Airports: What's the big fuss?

 
Plane taking off

Perhaps the most striking conclusion of the Airports Commission chaired by Sir Howard Davies is that the economic cost of the capacity constraints at UK airports, and at Heathrow in particular, will be between 0.03% and 0.05% of GDP by 2030 and up to 0.09% of national income by 2050.

This is not huge.

A loss of income of this size looks like a rounding error in comparison with the peak-to-trough fall in national income of more than 7% caused by the 2008 banking crisis or the 20% gap between today's GDP and where it would have been if the pre-Crash growth trends had been sustained.

Or to put it another way, keeping the banking system solid and sound looks a rather more important priority than whether or not Heathrow gets a new runway or the London Mayor builds his vast new flying city on the Isle of Grain.

And yet airports and runways seem to get people's hackles and passions up in a way that risk weightings for bank lending and leverage ratios never do.

Which is not to say that the decision about where or whether to build new runways is trivial, but that it's not make or break for the British economy.

What is also very interesting in the report is the way it pours cold water on the notion that top rank economies must have a so-called hub - an airport flying almost everywhere and servicing gazillions of transit passengers - of unlimited capacity, which is what both Heathrow and Boris Johnson rather imply.

It paints a picture of a constrained Heathrow still performing extremely well. And it believes existing capacity can be used more efficiently through improved transport links between airports and better sharing of information by them.

So what will the Commission's final recommendation end up being?

Even though it is continuing to evaluate Johnson's grand design in the Thames Estuary, the £112bn expense looks so large compared with the putative costs of doing nothing at all - up to £20bn to airport users and providers over 60 years, and a maximum of £45bn to the wider economy over the same period - that lift-off seems almost inconceivable.

What of the choice between the two Heathrow options and a new runway at Gatwick?

Well if it became clear that low cost airlines such as Ryanair and Easyjet - which have been responsible for all the growth in flying over recent years - were to offer long-haul and transit services to popular destinations from Gatwick, that would allow considerable capacity to be liberated at Heathrow.

Or to put it another way, an expanded Gatwick might allow Heathrow to be a less constrained hub.

Whether the low-cost carriers rise to that challenge is uncertain - although whoever wins the election would be thrilled not to be given the verdict that only Heathrow has the X-factor (and, by the by, the Commission reminds us that its predecessor inquiries have a 100% record of being ignored by their sponsoring governments).

 
Robert Peston Article written by Robert Peston Robert Peston Economics editor

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  • rate this
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    Comment number 170.

    I suggest that anyone promoting building an airport on the Isle of Grain should go have a look at what is there. The first thing you will notice is the power station, an 800 foot tall monument to man's addiction to oil. Conceived when oil was cheap, never completed and mothballed for most of its life. Maybe an empty four runway airport would make an even more fitting monument to man's stupidity.

  • rate this
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    Comment number 169.

    Gatwick to Sydney with a low cost carrier and inflight sales of e-cigs, lottery tickets and phone cards. Now that is a bright spot on the horizon.

  • rate this
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    Comment number 168.

    London, London, London! Nobody suggests LHR should be abandoned but it's beyond its sell buy date. Operators push for more capacity because they will make more money - the cost is misery for everyone else - residents and users alike. Where will you put the 4th runway? What do I care? You can fly to Schipol from East Midlands and go anywhere in the world - keep it a secret! Better EM than Gatwick

  • rate this
    -1

    Comment number 167.

    Conservatives have number of MPs in SW London. Increased noise from larger Heathrow would be disruptive. Business lobbies, airlines & MPs - FAR FROM HEATHROW - argue London needs more capacity, but it's easier to argue than design alternative.
    Personally, I like “Boris Island” - Lord Foster, architect, proposes, “Thames Hub” - with barrier-generated electricity & flood protection.

  • rate this
    +1

    Comment number 166.

    Under EU law, big airports have to plan to curb, impact of aircraft noise, especially for those agonized by average noise levels above 55 decibels. In 2006, govt survey found there were about 725,000 such sufferers in W. London. A 2003 study by ANOTEC Consulting found that Heathrow imposed excessive noise on far more people than any other EU airport.
    Where is the plan for noise impact?

 

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