Sir Howard Davies writes to Patrick McLoughlin and the GLA to dismiss Gatwick’s claims
The Airports Commission, now almost closed down, has published on its website a letter to the GLA from Sir Howard Davies, setting out why they believe strongly that their analysis is robust to the arguments that Gatwick airport have made (recently repeated). The Commission also published a letter to the Transport Secretary, Patrick McLoughlin, dated the 7th September, and now copied to the GLA, countering all Gatwick’s arguments why it should be the site for a new runway. The Commission’s letter to Patrick McLoughlin deal with Regional Connectivity, on which they dismiss Gatwick’s claims; Economic Benefits, on which the Commission says the benefits to the UK from a Heathrow runway are substantially greater than a Gatwick runway; on Costs and Charges; Deliverability and Financing; Air Quality; and Noise. The Commission says, quote: “GAL accuse the Airports Commission of having ‘largely ignore[d]’ Gatwick’s lower noise impacts compared to those of Heathrow. That is nonsense.” Sir Howard Davies’ letter to the GLA covers the issues of capacity and resilience, connectivity, noise mitigation, surface access and finance. Criticising the session at the GLA where Sir Howard was interviewed, he says there was no “serious consideration of the role of aviation, and the benefits of expansion, in supporting the capital’s long term prosperity.”
There are links to both letters on the Airports Commission website at https://www.gov.uk/government/publications/sir-howard-davies-letters-following-the-airports-commission-final-report
The letter to Jennette Arnold OBE AM, Chair of the London Assembly https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/463767/howard-davies-to-jennette-arnold-280915.pdf
The letter to Transport Minister, Patrick McLoughlin
The Rt. Hon. Patrick McLoughlinMP
Secretary of State
Department for Transport
Great Minster House
33 Horseferry Road
London SW1P 4DR
Sir Howard Davies
Chair Airports Commission
20 Great Smith Street
London SW1P 3BT
Date: 7 September 2015
Dear Secretary of State,
I am writing in response to recent media coverage of the criticisms made by Gatwick
Airport Ltd (GAL) of the analysis and recommendations in the Airports Commission’s
Final Report. The majority of the points made by GAL in the media were in reality
also made to the Commission in the course of its work and we considered them
carefully before we reached our conclusions. I thought it may therefore be helpful to
provide an overview of this and to explain why we believe strongly that our work is
robust to these criticisms.
GAL’s criticisms fall into seven broad categories, with which this letter deals in turn.
The reliability of the Airports Commission’s forecasts, which were derived using an
enhanced version of the DfT aviation model, wasregularly questioned by GAL
throughout the Commission process and therefore commanded our close attention.
This included commissioning additional advice from the OECD and from a leading
academic expert, Professor Andreas Schaefer,as tothe robustness of both our
forecasting approach and the criticisms and alternative forecasts put forward by
GAL. Their conclusions were unequivocal:
- In respect of the Commission’s forecasts, the OECD found that: the various
trends in the Commission’s traffic forecasts … are plausible, and that the
various points raised by the consultees do not provide persuasive evidence
that the airport allocation model is biased. The forecasts provide, in our view,
a valid basis for the Commission to compare the impacts and relative merits
of different options for investment in additional capacity at London’s airports.
- In respect of the DfT aviation model, Professor Schaefer found that: “The
scale, capability, and level of detail of the DfT aviation model system is
impressive. I am not aware of … any other country having such kind of
apparatus available … In addition, I found the overall modelling approach to
be coherent and the model specifications to follow good practice.”
- In respect of GAL’s forecasting model, Professor Schaefer found that: “it is not
clear how the results were produced and what specific assumptions they are
based on. Without more detail … it is not possible to disprove that the ICF
Model is based on a set of assumptions rather than rigorous quantitative
relationships. Therefore it is my recommendation that the ICF Report results
should not be used for decision making.”
We strongly disagree with the Gatwick’s view that the Commission’s forecasts underestimate the level of passenger growth that would be seen at an expanded
Gatwick and overestimate growth at an expanded Heathrow. Even so, we have
always acknowledged the risks associated with longterm forecasting. That is why
we developed a scenariobased methodology, which enabled us to understand the
implications for our analysis of different views of the future. In some circumstances
an expanded Gatwick wouldperform more stronglythan in our assessment of need
forecasts, but these required extreme assumptions about economic growth or
industry development. Heathrow expansion saw rapid increases in passenger
numbers and services across the full range of scenarios tested.
