Do not pay a fortune to make Heathrow bigger, when it can first be made so much better
LONDON'S Heathrow is the world's busiest international airport. It handles nearly half of the passenger traffic between North America and Europe. It connects the City of London to the rest of the world. It is the fortress that guards the lucrative transatlantic business of British Airways (BA). In anticipation of this month's start of the “open skies” agreement between America and the European Union, other airlines are queuing up to fly from it too.
Yet Heathrow is also the world's most abhorred international airport. It suffers the worst flight delays and loses the most bags. Its endless security queues, rude staff and shoddy facilities plague passengers. Its owner, BAA, which also runs the two other main London airports, Gatwick and Stansted, is an object of much ridicule.
Yet Heathrow is also the world's most abhorred international airport. It suffers the worst flight delays and loses the most bags. Its endless security queues, rude staff and shoddy facilities plague passengers. Its owner, BAA, which also runs the two other main London airports, Gatwick and Stansted, is an object of much ridicule.
Despite the inevitable first-day glitches, the £4.3 billion ($8.5 billion) Terminal 5, which opened this week, will improve Heathrow for the 40% of passengers who fly with BA. But new terminals will not solve the real problem: a lack of runways. Heathrow has only two, which operate within a whisker of full capacity. It cannot grow to meet demand. And, when something goes wrong, small delays become big ones.
The British government thinks this frames the case for a third runway at the airport. To the fury of local residents and green campaigners—and cheers from the aviation industry—it argues that Heathrow must expand if Britain is to have the competitive hub airport it needs. A decision has been promised before the summer. It looks like being the wrong one.
Up in the air
With the closure of Hong Kong's Kai Tak a decade ago, Heathrow ranks as the airport that does most harm to people living nearby. Thanks to its westerly winds and the east-west axis of its two runways, about 2m people in West London and neighbouring towns endure noise, air pollution and the small, ever-present risk of a catastrophic accident. By relaxing operating restrictions on Heathrow's runways and adding another, BAA reckons it can raise the number of flights from today's limit of 480,000 a year to 720,000. BAA and the government think that because aircraft are getting quieter and cleaner the extra flights will be bearable. But that conclusion is disputed by the government's own watchdog, the Environment Agency.
If the environmental externalities were the only cost of expanding Heathrow, you could perhaps mitigate them by charging airlines for pollution (a good idea, anyway). However, the other reason to doubt the wisdom of letting Heathrow go on growing—the constraint on space imposed by its location in London—is less easy for the government to dispense with. Passenger-traffic forecasts suggest that, shortly after a third runway opens, in 2020, Heathrow will be full again. BAA has talked about a fourth runway, but not even the most ardent Heathrow expanders can say where it would go.
The government thinks this hell is worth it: the British economy benefits from having Heathrow as a competitive hub airport, because the more transit passengers there are—they have grown from 9% of the total in 1992 to 35% in 2004—the bigger the route network and the more valuable the airport is to Britons. But Heathrow will never be a desirable hub airport, because of where it is. It will continue to be out-gunned by Paris Charles de Gaulle, Amsterdam Schiphol and Frankfurt, all of which have twice the runway space, greater potential for expansion and better surface transport.
One alternative is to start again. Time after time in country after country, hub airports have been rebuilt farther away from city centres. In the 1970s Britain toyed with the idea of building a big new airport in the Thames estuary to the east of London. But the scheme was overtaken by economic crisis, and the stranglehold of BAA and BA, both of which have a lot invested in Heathrow, has prevented its revival.
A new airport may yet be needed. But, in the meantime, there are ways of making Heathrow better. It is crowded because it is too cheap for airlines to use and because BAA has been encouraged to stuff it full of transit and leisure passengers who it hopes will spend money in its shops. Business travellers, who generate the most value for the wider economy, account for only a third of the airport's passengers.
This suggests a better solution to the overcrowding. First, the price for using Heathrow should reflect the value and scarcity of its capacity. Second, any new capacity should be built at London's other airports. And, third, these airports should be set free to compete with Heathrow by breaking up BAA.
Higher charges would drive transit passengers to the hubs in continental Europe. That would be no great loss. Although transit passengers help BA and BAA, they do little for Britain's economy. If the route network shrinks, the least-useful routes go first. In any case, because lots of people want to fly to and from London, transit passengers are less crucial to maintaining Heathrow's route network than the government thinks.
Competition between Heathrow, Gatwick and Stansted would help too. Stansted, with a second runway, would suck in leisure traffic. The new owner of Gatwick, much better placed to grow than Heathrow, would have good reason to build a second runway after 2019 (when an old planning agreement expires), with the aim of attracting one of the big airline alliances—and thus becoming a hub itself.
