Heathrow 3rd runway to provide a good range of destinations purely for exotic leisure travel

The Airports Commission changed its arguments sharply between its 2013 interim report and the final document of today, July 1st. In 2013, the central idea was that Heathrow should be expanded because of a rising need for business air travel. The UK is missing out, the Commission suggested, because Heathrow did not have sufficient capacity to service desirable locations such as the largest Chinese cities.

Everthing changed today. Now the core argument is that without Heathrow expansion the UK’s leisure travellers would suffer. The Commission tells us that air travel makes people happy (I am only slightly simplifying the text). Therefore London needs more runways so that we can all fly more.

The purpose of this post is to point to what I think is a serious flaw in the analysis of the impact of air travel on happiness. I apologise for straying into econometrics but since the Commission’s report is likely to result in public policy decisions, I believe it is vital that poor and misleading analytic work is scrutinised.

In summary, I say that the Commission’s econometric work does not show that air travel makes people happy. Rather it demonstrates the wholly unsurprising conclusion that having holidays away from home is associated with a better state of mind and health. There is no legitimate ground for the Davies Commission to justify Heathrow expansion on the basis of improved happiness as a result of more air travel.  (I’ve tried to make the rest of this article as free from econometrics as I can).

Below is a crucial chart that the Commission didn’t include in the interim report but does make an appearance in today’s document. It’s worth a close look. For the first time we see on Airport Commission headed paper an admission that business air travel is falling. It’s lower in terms of millions of passengers than it was in 2000 down from about 31 million trips to around 29 million.

Any growth that is coming is from leisure travel, either for holidays or Visiting Friends and Relations (VFR). This conclusion is as true for Heathrow as it is for other London and large regional airports. Heathrow is a leisure airport, partly for UK residents and partly for non-residents passing  through the airport on the way to another destination.

Simply put, the notion that business needs more airport runways around London is nonsense. If there is any need for more airport capacity, it arises because of leisure travel.

And it is certainly worth pointing out again that many of the leisure travellers that pass through Heathrow are in transit from one non-UK destination to another.

They are of no substantial value to the UK economy. Why the people of Richmond or Hounslow should suffer more noise and traffic disruption to allow more non-UK people to fly on holiday elsewhere is an issue that Howard Davies does not address.

By ceasing to stress the business need for Heathrow expansion, the Davies Commission seems to have finally accepted that the arguments for more runways can only be made by reference to the possibility of rising leisure travel, by UK residents and those from abroad.

That is why we see the following surprising statements early in the Commission’s final report.(There’s nothing remotely like these comments in the interim version).

Page 70  (see Commission Final Report here) 

‘Leisure flights have a high social value. Empirical analysis focused on passengers travelling on holiday or to visit friends and family has shown how the access to leisure travel affects mental health and wellbeing. The findings demonstrate these patterns of travel are associated with higher levels of life satisfactions, general and mental health, and happiness’.

And so it goes on. Heathrow expansion is justified not by the brutal logic of global economics but by an unusual interest in personal happiness. The Commission pulled in consultants PwC [no link to their report is given] to provide the analysis that back up its assertions that air travel makes us feel good. The consultants trawled through published academic research and analysed three large scale statistical studies of personal happiness.

The academic research is limited and not particularly helpful. PwC writes

‘Most of this literature is based on analysis of surveys of small groups of people with specific characteristics or small samples designed to be representative of large populations . None of the studies has conducted empirical analysis using datasets similar to those we have used in our empirical analysis’

So they move on to their three big statistical studies. The first shows reasonably convincingly that having an annual holiday is associated with greater happiness. Nobody will be surprised. If you don’t have a holiday you are likely to have less control over your life and/or be the kind of person who gets little pleasure from leisure. These are clear predictors of unhappiness.

The second PwC study demonstrates, the consultants say,  that air travel is associated with a higher level of happiness. This is the conclusion that the Davies Commission leaps upon because it supports the case for more London runway capacity. (Here comes the only bit of econometrics in this article, sorry). However, the statistical work that PwC did for the Commission didn’t split up the respondents into those that travelled on holiday by car, train or bus and those that flew. This second study is therefore picking up nothing more or less than the same phenomenon seen in the first study. If you travel abroad you are likely to be doing so because you are going on holiday. In other words, the second report finds the same conclusion as the first; holidays are associated with happiness, not that people like air travel. There can be no conclusion that air travel causes a higher sense of life satisfaction.

