why london needs a new hub airport
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FOREWORD BY BORIS JOHNSON,THE MAYOR OF LONDON
Even before I became Mayor of London, it was clear to me that
expanding Heathrow was not the solution to the capitals pressing
need for increased aviation capacity. A constrained site too closeto thousands of homes was never going to provide us with the
full-service, round-the clock, multiple-runway hub airport that so
many of our neighbours and competitors now boast. So I
welcomed the Governments decision to take the third runway at
Heathrow off the table.
But saying no to a bad idea does not excuse us from working
to come up with the right ideas. London and the country at
large depends on aviation for business success and demand for
air travel is set to grow. That is why I published a paper in Januarythis year calling for a new hub airport to serve London. It was
widely welcomed by businesses and has I think helped to move
the debate forward nationally.
The article below from Transport for London takes these
arguments further. It will inform the response I shall be making
shortly to the Governments consultation on the Scoping
Document for its proposed Sustainable Aviation Framework (to
which I urge all Institute of Directors members to respond,
however briefly, with their views on the importance of aviation to
the health of the economy). It develops the arguments put
forward in my January paper and provides solid evidence of how
we are in danger of losing out to our competitors, becoming
merely a local station on a branch line connected to one of the
major airports on the other side of the English Channel. We
cannot allow that to happen if we wish to see international
businesses continue to invest in London.
The case is urgent. I hope you find the argument persuasive.
Boris Johnson and Transport for London
present the business case for a new hub
airport in the capital.
Why Londonneeds a newhub airport
According to the
Governments latestaviation forecasts, Londons
airports will be full by 2030.
While several new
terminals have opened in
the last 20 years, the only
new runway in London
since 1970 has been the
short strip at London City.
Londons international
economy depends on
access to a comprehensive
global network of flights.
This in turn relies on a fully-
functioning hub airport.
Without it, crucial long-haul
business destinations may
be under-served or notserved at all.
Heathrow is operating at
98% of its available
capacity. This is jeopardising
its effectiveness as a hub
airport. A number of long-
haul routes have been lost
in recent years, and UK
domestic routes have
also suffered.
An alternative to
Heathrow must be sought
to ensure that the UK has
a fully-functioning hub
airport to maximise theeconomic benefits
associated with Londons
status as a global city.
The issue is urgent. If we
fail to respond, the UK
risks becoming merely a
local station on a branch
line connected to one of
the major competitor
airports in Europe.
SNAPSHOT
Why London needs a new hub airport
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LATEST AVIATION FORECASTS
In August the Government published its latest aviation forecasts.
Under its current policy of not increasing runway capacity in thesouth east of England, Londons airports will be full by 2030. Growth
in demand will not simply cease in London at this point. According to
its central forecast, the Government envisages that nationwide by
2050 tens of millions of people every year will simply be deterred
from flying, while 42 million are expected to travel from London and
the south east to less congested airports in other UK regions, such as
Manchester.
This should alert the Government to a looming and potentially
disastrous problem. Londons highly international and productiveeconomy is uniquely dependent on access to a comprehensive global
network of direct and frequent flights. This network can only be
supported if there is a well functioning hub airport. Without such a
hub, crucial long-haul business destinations may be underserved or
even not served at all. Yet London will need first-class global aviation
connections more in the coming decades than ever before. Moreover,
through excellent new links Londons global aviation network should
be able to offer other UK regions opportunities for developing much
stronger, more globally competitive economies themselves.
THE UKS ECONOMIC CHALLENGES
The economic challenges now facing the UK are perhaps more
formidable than at any other time since the 1940s. The financial crisis
and subsequent recession have revealed fundamental weaknesses which
demand radical action. The policies which the Government is pursuing
to tackle the fiscal deficit are a vital part of this. However, a sustained
and sustainable recovery is also going to need bold investment togenerate far more jobs and improved export performance.
It is essential to consider the international circumstances in
which the UK economy will be competing in the future. Over the
course of the next forty years or so, a much higher proportion of the
worlds population can be expected to be participating in the global
economy. This means that the UK will be competing in an
increasingly tough, fast-changing world both for resources and for
markets. One of the strengths on which the UK must build over the
coming years is Londons status as one of a small handful of trulyglobal cities. We also need to move from a position in which London
generates wealth to support other regions to one in which the UKs
regions participate more fully in the wealth creation opportunities
which London offers, including its global connections.
