A new runway at Heathrow or Gatwick would mean big increases in passenger fees – New report
The Aviation Environment Federation (AEF) has submitted a new report to the Airports Commission. It casts doubt on the feasibility of building a new runway at either Gatwick or Heathrow. So far there has been little realistic discussion about who will actually pay for the proposed runways. The new study, “Who Would Pay for a New Runway” by Brendon Sewill, shows that a new runway at Heathrow would be likely to mean an increase in landing fees and other airport charges from £19 per passenger now, up to £31. At Gatwick there would be a larger increase, up from £8 now to £33.60. The study points out that with all the London airports separately owned, unlike in the days of BAA, the cost will have to fall only on the passengers using that airport. If an expensive runway (and terminal) is built, the options are either that the passengers pay for it – or that it has to have public subsidy. A report for the Airports Commission, by KPMG, concluded that a new Heathrow runway would need a subsidy of around £11 billion, and a new Gatwick runway a subsidy of nearly £18 billion. However, the Government is reluctant to commit public funds, and new EU guidelines ruling out subsidies to major airports. That leaves landing charges – will passengers put up with that, or vote with their feet by using cheaper airports?
A new runway at Heathrow or Gatwick would mean big increases in passenger fees
MONDAY 10TH MARCH (Aviation Environment Federation)
The Aviation Environment Federation (AEF) is today (10 March) submitting a new report to the Airports Commission which casts doubt on the feasibility of building a new runway at either Gatwick or Heathrow.
The new study, “Who Would Pay for a New Runway” by Brendon Sewill, and published by the AEF3, shows that a new runway at Heathrow would be likely to mean an increase in landing fees and other airport charges from £19 per passenger to £31. At Gatwick there would be a whacking increase from £8 to £33.60.
Sewill said: “There has been unending discussion of where a new runway should be built. But it seems that no one has stopped to ask who will pay?”
The study points out that the situation today, with each of the main airports separately owned, differs from that in the past, in that the cost of any new runway would fall only on the passengers using that airport.
The choice is simple: a new runway will require the passenger to pay through increased charges or the increase will need to be offset by a public subsidy. A report by KPMG concluded that a new Heathrow runway would need a subsidy of around £11 billion, and a new Gatwick runway a subsidy of nearly £18 billion. But with the Government reluctant to commit public funds, and new EU guidelines ruling out subsidies to major airports, the most likely answer would be a substantial increase in ticket prices which would drive airlines to use other airports.
So, as the study concludes, “If the punters won’t pay, the runway won’t fly”.
Tim Johnson, Director of AEF which published the report, commented: “The high environmental price of a new runway is well known but to this day the aviation industry has argued that the economic benefits would far outweigh it. This report shows that it won’t just be the environment that pays but also either the passenger or the tax payer. A new question arises: Who will actually benefit?”
Link to the report:
The report’s author, Brendon Sewill, has a degree in Economics from Cambridge. He has been an adviser in the Treasury and to the British Bankers Association (in the days when banks were respectable). He has also been a member of the National Trust Council. Since 1990 he has been chairman of the Gatwick Area Conservation Campaign (GACC) http://www.gacc.org.uk/.
The AEF is the Aviation Environment Federation – a national organisation working to ensure the aviation industry takes full account of its environmental and social impacts.
The cost of a new Gatwick runway – £50 extra per return flight
March 10, 2014
A new research study – ‘Who would pay for a new runway’ – examines who would pay for a new runway at Gatwick or at Heathrow. It concludes that a new runway at Gatwick would mean an increase in airport charges (landing fees, aircraft parking charges etc) per passenger from £8 at present to £33.60 – an increase of £25, or £50 per return flight. At Heathrow the increase would be from £19 per passenger to £31. The calculations are based on the estimate made by the Airports Commission that a new Gatwick runway would cost £10 – £13 billion. The local Gatwick campaign, GACC, say Gatwick often claim that a new runway at Gatwick would be cheaper than one at Heathrow. But they don’t mention that the cost would need to be borne by roughly half as many passengers at Gatwick as at Heathrow. In the past the cost of new infrastructure was met by the Government, or spread among BAA’s airports. But now all the airports are privately owned by separate companies. The cost of a Gatwick runway would have to be met only by the passengers using Gatwick. £50 extra on a return flight might well cause price sensitive passengers and airlines to choose to use Stansted instead.
One section of the report is copied below:
Don’t forget the competitors
Because Heathrow exercises an hypnotic or magnetic attraction for airlines, an increase in charges from just under £20 to just over £30 per head would probably not prevent the new runway from soon reaching full capacity.
At Gatwick, however, the situation would be very different. An increase from £8 to £27 per head would come as an unpleasant shock for both airlines and passengers.
Stansted and Luton will have plenty of spare slots throughout the 2020s and 2030s. Both airports could offer much more attractive rates – at present at Stansted, as at Gatwick, they average about £8 per passenger. A number of airlines would be tempted to move to Stansted, or at least operate new routes from Stansted. Certainly many of the new airlines which the Commission expect to be using Gatwick would be likely to choose Stansted instead.
Therefore the assumption by the Airport Commission that by 2030 Gatwick will be operating at 70% of the capacity of its two runways – that is 56 million passengers a
year – may well be too high.
The reason why the Commission’s logic is flawed is that they have relied on Department for Transport forecasts which, developed in the era before airports started competing with each other, do not take market forces into account. All airports are assumed to have similar operating costs, and the need to charge passengers the cost of building a new runway is not taken into account.
Gatwick is expected to reach full capacity on its existing runway sometime between 2020 and 2025, handling around 40 million passengers. GAL (Gatwick Airport Ltd) say that they
hope to open the new runway perhaps as early as 2025. Taking into account intense competition from Stansted and Luton, it seems unlikely that the number of passengers in 2030 would be more than 45 million.
Simple arithmetic shows that if the cost of a new runway shared between 56 million
passengers would be £27 per passenger, then the cost shared between 45 million
would work out at £33.60.
Thus, if a new runway were to be built, every passenger passing through Gatwick in future would have to pay something like £33.60, instead of £8 at present.
On a return trip the cost would be around £67, instead of £16.
For a family of four going on holiday the cost would be £269, instead of £64.
These results are not plucked out of the air; they are based on the figures provided by the Airports Commission – with the only difference that they take into account the likely competition from Stansted and Luton.
easyJet gets heebie-jeebies
In case anyone might still be tempted to think that these figures are an exaggeration, it is good to find that they are lower than the estimate made by easyJet, Gatwick’s largest airline. In October 2013 Carolyn McCall, Chief Executive of easyJet, said:
‘Our greatest concern is [that] the CAA has handed GAL a licence to print
money and has significantly enhanced the value of the future sale of GAL by
private infrastructure fund GIP. Using GAL’s own figures passengers could be
paying £28 more per flight for years in advance of the opening of a new £9
billion runway without any real oversight by the CAA.’
£28 more, i.e. on top of the present charges of £8 per passenger. And what is giving Ms McCall the heebie-jeebies is not only the prospect of a four-fold increase in airport charges but also the thought that GAL is to be allowed to put up the price before they build the new
No wonder easyJet has not been jumping up and down with enthusiasm.