Expected drop in demand for air travel seriously undermines rationale for airport expansion or new runways
Campaigners seized on the Department for Transport (DfT) figures to query the aviation industry’s claim that new airports are urgently needed to meet demand. However, the DfT said the figures meant all airports in London and the south-east would probably be operating at full capacity by 2030, though it could take until 2040 for that to happen.
The DfT said that it anticipated around 315 million passengers annually at UK airports by the end of the next decade. That is 7% fewer than predicted in late 2011 and 90 million fewer than in forecasts from four years ago. Overall, it predicts demand will grow at between 1% and 3% a year, down from a previous assumption of 5%. But its forecast range suggests numbers could double by 2050 if the building of new runways is “unconstrained”.
The latest forecast reduction is mainly due to a less optimistic assessment of the UK’s future GDP, and the related number of people able to afford air fares as the era of cheap flights ends.
John Stewart, chair of the pressure group Hacan, which represents residents under the Heathrow flight paths, said: “The exact figures about future demand may be uncertain but the trend is unmistakable: the growth in air travel in the developed world is slowing down. Any proposals for airport expansion must be seen in this light.”
The Stop Stansted Expansion group said the figures showed that even in 2050 Stansted airport could meet demand without a second runway. Residents have been alarmed by suggestions made by the London mayor, Boris Johnson that the Essex airport should be considered for redevelopment as a four-runway, 24-hour hub.
The government’s Davies commission on aviation will report in 2015 on the need for additional airport capacity in the south-east of England, with the focus likely to be on Heathrow’s thwarted plans for a third runway. Sir Howard Davies has said that one of his first tasks will be to scrutinise the official demand forecasts.
The 2011 forecasts were the first to include the major revisions to the long-term economic outlook following the financial crisis of 2008 and subsequent recession. The drop of 26% from 465 million terminal passengers in the 2030 unconstrained forecast in the 2009 publication to 345 million passengers in the equivalent forecast in the 2011 publication is considerably greater than the reduction analysed in this chapter.
From page 66
From Page 68 of DfT 2013 forecasts:
The results for million terminal passengers per annum (mppa) at the national level are summarised in Table 5.1. This table shows that, after accounting for airport capacity constraints under the ‘max use’ capacity scenario, the number of UK air passengers is forecast to rise to 315mppa in 2030, within the range 275mppa to 345mppa. By 2050, the number of UK air passengers is forecast to reach 445mppa within the range 340mppa to 445mppa.
.From page 71 of
.Last year, the Aviation Environment Federation (AEF) put out the briefing below, on the state of airport capacity in relation to the air passenger forecasts made in August 2011:
12th October 2012
In Oct 2012 the AEF said that the August 2011 forecasts showed a massive reduction in expected future levels of demand compared with the heady forecasts produced in 2003. Those 2003 forecasts led to the Government’s ‘white paper’ which supported new runways at Heathrow and Stansted as well as a new runway in the Midlands and one in Scotland. Even in 2007 demand was predicted to be 495 million passengers per year (mppa) at 2030, but by 2011 the forecast had fallen to 345 mppa.
Even the 2011 forecasts were probably still too high because they assumed:
- A resumption in economic growth at around 2% pa or above and continuing indefinitely, which is very uncertain [The DfT now say that they use the OBR’s 20% and 80% confidence intervals around their central forecast until 2017. By 2015 this amounts to a range of +/- 2% compared to the central case GDP growth for that year.]
- No increase in oil prices (despite evidence of increasing demand and increasingly difficult and expensive approaches to extraction), [The DfT now say oil price projections are based on DECC’s Fossil Fuel Price Assumptions, published in October 2012. In the central case, prices start at $105 a barrel in 2012 in (2008 prices); equivalent to around $118 in nominal prices. This rises to over $120 a barrel by 2030 in 2008 prices. Oil prices are held constant in real terms (i.e. assumed to rise in line with inflation) from 2030 onwards.]
