A new report by Frontier Economics shows that political inertia on the need for a third runway at Heathrow is increasing ticket prices for air travellers.
Heathrow, the UK’s only hub airport, has been unable to add more flights for a decade but demand has continued to increase, pushing up prices. Independent research by Frontier Economics estimates that passengers travelling through Heathrow are already paying an average of £95 more for a return ticket than they would do if Heathrow had a third runway. In future un-met demand will be even greater, and Frontier Economics estimates that by 2030 the average return ticket price could be £300 less with Heathrow expansion than with a two-runway Heathrow.
The figures take into account the costs of building a third runway and show that the savings delivered to consumers by additional capacity are far greater than the costs of construction. The Airports Commission estimates that the costs of building a new runway are around £20 per return passenger whereas Frontier estimates the total reduction in the average return fare by allowing airlines the freedom to compete would be £320.
Colin Matthews, Heathrow’s Chief Executive, said:
“This research shows that not building a third runway at Heathrow will add hundreds of pounds to the cost of a family holiday, be a disincentive to doing business in the UK, and increase the cost of the goods and services that are imported and exported through Britain’s most important trade gateway.
"This additional burden on both the cost of living for families and on businesses is entirely avoidable. The private sector stands ready to invest in the infrastructure Britain needs. Government has it within its power to lower prices for consumers by taking a clear decision to support expansion and end the years of prevarication that are now causing fares to rise and routes to be constrained.”
A third runway would create a greater choice of routes for passengers. Frontier Economics’ detailed study concludes that expanding Heathrow could add 40 new direct connections to London as a whole, with many of those routes going to destinations in rapidly growing economies such as Calcutta, Lima and Mombasa. In addition, Heathrow has made a commitment that it would work with government and airlines to ensure that expansion delivers improved air links between Heathrow and other parts of the UK - destinations such as Inverness, Liverpool, Newquay and Humberside could be connected to the UK’s hub. In contrast, adding a second runway at Gatwick would only add between five and seven new routes, mainly to package holiday destinations.
The report argues that there would be even greater benefits to passengers if both Heathrow and Gatwick were allowed to expand, since having spare capacity at both airports would allow the greatest scope for competition. Heathrow is not opposed to expansion at Gatwick, as long as it is not at the expense of the urgent and pressing need for more hub capacity to connect the country to emerging markets. Expansion where capacity is needed means people and businesses would be free to choose where and how to fly.
The two airports serve very different markets, both important for the UK. As the nation’s only hub airport Heathrow has full service airlines offering long-haul routes to destinations important for business, visiting friends and relatives as well as leisure. As a point-to-point airport, Gatwick, alongside Stansted and City Airports, serves predominantly short-haul flights. The Airports Commission predicts there will be spare point-to-point capacity until 2040.
Notes to editors
The report ‘Competition and Choice’ was commissioned by Heathrow and researched independently by Frontier Economics.
1)Table showing relative figures (in today’s prices) for Heathrow expansion:
Current average return fare
Additional cost consumers are paying today due to lack of capacity (per return fare)
Additional cost consumers could be paying in 2030 due to lack of capacity (per return fare)
Estimated cost of expansion per return ticket (Airports Commission data) (per return fare)
Reduction in average return ticket that could be delivered by Heathrow expansion (per return fare)