The third statistical study confirms the first. People who are able to take holidays tend to be happier than those that do not.

PwC concludes

‘Our empirical analysis of the UK using three large datasets consistently finds that taking holidays and flights is associated with improvements in health and wellbeing as measured through various indicators of health and wellbeing’.

No it does not. PwCs’ empirical analysis shows that people who take holidays are happier. Nothing more and nothing less. For their money PwC should have done better econometrics. And the Davies committee shouldn’t have based their revision to the reason why London needs more airport capacity on such a weak piece of work.

There’s one more comment to make. In addition to the new focus on leisure, the Airport Commission uses its final report to make the case for Heathrow based on the amount of freight coming in to the airport. This argument is almost shockingly lame. The reason Heathrow takes in more freight tonnage than elsewhere is simply that it has far more inbound passenger flights. The freight that arrives in the airport doesn’t come in cargo aircraft but in the holds of long distance passenger flights. And since Heathrow has almost seven times as many long distance passenger flights as Gatwick it is utterly obvious why it brings in more freight.

The truth remains that London doesn’t need more runway capacity and that the pressure for Heathrow expansion is entirely driven by the understandable desire of the owners of the airport to make more money by running more services. Nothing more and nothing less.

If the UK thinks it can meet its carbon budgets for 2050 by expanding the number of airport runways, delusions have set in very deep. Today’s air travel CO2 emissions of around 40 million tonnes a year will use up almost all the UK’s allowance by mid-century. We cannot meet our carbon budgets by continued encouragement of aviation.

http://www.carboncommentary.com/blog/2015/7/1/f7e2bqjw7kzpgx6sti68kwt7r3zz07

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(see Commission Final Report here) 

Page 70 of the Airports Commission Final Report states:

3.5 Leisure flights have a high social value. Empirical analysis focused on passengers travelling on holiday or to visit friends and family has shown how the access to leisure travel affects mental health and wellbeing. The findings demonstrate these patterns of travel are associated with higher levels of life satisfaction, general and mental health, and happiness. 19  [Footnote 19: The full analysis of this topic can be found in the report Quality of Life: Leisure Impacts Assessment, published alongside the Commission’s consultation and in a further report, Quality of Life: Further Assessment published alongside this report.]

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3.6 Leisure travel is also of significant importance for the UK economy. Multi-national businesses operating in the UK recruit from a global pool of talent in IT, creative industries, financial services, advanced engineering and many other sectors. For their personnel the ability to return home easily to visit parents and even children is not a luxury, it is an important part of the package that persuades them to take a job in the UK. The same considerations apply to UK businesses posting staff to important overseas markets. The ability to travel home affordably and conveniently is not just a social benefit, it makes a material contribution to the competiveness of the UK.

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and also

3.8 The largest industry associated with leisure flights is tourism. The UK has a significant tourism sector which contributes both employment and gross value added to the economy. In 2013 the Tourism Direct Gross Value Added was £56 billion 20 while the most up to date value of inbound tourism is £21.8 billion in 2014.21 The wider UK tourism industry is forecast to grow significantly over the coming decades but of particular relevance to Commission’s analysis is the growing propensity to travel of a rapidly expanding middle class in many developing economies, particularly in Asia. This is a significant opportunity for the UK’s tourism as well as London as a global city with a strong history and an established tourist infrastructure which has great potential to be the starting point for European travel.

[This is a classic case of the Commission – in the same way the aviation industry does – looking at benefits of inbound tourism, and conveniently neglecting the inconvenient flipside. The money taken out of the UK by British people holidaying abroad].  

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Page 219

10.17 There is also a benefit to people nationally (as well as locally) through the leisure impacts of the resulting increased connectivity, which could increase access to leisure holidays or visits to see family and friends by increasing the availability of flights to different places, reducing the cost of travel and improving the passenger experience. The Commission’s analysis showed statistically significant positive effects of leisure abroad improving mental and physical health, as well as boosting productivity. The general results of the statistical analysis across all of the datasets is that taking holidays and flights is associated with improvements in health and wellbeing. The only differential impact between socio-demographic groups (e.g. age, income) is that the positive association between having holidays and self-reported general health and depression is stronger for unemployed people than for employed people.

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The Commission also says, by contrast – on the subject of those whose quality of life and well-being is reduced by living with aircraft noise, that:

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