Slowly does it
Such changes call for an overhaul of the way Britain runs air travel. At present, the landing charges for Heathrow and Gatwick are fixed by the Civil Aviation Authority, which juggles desire for low prices with the need for BAA to invest and make money. It should be told to think instead about charging a full price for using Heathrow, and the resulting excess profits at BAA should be taxed. The incumbent airlines, the big losers, would have to accept that their slots would be worth less and that they would pay more (which is one reason to phase in the change), but their passengers would gain a functioning airport. It is time for the British government to realise that it is not its job to be the champion of the aviation industry.
The British government thinks this frames the case for a third runway at the airport. To the fury of local residents and green campaigners—and cheers from the aviation industry—it argues that Heathrow must expand if Britain is to have the competitive hub airport it needs. A decision has been promised before the summer. It looks like being the wrong one.
Up in the air
With the closure of Hong Kong's Kai Tak a decade ago, Heathrow ranks as the airport that does most harm to people living nearby. Thanks to its westerly winds and the east-west axis of its two runways, about 2m people in West London and neighbouring towns endure noise, air pollution and the small, ever-present risk of a catastrophic accident. By relaxing operating restrictions on Heathrow's runways and adding another, BAA reckons it can raise the number of flights from today's limit of 480,000 a year to 720,000. BAA and the government think that because aircraft are getting quieter and cleaner the extra flights will be bearable. But that conclusion is disputed by the government's own watchdog, the Environment Agency.
If the environmental externalities were the only cost of expanding Heathrow, you could perhaps mitigate them by charging airlines for pollution (a good idea, anyway). However, the other reason to doubt the wisdom of letting Heathrow go on growing—the constraint on space imposed by its location in London—is less easy for the government to dispense with. Passenger-traffic forecasts suggest that, shortly after a third runway opens, in 2020, Heathrow will be full again. BAA has talked about a fourth runway, but not even the most ardent Heathrow expanders can say where it would go.
The government thinks this hell is worth it: the British economy benefits from having Heathrow as a competitive hub airport, because the more transit passengers there are—they have grown from 9% of the total in 1992 to 35% in 2004—the bigger the route network and the more valuable the airport is to Britons. But Heathrow will never be a desirable hub airport, because of where it is. It will continue to be out-gunned by Paris Charles de Gaulle, Amsterdam Schiphol and Frankfurt, all of which have twice the runway space, greater potential for expansion and better surface transport.
One alternative is to start again. Time after time in country after country, hub airports have been rebuilt farther away from city centres. In the 1970s Britain toyed with the idea of building a big new airport in the Thames estuary to the east of London. But the scheme was overtaken by economic crisis, and the stranglehold of BAA and BA, both of which have a lot invested in Heathrow, has prevented its revival.
A new airport may yet be needed. But, in the meantime, there are ways of making Heathrow better. It is crowded because it is too cheap for airlines to use and because BAA has been encouraged to stuff it full of transit and leisure passengers who it hopes will spend money in its shops. Business travellers, who generate the most value for the wider economy, account for only a third of the airport's passengers.
This suggests a better solution to the overcrowding. First, the price for using Heathrow should reflect the value and scarcity of its capacity. Second, any new capacity should be built at London's other airports. And, third, these airports should be set free to compete with Heathrow by breaking up BAA.
Higher charges would drive transit passengers to the hubs in continental Europe. That would be no great loss. Although transit passengers help BA and BAA, they do little for Britain's economy. If the route network shrinks, the least-useful routes go first. In any case, because lots of people want to fly to and from London, transit passengers are less crucial to maintaining Heathrow's route network than the government thinks.
Competition between Heathrow, Gatwick and Stansted would help too. Stansted, with a second runway, would suck in leisure traffic. The new owner of Gatwick, much better placed to grow than Heathrow, would have good reason to build a second runway after 2019 (when an old planning agreement expires), with the aim of attracting one of the big airline alliances—and thus becoming a hub itself.
Slowly does it
Such changes call for an overhaul of the way Britain runs air travel. At present, the landing charges for Heathrow and Gatwick are fixed by the Civil Aviation Authority, which juggles desire for low prices with the need for BAA to invest and make money. It should be told to think instead about charging a full price for using Heathrow, and the resulting excess profits at BAA should be taxed. The incumbent airlines, the big losers, would have to accept that their slots would be worth less and that they would pay more (which is one reason to phase in the change), but their passengers would gain a functioning airport. It is time for the British government to realise that it is not its job to be the champion of the aviation industry.
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