THE IMPORTANCE OFLONDONS AVIATION LINKS
London has become a global city for a number of geographical, historical
and cultural reasons but, above all, it has relied on first class global
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communications. In particular, in the decades after the Second World
War London built an international network of aviation links of
unparalleled quality which allowed it to act as a world hub through
which passengers from all corners of the globe were funnelled andconnected. This has provided huge benefits, from income and work in
the aviation sector itself (around one job per thousand annual
passengers at airports), its supply chain and the induced demand from
this, to competition and productivity benefits in the wider economy.
Above all however, the effect of aviation over time has been to
transform the character and nature of Londons economy, enabling it to
generate far more wealth than it otherwise would have been able to do.
For people and businesses based in London, direct flights were
available to more places and at greater frequencies than
competing cities could offer. Businesses which were heavily
dependent on aviation were consequently attracted to London
and became increasingly concentrated there, most notably in the
financial and business services sectors. This fed demand for
aviation and created a virtuous circle of both aviation usage and
economic linkages between the UK and the rest of the world, as
shown in the diagram below.
Over time, Londons economy has evolved to be increasingly
aviation intensive and this has benefited London and the UK
enormously. Business travel brings a whole range of economic
benefits, boosting productivity and profits for the firms involved.
For example, it enables collaboration within multi-national firms,
which in turn produces social network effects and improvements
in firm performance and productivity. It also helps attract capital
flows from overseas. It is estimated that foreign direct investmentcontributes more than 52 billion each year to Londons economy.
Why London needs a new hub airport
CHART 1
Virtuous circle between aviation links and the wider economy
Source: based on Mariya A. Ishutkina & R. John Hansman,Analysis of the interaction between air transportation and economic activity: a
worldwide perspective, MIT International Center for Air Transportation, March 2009.
Demand for passenger travel
and freight
Supply of air transport
infrastructure
Air transport flows
Additional enabled flows
London andthe UKs
economy
Worldwide
economy
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REASONS FOR FLYING ANDREGIONAL VARIATIONS
People do not generally fly for flyings sake, but rather as a means to an end. Airportdemand therefore arises from the demand generated by activities which rely on
aviation, both personal and business. These include holidays, visits to see friends and
relatives, study visits, conferences, company business in overseas offices, client
meetings, overseas employment, to receive healthcare and also for serving goods
markets and their supply chains although much cargo is price-sensitive, it is
regularly carried on passenger services, particularly where speed adds value.
There is regional variation in the nature of the demand for aviation, reflecting
the different economic role it plays in various regions. In London, a higher
proportion of the market travels for business purposes, a result of the peculiaraviation intensity of its economy. As Chart 2 shows, while the total volume of trips
handled at the London airports is about twice as high as the total handled at the
main regional airports, the volume of business trips is approximately three times as
high. There are also higher volumes of trips to visit friends and relatives (VFR) from
London airports because of the higher proportion of Londons population with
overseas family and social ties than in other regions. Just over a third of leisure trips
at the London airports are for this purpose, which compares to just over a quarter of
trips at the main regional airports.
Also, whereas outbound tourists dominate regional airport usage, there is more
balance between inbound and outbound tourists in London. While many tourists
visit a variety of UK regions, they typically see Heathrow and London as the gateway
to the UK (and to Europe in some cases). As Chart 3 illustrates, while the number of
passengers handled at the London airports is less than double the number handled at
the main regional airports, the London airports handle almost four times as many
inbound tourists as the main regional airports.
CHART 2
Totalannualpass
engers
0
20,000,000
40,000,000
60,000,000
80,000,000
100,000,000
120,000,000
140,000,000
160,000,000
VFRBusiness Other leisure
Share of business, VFR and other leisure trips at the London and main
regional airports
London Airports Regional Airports*
*13 of the UKs main regional airports
Source: CAA, Passenger Survey Report, 2007/8, 2008, 2009. (The regional airports sample represents approximately three-quarters of
total regional demand.)
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CURRENT AVIATION PROVISIONAND PERFORMANCE IN LONDON
Today, Londons five principal airports together accommodate60% of UK demand. Heathrow is not only the largest but is also
the UKs only hub airport, while Gatwick, Stansted, Luton and
London City airports focus on providing point-to-point services,
like every other UK airport. Heathrow therefore plays a special
role. Its hub status has a major influence on the services it offers.
