CE Delft economic study shows cost of building a new Nantes airport would exceed its benefits
26.10.2011
The study concludes that :
“We find that, when correcting for the extremely high valuation of time and taking oil price projections and inclusion of aviation in the EU ETS into account, the costs of the new airport at Notre-Dame-des-Landes exceed the benefits. When the benefits of urbanisation are taken into account, the SCBA [social cost benefit analysis] still shows a small negative result. If, however, construction costs are 40% higher than anticipated, which is the average cost overrun for large infrastructural works, the costs exceed the benefits by a wide margin.” and
“In summary, based on this study, the optimisation of Nantes Atlantique appears
to generate more welfare to France than the construction of a new airport at Notre-Dame-des-Landes. This presents a very strong case for a full analysis of the costs and benefits of all the options for improving air traffic in the Nantes region.”
Review of the Social Cost-Benefit Analysis of Grand Ouest Airport
Comparison with Improvements of Nantes Atlantique
by CE Delft. October 2011 CE Delft report on Nantes
Extract from the Summary:
The French government has decided to build a new airport to the north of Nantes.
Called l’Aeroport du Grand Ouest, the airport should replace Nantes Atlantique
(NA) as the main airport in Loire-Atlantique. The airport will be built in an
area called Notre-Dame-des-Landes (NDL), which is an alternative name for this
airport used in this report as well.
In preparation for the new project, an economic impact assessment (social cost-benefit
analysis, SCBA) has been performed in Pièce F of the Enquête Publique (EP) from
2006. This shows that in two or three scenarios studied, the benefits of the new
airport exceed the costs. Many organisations, notably Solidarité Ecologie, have
proposed to continue to use the airport of Nantes Atlantique and optimise its
the structure instead of building the new airport. This would have the advantage
that no new site would have to be developed in an area that currently has a high
ecological quality. The economic costs and benefits of this alternative have not
been studied, even though the French ‘Grenelle de l’Environnement’, which occurred
in 2007-2009, prescribed that a study on alternative options has to be done when
projects have a big impact on the environment. As a result, it is currently not
possible to base a decision on the airport infrastructure in Loire-Atlantique
on a review of the economic impacts of the alternatives.
The organisation of elected representatives who have doubts about this project
(le Cédpa) has asked CE Delft to carry out a review of the existing SCBA and to
compare the economic impacts of the new airport with the continued use of Nantes
Atlantique. This is done in two ways:
1. With improved access.
2. With improved access AND another runway replacing the existing one.
A social cost-benefit analysis (SCBA) assesses all the impact of a project and
expresses them in monetary terms. This is done both for market goods (for which
price information is available) as for non-market goods (e.g. travel time savings,
air pollution, noise, et cetera). An SCBA provides an overview of current and
future pros and cons of a particular investment or policy project for society
as a whole as objectively as possible. For this purpose, effects are denominated
in Euros whenever possible and can be aggregated. The analysis then shows whether
the project under evaluation leads to a desired increase in social welfare.
Conclusions
4.1
Is there a need for a new airport? A new airport at Notre-Dames-des-Landes has been proposed because the airport
of Nantes Atlantique would be near to its maximum capacity. This report has reviewed
the evidence on the maximum capacity of Nantes Atlantique and finds that it may
take a long time before it reaches its capacity because of two reasons:
1. Passenger demand growth projections are optimistic
Current oil price projections are considerably higher than projections at the
time of publication of the passenger projections. As a result, ticket prices are
higher and demand for aviation will be lower.
The passenger projections do not take into account that aviation will be included
in the EU ETS from 2012. As a result, ticket prices will be higher and demand
for aviation will be lower.
Two of the scenarios on which the projections are based include rather optimistic
assumptions on economic growth. A less optimistic assumption would result in lower
demand for aviation.
All the scenarios presented assume that the costs of aviation will continue to
decrease in the next decades. This is presumably based on the decrease of costs
in the past, caused by the liberalisation of air traffic in Europe and the emergence
of low cost carriers. Experience in the US shows, however, that liberalisation
and emergence of low cost carriers results in a cost decrease that seems to level
off over time.
High speed rail transport is a substitute for air transport. The improvement
of the LGV network (for example Nantes-Roissy and Nantes-Orly with ‘Le Barreau
Sud’) may increase demand for rail transport at the expense of air transport.
The market for aviation in Europe may mature and become saturated in the coming
decades, which means that with rising incomes demand will not rise as quickly.
