The third runway: urgent but not vital
Heathrow has taken advantage of the Brexit vote to ramp up its increasingly strident calls for an immediate decision from Government, arguing that there is no better way, post-Brexit, of showing global investors that Britain is a confident, outward-looking nation, open for business. Its chief executive has suggested that it could add a further 42 long-haul destinations if it was given permission to go ahead with the runway and that Heathrow expansion is “vital” for the economy. But is it? There are a number of reasons to think that adding capacity either at Heathrow, or at the alternative site advanced by the Airports Commission, Gatwick, is important for economic growth, but not vital.
Take for example the prospective 42 destinations mentioned by Mr Holland-Kaye. It should not be a surprise to learn that it is not the chief executive of Heathrow airport who will decide whether these 42 destinations are served, but the bosses of the airlines using Heathrow. And I presume that Mr Holland-Kaye also knows that airline bosses can choose, if they wish, to serve these destinations, even without a new runway, or any additional runway capacity. This is possible because of market mechanisms that are in place to ensure that existing runway capacity is used efficiently.
At airports, airlines are allocated what are known as ‘slots’ for aircrafts to land and depart (the intervals of time between each aircraft using the runway). For an airline to serve a new destination it will require access to at least a couple of slots (usually on a daily basis) and it will need to be reasonably confident of favourable commercial prospects for the route. Importantly, when an airline has an existing portfolio of slots at a congested airport, it has to take into account the cost of foregoing an alternative route. (The dominant carrier at Heathrow, British Airways, has a huge portfolio of slots which it can, if it wishes to, juggle between routes). Alternatively, an airline can purchase a pair of slots in a secondary market. The secondary market, which Britain pioneered in Europe, allows airlines to trade slots: airlines with poorly performing routes sell slots to those able to make better use of them.
The existence of this market mechanisms implies that Mr Holland-Kayes’ 42 un-served destinations are of relatively low commercial value to Heathrow airlines. One must suppose that each one will produce less profit than the most marginal route flown currently from the airport. It is possible, of course, that some of these 42 routes could be profitably served from Heathrow but the ‘rights’ to fly these routes are still to be negotiated. If so, it is not the lack of runway capacity that is the impediment. Another reason for their absence from the current Heathrow timetable might be that the size of the local market is restricted by competition from alternative hub airports such as Amsterdam Schiphol and Paris Charles de Gaulle. In time, circumstances may change but, for the time being, provided UK businesses can reach destinations not served from Heathrow by flying to another hub to make the connection, the impediment to trade will be marginal. Indeed, one has to question how much loss there is to UK plc if the businessman or businesswomen, instead of flying to Heathrow to make a connection, use instead one of the existing frequent flights from a regional airport to a Continental hub?
In time the Government will make its decision on the matter of the third runway but it is to be hoped that time has been well spent by Whitehall by questioning some of the wish-lists of the airport bosses, in particular airports’ plans for 3,500m length runways. In many circumstances such mega-lengths would add modestly to construction costs, but that is certainly not the case at Heathrow where, to accommodate such a runway length, the M25 motorway has to be bridged and a small power plant has to be moved; not only will this add to the costs of the scheme but it will also be disruptive to motorists using a critical part of the motorway system. Moreover, if Heathrow is chosen, it will add to the time taken to bring this “vital” project on-stream. In 2007 the government started public consultations on a 2,000m runway. By January 2009, the length had grown to 2,200m; by 2010 to 2,800m and then, by the time of the Airports Commission, to an M25 hopping 3,500m. The technical and economic justification for this Topsy-like growth has yet to be made.
Prof David Starkie is a visiting professor at the University of Applied Sciences, Bremen. He was on the Expert Advisory Panel of the Airports Commission, but writes here in a personal capacity.