Heathrow accommodates approximately 35% of all passengers
using UK airports to travel overseas and 70% of those travelling
outside Europe. Approximately a third of Heathrows passengers
transfers between flights, allowing a far broader range of long-haul
Why London needs a new hub airport
CHART 3
CHART 4
Totalannualpassengers
0
20,000,000
40,000,000
60,000,000
80,000,000
100,000,000
120,000,000
11% of passengers arriving at UK
regional airports are inbound tourists
Inbound tourists Other
London Airports Regional Airports*
*13 of the UKs main regional airports
Share of inbound tourists at London airports and the main regional airports
Source: CAA, Passenger Survey Report, 2007/08, 2008, 2009. (The regional airports sample represents approximately three-quarters oftotal regional demand.)
23% of passengers arriving atLondons airports are inbound tourists
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
70,000,000
Heathrow Gatwick Stansted Luton London City
Annual passengers at Londons five principal airports, by origin/destination
Domestic Rest of the worldEurope
Source: CAA,Annual UK Airport Statistics, 2010.
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destinations to be served directly, as well as at higher frequencies
than could otherwise be offered. This is reflected in the
distribution of destinations served, as shown in Chart 4.
The global reach of Heathrows direct services is very valuablefor London as a business location. Business travellers place a
premium on the flexibility of high frequency flights and the
convenience of direct ones. Although London probably generates
more international business passengers than any other city in the
world, the demand they generate alone could not justify the levels
of service upon which they depend. These services depend to some
extent on consolidated demand from leisure passengers, including
those originating elsewhere and transferring. For many flights,
long-haul in particular, the economics are such that passengers in
both economy and business seats are required, together with high-
value goods in the belly-hold. This is explained further in Box 1.
Whilst in the past Heathrows aviation offer has grown alongside
growth in passengers, in the past 15 years or so capacity
constraints have begun to bite and the development of services
has been unable to keep pace. While several new terminals have
opened at Londons airports in the last 20 years, the only new
runway since 1970 has been the very short strip at London City, as
shown in Chart 5.
As a result, Londons airports are becoming full. Heathrow inparticular is operating at 98% of its available capacity. This causes
peak-time delays and poor resilience at times of disruption. At
busy times, incoming aircraft spend between 30 and 40 minutes in
stacks circling London. In the last ten years, flight sector times
between Amsterdam and Heathrow have increased by 30 minutes
to 90 minutes to account for this. Pre-departure delays and taxi
times are also much higher than at other major European airports.
Not only do these problems detract from the quality of the
experience of using Heathrow, they also worsen theenvironmental impacts of Heathrows flights.
Furthermore, Heathrows capacity constraints are jeopardising
IoD Big Picture Quarter 3 2011
Why business needs could be under-served without a hub airport
BOX 1
Access to a network of direct long-haul destinations is important for some businesses and they tend to
cluster in the relatively small number of cities that can offer it. However, even a city like London could not
justify a network of frequent flights to a wide range of long-haul destinations on the basis of business
demand alone. In fact, airlines rely on the additional revenue provided by leisure passengers (and cargo) to
make viable the network of routes which suits international businesses, with adequate frequencies. The
importance of this is demonstrated by the fact that in 2010 there were 39 routes at Heathrow on which
more than 50% of passengers were transferring, and a further 92 routes on which more than 25% of
passengers were transferring.
This works because leisure passengers are more willing to fly indirectly than business passengers,
particularly since airlines price indirect flights more attractively. Leisure demand for long-haul destinations
can therefore be consolidated at hub airports like Heathrow. In economic terms this means that leisure
passengers are effectively generating positive externalities to other passengers, including business
passengers, which help correct the market failure associated with the high fixed costs of operating direct
long distance air services.
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its effectiveness as a hub airport. The development of new serviceshas generally come at the expense of others, as shown in Chart 6.
Aside from the loss of a number of thinner long-haul routes from
Heathrow1 in recent years, UK domestic routes in particular have
suffered. Whereas there were 22 routes between Heathrow and
other UK destinations in 1990, there are now six. Passengers
departing from UK regional airports do not, however, generally use
the other London airports to transfer to long-haul flights. Spare
capacity at Gatwick, Stansted and Luton, largely at inconvenient
and unattractive times of day, is being overlooked, while regional
passengers now routinely use overseas hubs such as Amsterdam
Schiphol, Paris Charles de Gaulle and Dubai to transfer to long-
haul flights not directly available from their home airport.
Why London needs a new hub airport
Historic growth in Londons aviation provision
CHART 5
Source: Mayor of London,A New Airport for London, January 2011.
Changes in destinations served by Heathrow, 2002-2011
CHART 6
Source: OAG, 2002 & 2011.
