”
Above this hardens to “the report s hows the lack of capacity at Heathrow airport is already costing the UK up to £14bn a year in lost trade ”
Worth also bearing in mind that £14bn lost trade is not £14bn GDP, it will be a fraction of that.
“the “no” hub (at least in report’s terms) solution is also worth considering.”
I think this is right. It’s true no-one would build an airport where Heathrow is (of course it is where it is, which is quite important); is it really the case that the S-E of England is a great place for a hub airport at all?.
The thinking must change – already in the comments above it appears a wider conceptual understanding of a continental multi-hub is growing – Chengdu and Shanghai, or Chennai and Hyderabad will not share exact route destinations, just as nobody would expect New York and Miami, or London and Paris to!
Different types of passengers travel different types of routes to different types of destinations, just as they demand different requirements and different development patterns follow.
As far as I’m concerned, the choice between a single hub or none is a false choice and a strategically inept one with it.
We must concentrate of placing British access to air travel within the global route architecture, and let the routes and final destinations determine in combination where the hub interchanges need to be. London is an ideal choice for a hub interchange, but nobody realistically thinks Chennai-London-Bucharest can be competitive either economically or environmentally. You wouldn’t change train at Aberdeen to travel from Bristol to Cardiff.
Why are decision-makers constantly trying to bring the nation’s economy into the 20th century when this is already outmoded as ancient history? We need to look to the future to avoid the pitfalls, rather than engage in an angst-driven headlong stampede towards them!
Britain is an island and our status depends on integrating with the global economy, so we cannot escape air travel. But this cannot be at any expense – with a decision this big a hasty one is inevitably the wrong one. Interim measures such as splitting business and leisure passenger travel from freight transport, as the disentangling of former national monopolies will free up substantial capacity and remove the strong political bias which is colouring the current debate.
What about a dual hub with one catering for origins East and destinations West, the other for origins West and destinations East? Shares the load equally, No problems for airlines, just as convenient for most passengers.
There are yet more options available:
– decrease the need for air travel by shifting more people to alternatives, like rail, and encouraging commercial users to avoid travelling at all by making greater use of telepresence
– improve efficiency at Heathrow by using larger craft and denying smaller ones access to the runways
– France has several good airports, and for large parts of the UK, it’s quicker to get to those than it is to get to Heathrow. Put the hub over there and cut a deal with the French government for a share of the profits. Nobody said that our trade has to happen on UK soil.
MarG
Whilst I welcome Nigel coming on here, I am surprised by the lack of robust response to the report (which clearly serves its paymasters). I also think that Matthew’s critique is a very strange one – clearly, we do want to trade with important emerging markets
Do we? I think it is worth asking the question rather than just jumping to the assumption – which is what the original article was doing. Do we want more of our economy bought up by foreign control? Do we want to make ourselves even more dependent on forces beyond our control? To some extent I was playing devil’s advocate with my initial comment, but it is always worth questioning assumptions to see if those assumptions really hold.