2. Runway capacity is not constrained by the number of passengers, but rather by
the number of flights
An analysis of traffic data of European airports shows that the number of passengers
per flight at Nantes Atlantique is quite low for an airport of this size. This
suggests that a growth in demand can be met at least to some extent by increasing
the average number of passengers per flight, e.g. by using larger aircraft. Since
this would not increase the number of flights, the limits of the current airport
would be reached at a (much) later point in time.
4.2
Economic justification for Notre-Dame-des-Landes Airport
The proposal for a new airport at Notre-Dame-des-Landes has been justified on
economic grounds with an analysis of the social costs and benefits (Pièce F, EP).
This analysis shows that the main benefits of the new airport are the benefits
to passengers, which, in turn, are predominantly savings in travel time. A second
major benefit is the fact that urbanisation in the south of Nantes will be increasing,
although the benefits are difficult to quantify. Other benefits, including reduced
noise, are at least an order of magnitude smaller.
Benefits in terms of external safety (the risk of an accident of an aircraft
that causes casualties and/or damage outside the airport perimeter) are almost
negligible in economic terms, even though the emotional argument is strong.
The travel time savings depend on the number of passengers projected to use the
new airport. As argued above, this report concludes that the projections used
in the existing social cost-benefit analysis are too optimistic. In monetary terms,
the travel time savings are the product of the time saved (in hours) and the value
of time (in Euros). We find that the value of time that has been presented is
much higher than the value recommended in France.
In the economic justification for Notre-Dame-des-Landes Airport, published in
2006, three scenarios are presented of which one shows a negative balance of costs
and benefits (the costs exceed the benefits, excluding the effect of urbanisation)
while two show a positive balance. In only one scenario, the internal rate of
return of the new airport is enough to compensate for the risk of the project,
while in two other scenarios the rate of return is too low.
4.3
A comparison of improvements of Nantes Atlantique with the construction of a
new airport
This report has recalculated the social costs and benefits of a new airport at
Notre-Dame-des-Landes, taking realistic projections of passenger growth and of
their value of time into account. It has compared the results with an improvement
of Nantes Atlantique, where the airport would be equipped with fast taxiways,
a local radar system and land access by train for passengers. At some point in
time, a new runway is projected to be built, perpendicular to the current runway,
in order to reduce the noise impact on Nantes. The main difference between a new
airport at Notre-Dame-des-Landes and an improvement of Nantes Atlantique is that
the new airport would have higher construction costs and higher costs of damage
to nature. In terms of risks, the improvement of Nantes Atlantique has a lower
risk of cost overruns than the construction of a new airport.
We find that, when correcting for the extremely high valuation of time and taking
oil price projections and inclusion of aviation in the EU ETS into account, the
costs of the new airport at Notre-Dame-des-Landes exceed the benefits. When the
benefits of urbanisation are taken into account, the SCBA still shows a small
negative result. If, however, construction costs are 40% higher than anticipated,
which is the average cost overrun for large infrastructural works, the costs exceed
the benefits by a wide margin.
The improvement of Nantes Atlantique with fast taxiways, a local radar system
and land access by train would significantly improve its capacity and service
delivery. If a new runway is built, perpendicular to the current runway, the noise
impact on Nantes will be reduced. This report has tentatively analysed the costs
and benefits of such an improvement, although the estimates on construction costs
for NA are very rough since no such estimate has been made before. It finds that
the benefits are higher than the costs.
In summary, based on this study, the optimisation of Nantes Atlantique appears
to generate more welfare to France than the construction of a new airport at Notre-Dame-des-Landes.
This presents a very strong case for a full analysis of the costs and benefits
of all the options for improving air traffic in the Nantes region.
CE Delft report on Nantes (47 pages)
French campaigners against a huge new airport at Nantes to hold rally for cycles
and tractors in Paris on 12th November
Date Added: 24th September 2011
West France will be travelling by bicycle and tractor to Paris – leaving Nantes
on 6th November and arriving in Paris on 12th November where there will be a big
rally. Opponents of the proposed airport say it is not needed, it will destroy
2,000 hectares of good farmland, and do much harm. Campaigners from other countries
are invited to join the cycle ride and/or the rally in Paris. Click here to view full story…
Nantes plans to build a new airport – could it become the French Heathrow?
demonstrated against plans for a new airport on Sunday 12th July and 14,000 over
2 days. This could become the ‘French Heathrow’. The site of a victory as iconic
as the struggle against the third runway. The campaigners have succeeded in making
their fight a national issue, and the biggest airport campaign in Europe. Nantes
already has an airport, but wants to build a huge new one instead. Click here to view full story…