Continued from - Heathrow in Dragon’s Den | Neighbours | Passengers
According to the Institute of Directors (IOD), delaying further investment in Heathrow is costing UK PLC £1 billion each year in lost opportunity and congestion. Heathrow employs 72,000 people, making it the largest single-site source of employment inthe UK. Yet a third runway is projected to cost a massive £8 billion. How will this investment be recouped? Clearly, BAA believe that they will get their investment back, and the IOD figure would suggest that UK PLC would see a return in just 8 years - not bad for such a huge piece of infrastructure. But what if the airline industry continues to see weak demand?
Heathrow’s attraction
In the current downturn, Heathrow has stayed steady whilst other UK airports have seen demand fall. Heathrow operates at 99% capacity, whereas its main three European rivals (Frankfurt, Amsterdam and Paris Charles De Gaulle) all operate at around 75% capacity. Neither Amsterdam nor Frankfurt has the population to support airports of such size in their own right - these two airports only thrive because of the huge volumes of transfer passengers they attract. Only London and Paris can claim to be true hub cities, where there is substantial latent demand together with the demand for inter-connecting flights, which makes more routes viable.
But does UK PLC really want all these transfer flights?
There is a legitimate argument to say that transfer flights are the most wasteful form of air travel, and that it would be better to encourage people to make such connections at airports like Paris, where there is a lower noise footprint. This is, of course, a blatant ‘not in my back yard’ argument, but in terms of economics, is it really worth building an extra runway just to encourage more transfer passengers? The argument behind such transfers is that they enable huge numbers of routes to be profitable, when they would not otherwise be viable. Typically, 25-40% of passengers on long haul flights to and from Heathrow are making transfers - without these passengers, there would be much fewer routes.
Of course, point to point flying is the most efficient way of getting from A to B, but there are always going to be journeys where the hub and spoke system will be needed - for example from Edinburgh to Entebbe or Oslo to Osaka. Is it really right that these passengers should be forced to be funnelled through Paris, Dubai or Amsterdam, just because Heathrow doesn’t have the capacity?
Verdict: UK PLC clearly sees the advantages of Heathrow’s third runway and says ‘I’m in’. Score so far: 2-1 in favour.
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