This week has seen the Chancellor of the Exchequer state that it is the government’s position that the third runway at Heathrow Airport must proceed. Before auditioning to be a stand up comedian by saying it should be completed and operational within 10 years.
There are a lot of reasons for and against the expansion of airports. But as the government is positioning this as that of economic necessity, I thought it useful to give a short primer on the economic impacts of airport expansion.
To me, understanding the economic impacts of any transport scheme boils down to two things. First is the actual estimated benefit, and the second is the benefit most acutely felt by people – namely jobs, incomes, and costs.
So, what is the economic benefit of airport expansion?
The report Reeves used was unremarkably funded by Heathrow Airport. The airport is in the wrong place but unless replaced with Foulness or Boris Island likely to stay with us, at least it has fewer bird strikes.
Heathrow is no longer being unduly favoured and wants to fund it’s investment privately. Providing all the competing airports have the same flexibility seems fair.
Heathrow has just reached yet another passenger limit of 89m for 2024. Equally City, Gatwick and Luton all have reached records and have their own capacity plans.
One factor that has changed is in the past HRW was a notorious transit centre with up to a third of passengers just changing planes (which they could do elsewhere as not much benefit to the UK). This appears to have changed as CAA data shows mere fractional numbers. There is a new pattern of ultra-long flights and use of smaller planes for direct connections. BA’s alliance with Iberia means Madrid is used more, Schipol is a more effective transit airport, Istanbul offers new competition, as well as the continuing dominance of Dubai.
The Government needs to decide if it wants a domestic air service with regional airports. The overheads of operation are already taxing enough without APD which could be lifted for the smallest under 1m annual passengers for connectivity and development. There could be a transitory band of 50% between 1 m and 3m.
I think the Government and the owners should sit down and realise that Heathrow is not the transit hub that it was and regard it simply as a large, busy regional airport serving a large capital city and financial centre. Airports like Schipol are simply better placed in Europe for what they do. Don’t try to compete.
I was brought up and went to school under the flightpath: the Airport’s big enough already.