Heathrow supports the Government’s vision for ‘dynamic, sustainable transport that drives economic growth and competitiveness’ and welcomes the opportunity to contribute to the Airports Commission work to identify how to maintain the UK’s position as Europe’s most important aviation hub.
The UK has been home to the world’s largest port, then international airport, for the last 350 years. Heathrow is the UK’s only international hub airport, a national asset, providing the connectivity that has supported the UK’s leading position in the world economy. Heathrow handles more international passengers than any other global hub. The Heathrow hub provides the UK with the vast majority of its intercontinental connectivity, with direct connections to 77[i] destinations not available from any other UK airport. Over 90% of the South East’s long-haul passengers travelling for business fly from Heathrow[ii].
However, Heathrow is already operating at its permitted capacity. The Department for Transport (DfT) forecasts indicate that by 2020 there will be 11m of un-served passenger demand at Heathrow and 28m by 2030[iii]. More hub capacity is urgently needed and whilst longer term demand forecasts are inherently uncertain, the more immediate demand case for a three runway hub is very clear. The longer term forecasts also show that any potential demand case for a fourth runway is highly uncertain and may not materialise.
Heathrow believes that the DfT forecasts provide a good high level estimate of future passenger demand. However, there are two important areas in the model’s approach to allocating traffic between UK airports that need strengthening. Firstly, it must take account of network or hub economics and secondly it must properly account for transfer passengers.
The DfT forecasts incorrectly assume that with Heathrow constrained, long haul demand, and to an extent transfer demand, will get picked up at other UK airports. In practice, network economics and the related airline business model, make this highly unlikely. Instead overseas hubs and economies are the beneficiaries. The issue is leading the UK Government to underestimate the very pressing nature of the hub capacity constraint and its damaging impact on UK intercontinental connectivity. With weaker connectivity comes lost trade opportunities. Frontier Economics estimates that the UK may already be forgoing trade worth £14bn p.a., 0.9% of UK Gross Domestic Product (GDP)[iv]. Once lost, these opportunities are much harder to recover as relationships, systems and investments become more entrenched elsewhere.
Similar to the DfT, Heathrow forecasts constrained traffic growth of ~0.5-1% p.a. at the UK’s hub, with growth slowing as the hub capacity constraint tightens. This low level of growth reflects the reality that Heathrow is already operating at over 98% of its 480k Air Traffic Movement (ATM) cap. Heathrow’s unconstrained central case forecast for hub demand growth to 2030 is 2.4% p.a. This is close to the DfT forecast for Heathrow for the same period. Other reputable forecasters also anticipate long run growth of 2% to 3.5%[v], [vi], [vii]. Heathrow regards any forecasts to 2050 to be too uncertain to be a reliable planning tool at this stage.
Whilst the UK is already suffering from hub capacity constraint, the current political and planning landscape means that it will likely be 2024 before significant additional hub capacity could be operational in the UK, with Heathrow being the location where this can be delivered the quickest. By 2024 the UK’s hub will have been capacity constrained for two decades and a significant proportion of the un-served hub demand will have been lost, either for good, or for the very long term until it can be recaptured. Overseas governments, airlines and hub airports, such as Dubai and Istanbul, are already making major investments that exploit the UK’s hub capacity constraint. As a result, Heathrow anticipates that adjusted unconstrained hub demand will be somewhat lower than forecasts might suggest. It is important that the Airports Commission’s assessment of need for additional hub capacity does reflect that some hub demand will have been lost by the time new capacity is in place to serve it.
The UK has an urgent need for hub capacity to meet continued growth in hub demand and UK connectivity needs. Heathrow looks forward to supporting the Airports Commission in evaluating how to maintain and improve the UK’s position as Europe’s most important aviation hub.
[i] OAG Airline Schedules Database, HAL Analysis, October 2012
[ii] CAA Passenger Survey 2011, HAL Analysis, February 2013
[iii] ‘UK Aviation Forecasts’, Pages 154-158, UK Department for Transport, January 2013
[iv] ‘Connecting for Growth’, Frontier Economics, September 2011
[v] ‘Current Market Outlook, 2012-2031’, Page 14, Boeing, 2012
[vii] ‘Aerospace Forecast, Fiscal Years 2012-2031’, Page 35, FAA, 2012