In making its case, GAL also focuses on individual figures rather than looking at
longterm trends. For example, it refers to the 2.7 million increase in passenger
numbers seen in 2014 to support its argumentthat an expanded Gatwick would grow
faster than we have forecast. In fact, the 2014 increaseat Gatwick was unusual. The
previous year, for example, passenger numbers increased by just 1.2 million and
average growth between 2004 and 2014, even with spare capacity available, was
less than 0.7 million a year.Similarly, the differences between the Commission’s and
GAL’s shortterm estimates of passenger numbers are of limited relevance, as we
both see the airport’s single runway reaching capacity before 2020.
GAL’s final point is that the difference in forecast growth between an expanded
Gatwick and an expanded Heathrow ( m vs 3 m passengers over the 5 yearsto
2030) is inexplicable.We do not consider that this is the case. As set out above, with
spare capacity available, Gatwick has grown at less than 1m passengers per year
over the past ten years. The provision of significant new capacity, particularly in the
morning and evening peak periods, ould accelerate this, as our forecasts show, but
would not fundamentally alter the underlying demand without broader changes in the
economy or aviation industry. In contrast, Heathrow is one of the world’s most
profitable airports from which to operate and has been capacity constrained for many
years. As a result, it is reasonable to assume a high level of suppressed demand for
runway slots. The willingness of airlines, most recently Vietnam Airways, to switch
from Gatwick to Heathrow as soon as slots become available bears this out. The
construction of a new runway would allow this suppressed demand to be met,
leading to rapid growth in passenger numbers and services.
GAL has argued that an expanded Gatwick Airport would be better for regional
connectivity than expansion at Heathrow, but their argument misunderstands and
misrepresents the Commission’s analysis. They state that Gatwick is preferable
because an expanded Heathrow – according to the Commission’s forecasts – would
serve only fourdomestic routes compared to the seven served currently and
compared to eight at an expanded Gatwick.
There are three flaws in this argument. The first is that, without any additional
measures to safeguard domestic connectivity, an unexpanded Heathrow would see
domestic routes decline even further to just three. In contrast, expansion at Gatwick
makes no difference to the number of domestic routes forecast at the airport, which
would be eight with or without expansion.
The second flaw is that the argument assumes that a link to one London airport is
the same as a link to another. Our discussions with stakeholders in the nations and
regions revealed very clearly the importance that they attach to direct links to
Heathrow because of the access provided to its substantial longhaul route network.
A third runway at Heathrow would allow further expansion in that network as well as
more than trebling the number of domestic passengers able to access it.
The third flaw is that the Commission’s forecasts do not assume any additional
measures are taken to promote domestic connectivity to the expanded airport. A
number of such measures are, however, feasible and are recommended in our Final
report. These include reduced passenger charges on domestic services and the use
of Public Service Obligations to support a broad route network. Therefore, we
believe that the level of domestic connectivity could be greater than that indicated by
our forecastsalone. EasyJet’s submission to our consultation indicated thatitwould
consider serving around seven domestic destinations from an expanded Heathrow.
Contrary to GAL’s assertions, the direct economic benefits of expansion at Gatwick
and Heathrow are not ‘virtually the same’. In both the‘carbon traded’ and ‘carbon
capped’ forecasts, the net social benefits of a new north west runway at Heathrow
are roughly two thirds higher than those of a second runway at Gatwick.
The Commission has acknowledged that if the costs of the schemes are
incorporated into the calculation, the gap may be narrowed or reversed. But this is
not primarily a public investment decision, but rather a decision as to which of a
number of private sector schemes, in each case likely to be funded significantly by
international investors, should be facilitated through the planning system. The
Commission’s view is that this should be the scheme which delivers the greatest
benefits for the UK.
We have also been careful in our use of the more innovative modelling of wider
economic impacts carried out by PWC. In particular, we have been clear that these
results are based (for both Gatwick and Heathrow) on an assumption that investment
in aviation capacity is likely to stimulate knockon investment elsewhere in the
economy, and for that reason have considered them as part of the strategic case
and not as part of our cost-benefit analysis.
In doing so, and bearing in mind our expert advisers’ notes of caution, the
Commission considered carefully whether the monetised outputs of this modelling
were consistent with its broader strategic analysis of the schemes’ benefits and
impacts. Our conclusion was that they were. Expansion at Heathrow delivered
greater benefits for the UK’s long haul network, enabled more rapid growth in
inbound and business travel and in the air freight sector and enhanced competition
to a greater degree than expansion at Gatwick. Heathrow expansion also had a
stronger impact on the surrounding local economies, generating more jobs more
quickly than expansion at Gatwick. This overall analysis aligned well with the PWC
results, which showed much stronger impacts across the UK economy from
expansion at Heathrow – more than £140 billion over 60 years compared to c. £90
with a second runway at Gatwick.