- A continuation of aviation’s tax exemptions (including no fuel tax and no VAT) [There is no mention of any new taxes in the 2013 forecasts, and on Air Passenger Duty (APD) the DfT says: APD rates are based on the rates announced in the 2012 Autumn Statement. APD rates used in the forecasts are expressed in 2008 prices and converted from the APD bands to the forecasting regions. When used in the modelling they are assumed to remain constant in real terms for the rest of the modelling period (i.e. this is the equivalent of rates rising in line with inflation). ]
The only airport in the entire country where there is a gap between demand and supply in terms of runway capacity, either now or any time soon, is Heathrow. And despite the recent hysteria about constraints at Heathrow, there is sufficient runway capacity serving London and SE England to continue to meet demand.
The Government forecasts show that passenger demand could be almost entirely met with existing infrastructure until 2030. Even if no new runways were built anywhere in the UK, less than 3% of potential air traffic would be squeezed out. (In the 2011 forecasts constrained demand at 2030 is 335 mppa, compared with unconstrained demand of 345 mppa.. By comparison, in the January 2013 forecasts the constrained demand in 2030 is 315 mppa and the unconstrained demand is 320 mppa).
Do we need to cater for more business travellers?
A key question is whether business travel would be squeezed out. The answer is almost certainly no.
CAA statistics indicate that only about 23% of air travel is for business. [Figures in the 2013 DfT forecasts have 27% business travellers – the way the number is measured seems to differ between statistics]. The great majority of the growth in demand is for leisure.
Business travel is very ‘inelastic’. This is entirely explicable – a highly paid business person wanting to travel to China to negotiate a multi-million pound deal is not going to be put off because he or she has to take a flight from one airport rather than another or because it is slightly more expensive.
Leisure travel is, by contrast, widely accepted as discretionary and highly ‘elastic’. If a particular trip is not convenient or becomes more expensive, people may chose not to take the trip, and to spend their money on something else.
For these reasons, the 3% of traffic that would be squeezed out by 2030 if no runways were built would be almost entirely leisure. There would be virtually no loss of business travel and therefore no loss of trade or loss to the UK economy.
There may well be benefit to certain airlines or airport operators if certain airports were expanded (eg Heathrow) or a new airport was built (eg Thames estuary). However, this is a completely different matter to benefits for UK passengers or economic benefits arising from business travel.
Can Government forecasts be trusted?
Government forecasts have recently come in for something of a battering. The aviation forecasts are certainly fallible and have been revised 4 times since 2003 – each time downwards.
But they are rigorously produced and improvements to the assumptions have been made over time so the official figures can serve as a useful check against the often wildly exaggerated forecasts by airports, produced to support business plans and please shareholders.
AEF considers that ultimately airports policy should not be determined solely by individuals’ demand for travel but also by society’s demands both for protection from unacceptable noise and air pollution, and for political action to tackle climate change. But even if the Government imposed no new constraints on aviation for environmental reasons, there would be sufficient airport capacity to cater for all aviation demand until nearly 2030.
Anticipating use of larger planes, in future decades, London’s airports can accommodate more passengers for the same number of air transport movements. They have the terminal capacity for this increase. Heathrow currently has terminal capacity for some 90 million passengers per year.
Title: UK Air Passenger Demand Forecasts Briefing
And summary at AEF Passenger Forecasts SUMMARY
And the UK Aviation Forecasts from the Department for Transport (August 2011)
Title: “Available UK airport capacity under a 2050 CO2 target for the aviation sector”
Date: July 2011
Author: WWF and AEF
Length: 20 pages
Summary: This report shows that there is already sufficient available runway and terminal capacity in the Southeast and other regions to meet demand to 2050, and in line with CCC limits to aviation growth, without the need for further expansion. This is based on the recommendations by the Committee on Climate Change that the number of UK air passengers should not increase, by 2050, over 60% above the level in 2005. [ i.e. some 227.4 million passengers in 2005 to some 363 million in 2050].
Also that the number of Air Transport Movements would not increase by more than 55% of the 2005 level by 2050 – [ ie. from some 2,300 movements in 2005 to some 3,560 ATMs.]