Heathrow expansion: the lack of flights to Chinese cities is not a good argument

The owners of Heathrow want to expand the airport and have started another campaign to get a third runway built. (The impact on carbon emissions is calculated here.) Sensing that senior politicians are increasingly susceptible to their blandishments, BAA commissioned yet another piece of analysis to show expansion would help the UK’s economy. It takes about five minutes to demolish the arguments that they put forward.

1)      The UK needs more connections to emerging markets, China in particular. The lack of capacity at Heathrow is choking off UK exports because people cannot get to large Chinese cities.

Here’s a quote from BAA’s recent press release

Colin Matthews, CEO, BAA, said: “The centre of gravity in the world economy is shifting and we need to forge new links with emerging markets. Instead, we are edging towards a future cut off from some of the world’s most important markets, with Paris and Frankfurt already boasting more flights to the three largest cities in China than Heathrow, our only hub airport.

BAA has made great play of this point over the last year. First, a September 2011 report from Frontier Economics and now a similar document from Oxford Economics tell us that the UK connects to fewer cities in China than Frankfurt does. (Why BAA has to use two   consulting firms to make this point is unclear).

Look carefully below at the data that backs this assertion up, published by BAA itself. Yes, you can get directly from Frankfurt to Guangzhou and Shenyang as well as the cities to which London connects. But please also note that the yearly flights from Heathrow to Hong Kong are almost three times as frequent as the most connected other link (Shanghai –Paris).

Airlines operating into London have worked out where the demand lies and have voluntarily chosen to go to Hong Kong and not to other Chinese cities. It isn’t a shortage of capacity at Heathrow that is stopping connections to Chinese cities, it is a lack of potential passengers. Airlines have decided that it makes more commercial sense to fly to Hong Kong than to Shenzhen.

There are over five thousand flights a year from Heathrow to China compared to less than three and a half thousand from Frankfurt. Any one  of these flights could switch from Hong Kong to elsewhere but the airlines choose not to. To put at its simplest, it is not the lack of a third runway that stops the UK having connections to more Chinese cities.

City Population (millions) Connectivity (flights per year)
2007 2025 LHR AMS FRA CDG MAD
 Shanghai
15 19.4 621 589 1110 1323
 Beijing 11.1 14.5 698 658 1032 964 104
 Guangzhou 8.8 11.8 311 211 290
 Shenzhen 7.6 10.2
 Wuhan 7.2 9.3
 Tianjin 7.2 9.2
 Hong Kong 7.2 8.3 3,539 720 778 1145
 Chongqing 6.5 8.3
 Shenyang 4.8 6.2 364
 Dongguan 4.5 6.2

 

Source: Frontier Economics, http://www.frontier-economics.com/_library/publications/Connecting%20for%20growth.pdf. LHR = Heathrow, AMS Amsterdam, FRA Frankfurt, CDG Paris, MAD Madrid.

2)      The lack of connections is stunting economic activity because Heathrow is of reducing importance as a hub airport.

Air Malta flies twice a day from Heathrow to Valetta, the main city in Malta. Malta has about 0.4 million people, less than a thousandth of China and its GNP is commensurately small. Air Malta has access to these slots because of ‘grandfather’ rights acquired generations ago. In a rational world, Air Malta would be priced out of its Heathrow slots and would transfer to Stansted, which nobody says is full. But it sticks at Heathrow, blocking the flights that the airport wants to go to Rio or Dallas or Delhi. Yes, of course Heathrow is at bursting. It has been for decades. But the reason isn’t shortage of capacity but because of the ludicrously inefficient failure to auction takeoff slots leaving a number of operators such as Air Malta using up the most valuable landing rights in the world.

3)      More widely, lack of capacity is constraining business.

By ceaseless repetition, BAA hopes to convince us that business travel is growing and the constraints on Heathrow represent a major impediment to economic growth. It doesn’t tell us the uncomfortable fact that flying for business purposes is down about 25% since the turn of the century. UK residents made 8.9 million business trips abroad by air in 2000 and 6.6m  in 2010.[1] It is leisure travel that keeps airports busy, not harried business travellers. Business air travel is falling fast and will probably continue to do so.

4)      Tourism is affected by Heathrow’s shortage of space.

Maybe. But Heathrow isn’t a tourist airport. There’s no reason why visitors cannot comfortably fly into the other London airports. There is space elsewhere, not least because total passenger numbers are down over 10% since 2007. In Q4 2011, UK airports handled a total of 49.1 million passengers compared to 54.7 million in Q4 2007.

 

We expect commercial companies to argue their case and Heathrow’s operators have every reason to want to get more revenue from airlines flying out of the airport. The disturbing thing is that reputable economics consulting firms are prepared to act as highly paid lobbyists for businesses such as BAA. And, even more unfortunately governments haven’t the courage to contest the lamentably weak points made by these lobbyists.

  1. Andrew Curry’s avatar

    Chris,

    I had a post at my blog, The Next Wave, which also critiqued the reason spate of ‘forecasts’ asserting that the lack of a Third Runway at Heathrow would harm Britain’s economic prospects. Carbon Commentary readers may be interested:
    http://thenextwavefutures.wordpress.com/2012/03/28/spinning-for-heathrow/

  2. Andrew Curry’s avatar

    Chris,

    I had a post at my blog, The Next Wave, which also critiqued the recent spate of ‘forecasts’ asserting that the lack of a Third Runway at Heathrow would harm Britain’s economic prospects. Carbon Commentary readers may be interested:
    http://thenextwavefutures.wordpress.com/2012/03/28/spinning-for-heathrow/

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