Independent Transport Commission underlines need for Davies airports decision

Delayed or ducked decision on expanding airport capacity in South East will have impact for the whole of the UK economy, says new ITC report.

Antony Oliver
22 June 2015

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ITC - Time to act: The economic consequences of failing to expand airport capacity

Any delay to the decision over expanding airport capacity in the south east of the UK will have serious implications for the future of the whole UK economy, a new report by the Independent Transport Commission has warned.

In a new report produced in advance of the expected Davies Commission recommendation on UK airport capacity, the ITC warns that, while controversial, a rapid decision by the new Tory government it critical to underpinning business success across the UK.

“Whichever option is chosen, the economic benefits are likely to be substantial,” Independent Transport Commission

“The issue of how to expand airport capacity in London and the South-East is both complex and controversial and implementing any recommendation will be difficult,” the ITC report accepting that the choice between Gatwick and Heathrow brings with it major political challenges.

“Whichever option is chosen, the economic benefits are likely to be substantial,” it adds. “Therefore it is important that people do not lose sight of the benefits of air connectivity in any debate on the pros and cons of the specific option for airport expansion the Airports Commission recommends. The impact of any decision (or lack of decision) will be felt much more widely than just in the vicinity of the airport itself. 

The ITC report titled “Time to act: The economic consequences of failing to expand airport capacity: Why connectivity matters for trade and investment” sets out the consequences for the UK of failing to boost airport capacity in the south east in the run up to the publication of the Airports Commission’s recommendations.

With these recommendations due imminently - but rumoured to be delayed -  the ITC warns that ducking or delaying of this difficult decision by the new Tory government will have consequences beyond simply the local economy of the London area.

"The report highlights that good connectivity is key to productivity, since the most productive firms and sectors are typically those which operate internationally." ITC

“This report reminds us how vital air connectivity is to the UK,” explains ITC Aviation working group chairman Dr Stephen Hickey in the foreword. 

“Productivity ultimately drives living standards and the UK has for years suffered from poorer productivity than rivals,” he added. “The report highlights that good connectivity is key to productivity, since the most productive firms and sectors are typically those which operate internationally. So better global connectivity is a key enabler if we are to meet the challenge of raising productivity and living standards.

The Airports Commission was set up in November 2012 under the chairmanship of Sir Howard Davies to advise government on how to maintain the UK’s status as Europe’s most important aviation hub. 

Lack of airport capacity in London and the South-East was identified as one of the key constraints facing the UK.

In is evidence presented to the Independent Transport Commission 2012, the Independent Transport Commission highlighted that the cost of lost connectivity as a result of capacity constraints could be: 

• Up to £1.4bn a year in lost trade;

• £100bn over the next twenty years;

• Costs for UK businesses of as much as £1.2 billion a year; and

• The loss of 141,000 jobs

In comparison the Airport Commission’s own figure area slight more conservative, suggesting that the cost of not acting to increase airport capacity in London over the period 2021 to 2080 would be equivalent to between £30 billion and £45 billion.

“Regardless of the methodology used, or the chosen option, it is clear that the benefits of improving airport capacity are significant,” says the ITC report. 

The ITC highlights eight key reasons why a recommendation on airport expansion is required from the Davies Commission follow by an urgent decision by government to press forward with action:

1. The London airport system (including Heathrow, Gatwick, Luton, Stansted, City, and Southend airports) is the largest air travel market in the world, when measured in terms of the number of passengers who start or end their journey in London.

2. Heathrow is already effectively operating at full capacity and Gatwick is expected to reach full capacity by 2020 at the latest and is already full at peak times. The London airport system as a whole will be under substantial pressure by 2030 and full by 2050.

3. The Airports Commission estimates that the benefits of increasing capacity at either Heathrow or Gatwick range from £42 billion to £214 billion (on a 60 year appraisal basis), depending on the option chosen and how demand for air travel evolves. Under the options considered, by 2050 GDP is expected to be between 0.2% and 1% higher than it would be if there is no increase in airport capacity.

4. Around 40% of UK trade by value travels by air – with roughly 70% travelling as belly hold on passenger services. In total over 75% of UK air freight by volume goes via a London airport.

5. Heathrow handles around 75% of air freight in London, of which around 15% travels at night, with 93% of the cargo moving at night being belly hold, of which 98% is long-haul.

6. The UK ranks behind key EU rivals such as France, Germany and the Netherlands in air connectivity terms.

7. By concentrating demand, hub airports are able to introduce new routes earlier than if they need to rely solely on local demand. An airline operating from a hub airport where only half the passengers are local (with the rest being transfer passengers) can introduce a new long-haul service 14 years earlier than if they needed to rely just on local demand.

8. The impact of capacity constraints and demand pressures mean Heathrow operates on fewer routes than all its rival hubs, with only 7 domestic routes served from Heathrow, and the number of routes served has been declining. Heathrow therefore serves fewer destinations in Brazil, China, India, Mexico, Russia and Turkey than Frankfurt Airport. However, the frequency of flights to each destination is higher from Heathrow.