Aviation and Muddling Through

Bridget Rosewell, senior partner, Volterra

If you thought the Airports Commission, headed by Sir Howard Davies, had been set up to give a strong independent view of the UK’s need for aviation capacity into the future, you must be very disappointed.  It has taken a short term perspective, has become muddled on the economic role of aviation capacity, and has privileged the role of sunk cost investments over economic vision.

Its short term perspective can be seen in the conclusions: one runway needed by 2030, with possibly another by 2050 so we can concentrate on the existing airports.  A proper long term perspective would start with the longer term need and then work back to the short term steps to achieve it.  The congestion impacts of two more runways at Heathrow would surely lead one to consider more seriously an alternative location, and keep Stansted in the frame, rather than a half-hearted and after thought addition of the Isle of Grain.

Its muddle on the role of aviation capacity has several aspects.  First, it fails to recognise that capacity and air traffic movements are not the same.  Heathrow needs more runway space to manage its existing flights efficiently – an airport should not be required to run at 99% capacity so that the slightest perturbation causes chaos not just to itself but also to other airports. 

Moreover, the CAA has the power to set aircraft movement constraints so concern about carbon limits can be dealt with much more flexibly by that route.  As great a concern, however, is the muddle over the role of a hub.  In this capacity London competes with other international airports, and it is losing this competition.  Airports such as Frankfurt, Paris and Amsterdam are getting the connections London needs, and will undermine it as a destination airport over time. 

The demand forecasts used by Davies are based on a history which already reflects this loss, but even so show that unconstrained demand requires more capacity in the short term.  Heathrow and Gatwick operate at above efficient levels – what could be clearer?

Finally, the Commission has bowed to the god of commercial investment with a short sighted view of economic profit potential.  Existing investors naturally want to protect their existing investments, and will be able to show willingness to invest that new propositions, unsupported by existing commercial investors, will not.  There has been great interest in such investments, but without policy support, no real money. 

Yet policy makers want real money before they make policy – this is putting the short term first with a vengeance.  The Mayor of London, taking a long term view of the capital’s needs, thinks that Heathrow is not fit for purpose.  His views and those of TfL, on whose independent aviation panel I sit, seem to have been ignored.

Perhaps we should have known that this effort would just take us back to the policy position of yesteryear, and that we are doomed to fight the same battles over and over again.  When will we learn that muddling through is not an option here?

Bridget Rosewell is senior partner with economic consultant Volterra Partners