Richmond campaign shows Heathrow runway would lead to 50% of the new capacity used for international transfers
The Richmond Heathrow Campaign has produced a very useful set of carefully argued briefings and aspects of a 3rd Heathrow runway (noise, CO2, air quality etc). These can be found here. There is now an updated briefing on economics. It makes several vital points showing how the Airports Commission’s conclusion and recommendation for a Heathrow runway is not supported by its own evidence. The RHC points out that the Commission’s own “strategic fit” document shows that with a new Heathrow runway, there would be an extra 22 million international-to-international (I to I) transfer passengers using Heathrow per year (about 30 million in 2050 rather than about 8 million then if there was no runway). The additional 22 million passengers would take up over 50% of the new runway capacity, and would provide little or no economic benefit to the UK. They do not pay APD. Transfer passengers do not leave the air-side at Heathrow. They contribute to the airline and airport profits and their value is said to add connectivity by providing minimum aircraft loads for otherwise unviable routes and by adding to route frequency. Support for thin (i.e. low demand/frequency) destinations is a main justification for the Commission recommending a Heathrow runway. But 95% of Heathrow’s I-to-I transfers support higher frequencies to already popular destinations rather than otherwise economically unviable thin destinations.
The RHC also points out that the £17.6 billion investment in the Heathrow runway produces just £1.4 billion of net benefit (present value over 60 years), which is negligible in macro-economic terms and within the margin for statistical error.
What impact would a new runway at Heathrow have on the UK Economy?
New economics briefing by the Richmond Heathrow Group
The Airports Commission’s brief was to maintain the UK’s position as Europe’s most important aviation hub. The Commission’s conclusion and recommendation for a northwest runway (NWR) at Heathrow is not supported by the Commission’s own evidence.
This Fact Sheet, updated to reflect the Commission’s Final report, shows that:
- There is already significant spare capacity at almost all UK airports, including Heathrow, which has existing capacity for an additional 34 million terminating passengers a year.
- Heathrow’s north west runway expansion results across the UK in 17 million fewer passengers a year, fewer business passengers, fewer flights, and less connectivity.
- Heathrow’s 41 million additional passengers a year result in a loss of 58 million passengers a year at other UK airports, including Birmingham, Manchester and Glasgow.
- An extra 22 million international to international transfer passengers a year (over 50% of the NWR capacity) provide little or no economic value to the UK.
- Heathrow adds only 9 long-haul destinations, 2 million long-haul business passengers a year and one new domestic destination but 37 new short-haul destinations. The increased connectivity is of doubtful value and is offset by reduced connectivity at other London and regional airports. The overall number of destinations from the UK is reduced by three.
- The £17.6 billion investment produces just £1.4 billion of net benefit (present value over 60 years), which is negligible in macro-economic terms and within the margin for statistical error. Omitted are: £15 billion of surface access costs needed to avoid road congestion and to meet service level standards and air quality limits; full recognition of noise costs; and the negative impact on the UK aviation market.
- State funding of surface access costs of £20 billion in total is unjustified, but without it, the scheme is potentially undeliverable.
Full briefing at
Just considering the points on the international-to-international passengers, from the RHC report, to look at here in more detail:
Some extracts on this:
[With a new Heathrow NW runway] Impact on the UK as a whole: [Data from Airports Commission’s Strategic Fit: Forecasts. Tables 5.6 and 6.1
viii. Reverses the decline in I-to-I transfers in the UK (most are at Heathrow). Without a 3rd runway, UK-wide I-to-I transfers decrease from 20.4 million transfers in 2011 to 8.3 million in 2050. But the NWR option results in 30.5 million I-to-I transfers across the UK by 2050, which means the NWR option adds 22.2 million transfers compared to the Do-minimum option or the equivalent of around 54% of the 3rd runway’s capacity. These provide little or no economic benefit to the UK (see paras. 26-29 below).NEGATIVE for the UK.
Impact on Heathrow: Reverses the decline in I-to-I transfers at Heathrow. Without a 3rd runway, Heathrow I-to-I transfers decrease from 18.5 million transfers in 2011 to 8.1 million in 2050 [AON carbon capped. Page 80 of link ]. But the NWR option results in 29.9 million I-to-I transfers at Heathrow by 2050, [AON carbon capped. Page 141 of link ] which means the NWR option adds 21.8 million transfers compared to the Do-minimum option or the equivalent of around 55% of the 3rd runway’s capacity. These provide little or no economic benefit to the UK (see paras. 26-29 below). POSITIVE for Heathrow but NEGATIVE for the UK.
22. The number of destinations served by Heathrow itself is forecast to decrease from 179 in 2011 to 151 in 2050 without Heathrow’s NWR expansion but to increase to 198 with Heathrow expansion. Compared to no NWR expansion, Heathrow’s NWR expansion adds 9 long-haul destination, 37 short-haul and one domestic destination. These increases, together with an increase of over 50% in the number of flights, improve Heathrow’s connectivity. But this results in increased numbers of I-to-I transfer passengers, UK resident leisure passengers on short-haul flights and increased frequency of flights to popular destinations. Therefore, the increased connectivity of Heathrow flights and destinations is of doubtful economic value. POSITIVE for Heathrow but of doubtful value for the UK.