New destinations
Increase in service
to destination
Decrease in service
to destination
Destinations lost
1 Jakarta, Osaka, Caracas and Bogota have disappeared from Heathrows departure boards. Lima, Guangzhou, Manila and Panama City have never been
available. All are offered at Amsterdam Schiphol, Paris Charles de Gaulle, and Frankfurt.
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Not only does this diminish the feeder traffic available at
Heathrow, it also means there is less international connectivity
available to the UK regions, since frequencies to these alternative
hubs cannot generally be as good as to Heathrow. Meanwhile,
while the development of services at Heathrow has been
suppressed by its capacity constraints, services from these overseas
hub airports have grown. Heathrow has lost its pre-eminence.
THE UKS FUTURE AVIATION NEEDS
The wealth and opportunities that globalisation offers are rapidly
spreading to new regions around the world. National income has
been growing at unprecedented rates in many countries, including
IoD Big Picture Quarter 3 2011
Capabilities and capacities of the main European hub airports
TABLE 1
Heathrow
Amsterdam
Paris
Frankfurt
Madrid
Airport
2
6
4
38
4
Runways
876
110
114
83
98
Current
maximumcoordinatedflights per hour2
87
120
120 (2015)
126 (2015)
120
Planned future
maximumcoordinatedflights per
hour3
98.5%7
70%
73.5%
74.5%
n/k
Current runway
utilisation
4
192
277
257
291
191
Destinations
served, as ofJune 20115
-2.5
0
2.5
5
7.5
-5
0
5
10
15
1970 1980 1990 2000 2010
World GDP
Gross domestic
product
World RPKs
Revenue
passenger-
kilometres
GDPPercent change
RPKsPercent change
CHART 7
The relationship between GDP growth and aviation use
Source: Boeing, Current Market Outlook 2011-2030, 2011.
2 Data obtained from airport operator websites and European Commission, Impact assessment of revisions to Regulation 95/93. Final Report. March 2011.3
Ibid.4 Ibid., unless otherwise indicated.5 OAG data, June 2011. Destinations include charter flights and flights which make more than one stop.6 Source: Airport Coordination Limited, Heathrow Summer 2011 Start of Season schedule, 2011. (Comprises 45 departures, 42 arrivals.)7 Source: BAA, 2007.8 Frankfurt is due to open a fourth runway in October 2011.
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Why London needs a new hub airport
China and India. Historical evidence indicates that there is a very
strong link between growth in GDP per capita and aviation usage,
as shown in Chart 7.
In fact it appears that there is a particularly strong relationship
between the number of households with income in excess of
$20,000 and aviation usage. Emerging megacities are expected to be
the locus of a disproportionate volume of aviation as their future
income levels rise, taking increasing proportions of their
populations above this critical level. These cities will be heavily
concentrated in Asia and Latin America, as shown in Chart 8. In
contrast, the current distribution of flights available from Heathrow
is weighted heavily towards North America and Western Europe,
which account for nearly three-quarters of total weekly flights.
Heathrow no longer has enough spare capacity to respond to
market opportunities and, as a result, new direct services are often
established more quickly at competitor airports. This may have
wider economic consequences for the UK, particularly in the case
of important emerging economies such as China. In particular,
when there are very high opportunity costs associated with landing
slots, as is the case at Heathrow, there is little incentive for airlines
to take risks with new and untested routes. In the case of China,
European rivals have been better placed to establish new routes
and gain first mover advantage, as shown in Chart 9.
Londons relative backwardness in developing links tomainland China is also reflected in the comparison between the
number of weekly scheduled seats available from Heathrow to
mainland Chinese destinations and the numbers available from its
continental rivals, as shown in Table 2.
ENVIRONMENTAL LIMITSTO AVIATION GROWTH
The UK should continue to be at the forefront of efforts to make
aviation more sustainable but without shackling its economic
Megacities 2010-2025
CHART 8
Source: McKinsey Global Institute, Urban world: mapping the economic power of cities, 2011.
Total GDP from 2010
2010 2025
New by total GDP GDP growth
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potential. The Governments Committee on Climate Change9 has
demonstrated that there is still considerable aviation passenger
growth permissible within climate change targets, although it is
clear that unconstrained passenger growth cannot be
accommodated. Its recommendation to the Government is that
the UK is likely to be able to accommodate an additional 130
million passengers per year by 2050.10
Given the enormous wider economic benefits associated with
Londons hub airport and in particular the need for direct
international business connections to be maintained and
improved, there is a strong case for prioritising hub airport
development. Further, there would be less disbenefit associated
IoD Big Picture Quarter 3 2011
Non-stop passenger flights to mainland Chinese airports from major European
hub airports per week
CHART 9
Source: OAG flight schedules for the week commencing 20 June 2011.