Costs and Charges
GAL’s argument that the lower costs of expansion at Gatwick should inevitably mean
lower per passenger charges is entirely misguided. The level of charge is a function
not only of the cost of the scheme, but also of the number of passengers paying for
it. The higher levels of demand seen at Heathrow significantly reduce the charge
required on a per passenger basis. GAL’s proposed ‘contract’ to limit charges to £15
could at best be considered the starting point for a negotiationgiven its significant
reas of omission (including any information on penalties should GAL fail to comply
with the contract’s provisions),and would in any case do nothing toalter the
underlying commercial fundamentals of the project.
Deliverability and Financing
A range of issues, including the need to tunnel and widen the M25 and to deliver
other transport improvements, as well as to relocate an existing EnergytoWaste
plant, are highlighted by GAL as indicating that the Commission must have
underestimated the delivery challenges associated with the north west runway
proposal at Heathrow. In fact, each of these was identified and considered by the
Commission, as was the additional evidence on this topic submitted by GAL to our
consultation,before we reached ourview that itwould be feasible for the scheme to
be delivered by 2026. It is important to note, however, that this is not a prediction;
any scheme of this kind is subject to a range of delivery risks and uncertainties.
While earlier delivery would undoubtedly be of benefit, the Commission’s
assessment of need was for new capacity to be available by 2030. Our deliverability
analysis gives us confidence that this would be the case.
GAL’s comparison of the level of spend required to construct Terminal 5 with that to
deliver a new runway is oversimplistic. Alongside constructing T5, Heathrow Airport
Ltd had to continue to invest in and operate its existing infrastructure. These
additional costs are taken into account in our assessment of commercial
deliverability. Furthermore, GAL provides no evidence for why a higher rate of
expenditure would not be feasible. Heathrow Airport Ltd have significant experience
in managing major development projects on an operational airfield which would be of
direct relevance to the construction of a new runway and it supporting infrastructure.
GAL argue that our analysis of the air quality issues around Heathrow is based on an
incorrect interpretation of the law. We do not agree. We considered carefullythe
legal arguments put forward by GAL in their submissions to our consultations, before
reaching a view that thosearguments were themselves unsoundand, if we had
accepted them, would have left us open to challenge.
Our air quality analysis was carried out by one of the UK’s leading consultants in this
fieldwith oversight and quality control offered by another, and withthe support of
Helen ApSimon, Professor of Air Pollution Studies at Imperial College and a member
of DEFRA’s Air Quality Expert Group. The allegations of incompleteness and
inconsistency made by GAL were dealt with in full in the report on the responses to
our air quality consultation.
In our Final Report, we acknowledge the air quality challenges facing the UK, includingthe requirement on the Government to achieve the EU limit values in London. Our analysis demonstrates, however,that the impacts of expansion at Heathrow would be a manageable part of this broader issue, which we believe the Government can feasibly devise and implement appropriate measures to address. In our view, therefore, limited weight should be placed on the suggestion that air quality represents a significant obstacle to expansion.
GAL accuse the Airports Commission of having ‘largely ignore[d]’ Gatwick’s lower
noise impacts compared to those ofHeathrow. That is nonsense. We have been
aware from an early stage of our work of Gatwick’s relative advantage in respect of
noise impacts, and this is brought out clearly, for example, in the Executive
Summary of our Final Report:
Although an expanded Gatwick would see more people affected by noise than today,
its overall noise impacts would still be much less significant than those around
Heathrow.In terms of the total number of people affected, an expanded Heathrow
would see more than 550,000 people within the 24hour 55 LDEN contour in 2030
compared to just over 22,000 at Gatwick. That reflects Gatwick’s more rural location,
which presents challenges in respect of the airport’s effects on tranquility, but does
not outweigh its overall noise advantage.
Similarly, GAL has accused us of failing to properly assess the number of people
who might be newly affected by noise as a result of expansion at Heathrow. In fact,
we have carried out such an assessment (and, perversely, it is our own figures that
GAL has quoted in in its advertisements on this point). What is important, however,
is the overall noise impact – including those who experience an improvement in the
noise environment as a result of expansion as well as those who experience a
worsening. For the Heathrow scheme, the population for whom noise levels would
reduce as a result of the redesigned flightpaths made possible by expansion could
be very substantial – well over 200,000 people. Therefore, it is these net figures that
we concentrate on in our analysis and reports.
I hope this is helpful in providing reassurance that our analysis is robust to the
arguments made by GAL in their recent releases to the press.
I am copying this letter to Philip Rutnam and Sir Jeremy Heywood. I would be
grateful if it could be circulated to the membersof the Economic Affairs (Airports)
Sir Howard Davies, Chair