25. Heathrow’s NWR expansion concentrates flights and passengers at a single airport. It follows that competition will be stifled. It could thrive if other airports were allowed to grow their market share and, in the south-east, all five London airports were encouraged to compete. ……… Heathrow has over 90% of the I-to-I transfer market. POSITIVE for Heathrow but NEGATIVE for all other airports.
26. Heathrow Airport Limited (HAL) claims that Heathrow competes with overseas airports as the UK’s only hub airport. A hub airport is one where transfers represent a major part of the activity and there are the facilities to cater for transfers. I-to-I transfer passengers represented 19 million or 27% of Heathrow passengers in 2011 or 91% of the UK’s total I-to-I transfers. In the absence of Heathrow’s NWR expansion, the number of I-to-I transfers at Heathrow decreases to 8 million passengers by 2050. This is 9% of Heathrow passengers. But with Heathrow’s NWR expansion the I-to-I transfers rise to 30 million passengers or 22% of Heathrow passengers by 2050.
27. An increase of 22 million I-to-I transfer passengers is over 50% of the new capacity of 41 million passengers served by an additional Heathrow runway.
28. Transfer passengers do not leave the air-side at Heathrow. They contribute to the airline and airport profits and their value is said to add connectivity by providing minimum aircraft loads for otherwise unviable routes and by adding to route frequency. However, there are very few thin (i.e. low demand/frequency) international routes from Heathrow that have any I-to-I transfers. There were 44 long-haul thin destinations in 2011 (less than one departure a day) out of a total of nearly 100 long-haul destinations. Only 7 of these thin destinations had I-to-I transfers and these accounted for just 446,000 out of 19 million transfers. It is doubtful that the economic viability of any of these 7 low frequency services depended on transfers.
But support for thin destinations is a main justification for the Commission recommending a hub airport such as Heathrow. Instead, 95% of Heathrow’s I-to-I transfers support higher frequencies to already popular destinations rather than otherwise economically unviable thin destinations. In 2011 New York JFK and Newark airports together had over 26 departures from Heathrow every day serving 1.2 million I-to-I transfers and 2.6 million terminating passengers. Average loads were as low as 216 passengers on flights to New York JFK in 2011 and 170 passengers to Newark, compared to an A380’s capacity of over 500 passengers. This issue was recently confirmed by the Sunday Times 18/10/15; it said that BA has over capacity on some US routes from Heathrow and is cutting the frequency of flights.
29. While frequency is important to connectivity there is a question of diminishing returns and efficient use of resources on high frequency routes, especially those serving primarily the leisure market. I-to-I transfer passengers are exempt from Air Passenger Duty. They support business travel between overseas countries in competition with the UK. The routes tend to be circuitous with an additional landing and take-off compared to a direct flight, which results in additional noise and pollution. They use the UK’s valuable CO2 ceiling. As a result of Heathrow expansion, a very substantial 22% of Heathrow’s capacity would be used for the benefit of I-to-I transfers but not for the benefit of the UK. Fewer I-to-I transfers could free up Heathrow slots for flights to as many as 100 new destinations a day.
The Commission has given weight to the importance of I-to-I transfers supporting new long-haul destination with potentially rich business opportunities. However, we question whether I-to-I transfers support thin destinations and we question their value in adding frequency to already popular routes serving the leisure market and the diminishing returns on high frequency routes, as explained in paras. 26-29. The WebTAG model attributes £6.2 billion of benefit to I-to-I transfer passengers but why WebTAG assumes their benefit should benefit the UK is unclear; they appear to be excluded explicitly from the S-CGE valuation because they are said by PWC to add no value to the UK. Oxera also confirm that there is no I-to-I value in their report [Oxera Report – Concerns with the Airports Commission’s Economic Appraisal. Oct 2015].
39. Heathrow needs to find £28 billion to finance a third runway and ongoing cash outflows  and £20 billion for surface access . Almost certainly Heathrow’s NWR expansion will require large amounts of state aid which will be at the expense of the rest of the UK and UK tax payer and will end up subsidising the return of Heathrow’s mainly overseas shareholders and the majority of users of the new capacity of 41 million passengers a year who will be I-to-I transfers passengers (an incremental 22 million by 2050) and UK resident leisure passengers (an incremental 7 million by 2050). The latter has a negative impact on the UK’s balance of payments. Air travel for leisure is also predominantly by the more wealthy and a questionable candidate for state subsidies. ABC1s are the predominant users of leisure air travel (74%). There is already substantial spare capacity at airports outside the UK requiring little further investment.
Series of RHC Factsheets on Heathrow
The other factsheets on Heathrow by the Richmond Heathrow Group are at
There are briefings on:
Air pollution. rhcfacts.org/air
Local economy. rhcfacts.org/local
Surface access. rhcfacts.org/surface