Total scheduled seats per week to mainland Chinese airports from majorEuropean hub airports. Week commencing 20 June 2011
TABLE 2
Source: OAG flight schedules for the week commencing 20 June 2011.
8,915
LondonHeathrow
11,008
AmsterdamSchiphol
15,078
Paris Charlesde Gaulle
17,583
Frankfurt
1,250
MadridBarajas
Total seats per week
9 The Committee on Climate Change is an independent body established under the Climate Change Act to advise the Government on emissions targets, and to
report to Parliament on progress made in reducing greenhouse gas emissions.10 Meeting the UK aviation target options for reducing emissions to 2050, Committee on Climate Change, December 2009.
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with lower growth at airports where direct aviation links are not
as essential to the functioning of the economy and which are
dominated by outbound short-haul leisure flights.
Nevertheless, for many people airports generate a major noisenuisance and aircraft emissions can represent a significant health
hazard. More than 250,000 people are significantly affected by
noise at Heathrow11 and a quarter of the nitrogen oxide
monitoring sites at the airport exceeds the EU limit value, with
poor health impacts for some people living near the airport. From
a local environmental perspective, further capacity expansion at
Heathrow is considered unacceptable.
GROWING HEATHROWIS NOT THE ANSWER
Londons economy is crucially dependent on access to an effective
hub airport which can give it the range and frequencies of flights it
needs for business purposes. Heathrows performance in this
regard is already suffering because of its lack of spare runway
capacity and the crowded surface access networks which serve it.
Despite current efforts to improve its infrastructure, these issues
will remain and the fundamental environmental problems it poses
for large numbers of Londoners will remain largely unaddressed. As
the demands of a modern world hub airport increase, Heathrows
shortcomings will only become more pronounced. Furthermore,
even had it been given the go-ahead, the third runway project
would not provide the long-term solution which is needed. Even
with a third runway, Heathrow would likely be operating at close to
capacity again by 2030. Heathrows competitor hubs will continue
to expand and would regain their advantage before long.
Another solution which has been proposed in the past is forLondons airports to work together as a virtual hub. Unfortunately,
since they are on different sides of the city, this is not feasible. No
major world city possesses a virtual hub network. BA and BAA did
try in the 1990s to create a dual hub at Heathrow and Gatwick, but
this failed. Convenience and speed of transfer are vital attributes of
an effective hub airport. The worlds most efficient hub airports
boast minimum connecting times between arrival and departure of
around 30 minutes. This level of service would not be possible for
transfers between London airports, even if the challenge ofproviding a fast, reliable and secure means of transferring goods and
baggage between aircraft at different airports could be solved.
A NEW HUB AIRPORT FOR LONDON
It is clear that an alternative to Heathrow must be sought to
ensure that London and the UK have a fully functioning hub that
can accommodate the projected number of passengers permitted
within environmental limits. Such an airport would have to meet
the following requirements:
Why London needs a new hub airport
11 This compares to less than 5,000 affected to the same extent (57dB) at both Stansted and Gatwick.
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An efficient, resilient operation which allows rapid
recovery from major disruption;
Sufficient runway and terminal capacity to support an
extensive route network, including a renewed domestic
network between London and the UK regions, and the
ability to concentrate flights into waves of arrivals and
departures;
Sustainable, high quality surface access, including
connections to both London and the regions, maximising
use of public transport and high speed rail use in
particular;
A high quality experience which not only provides anappropriate gateway to the UK but is also able to create
a favourable impression on transferring passengers.
Such an airport should allow significantly more flights within the
permitted climate change ceiling since it would be much more
operationally efficient than Heathrow. By ensuring that London
continued to have enough direct flights to an expanding network
of globalised cities, it would maximise the enormous economic
benefits associated with Londons global city role. By having
excellent rail and air connections to the rest of the country it
could also be a true UK hub airport. It would spread the benefits
of Londons global links across the whole country and help people
and businesses across the UK forge new business links to build a
strong, competitive and inclusive British economy. The Mayor will
continue to work on building a new consensus about the need for
such an airport and will in due course be publishing further
reports which examine the feasibility of various options.
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Why London needs a new hub airport