The Case Against a Third Runway

07/09/2012 12:22 | Updated 07 November 2012
  • Ann Pettifor Director of PRIME Policy Research in Macroeconomics
  • Jeremy Smith Co-Director of Policy Research in Macroeconomics (PRIME)

So just what has changed in the Heathrow debate, apart from the increasingly febrile political atmosphere? Supporters of the third runway (R3) claim our economy will be disastrously damaged if it doesn't proceed. But few supporting facts are put forward. This is not surprising, because the evidence is thin indeed.

Environmentally, expansion will certainly be damaging, and not just to those living under the flight-paths. Our climate is changing too rapidly; the latest R3 lobbying campaign coincided with news of a record Arctic ice-melt.

The aviation industry is responsible for a high proportion of greenhouse gas emissions, and almost 5% of manmade climate change (and a higher percentage of the UK's contribution). Yet it receives enormous fiscal advantages, including duty-free sales and tax-free fuel.

To enjoy economic life, we first need a liveable planet; aviation cannot continue its exponential carbon-filled 'flight path' into the future. Once this universal truth is recognised, a sensible aviation policy for UK and Europe will be formulated. But that will not require R3 at Heathrow.

What about the economic arguments over R3?

Emma Duncan, Deputy Editor of The Economist, says (Times, 29 August) she has been "converted" to R3 by studying London's economy, which while healthy, may easily "tip into another period of decline." London's success springs, she says, from its appeal to foreigners who invest and "create the jobs that keep London's economy working." Therefore, we need direct flights to more and more countries, including second tier cities - and airlines like hubs.
She is echoed by business leaders like Jon Cridland, head of the CBI:

"Every day, the UK is losing out to its European rivals on new routes to growing markets".

So how can one possibly be against? Well, let's look at a few facts.

Heathrow is the world's third busiest airport, and still Europe's largest by a big margin. In 2011 it carried 69 million passengers - with Gatwick, 103m. Paris CDG had 61 million (88m with Orly), Frankfurt 56 million, Schiphol 52 million. And compare this with New York's JFK, which had just 48 million. The world's busiest is Atlanta, whose lagging economy, however, does not support the more-is-better thesis.

True, Paris CDG and Amsterdam Schiphol have grown much faster (25%) than Heathrow (6%) over the last decade, but largely due to short-haul European travel.

Heathrow is overall by far the best connected to the world's main business centres. But how does it fare with cities in emerging countries? We looked at the European hubs' BRIC country destinations in 2011. Here, Schiphol leads with 27; Frankfurt had 23, Heathrow 15, Paris 14. Frankfurt had 10 Russian destinations (to London's two), reflecting Germany's foreign policy. Otherwise, London, Frankfurt and Paris are all very similar.

We want good links with emerging economies, and do not argue that the current pattern of Heathrow destinations is 'right' for the future. However, with over 100m passengers using "Heathwick" each year, this can be tackled without major capacity increase.

This requires government to plan, work with, and regulate the aviation industry, in the national interest. Key destination decisions should not be decided by short-term market forces. 75% of London's demand is for leisure travel (which has a net financial cost to the UK), 25% for business, so there is room to give priority to business needs where justified.

R3 would naturally be of great financial benefit to BAA and its main shareholder, Ferrovial. At present, BAA can only collect a 'rent' defined by current capacity; it requires bigger capacity for its income to grow more rapidly, and lower its huge debt mountain. But this is a private interest.

We also looked for evidence of positive macroeconomic impact from faster-growing EU hubs (Paris and Schiphol in particular), comparing the annual GDP figures for each host country over the decade to 2011. Unsurprisingly, no such evidence appears, the four countries having broadly similar results.

Of course, major investment at Heathrow would create significant employment, over several years. But it is not a question of R3 or nothing. Even greater investment is required for more sustainable transport projects - e.g. longer high-speed rail routes, and upgrading existing routes and facilities.

If Heathrow is a drag on London's competitiveness, this is due more to its poor facilities and services, plus excessive queues. For London's reputation, a joint programme by government, BAA and airlines to improve the passenger experience would do far more, at lower cost, than R3.

Europe's hubs will not continue growing indefinitely, nor can each hub serve every global city destination. At present, everything is seen through the prism of 'competition', but looking at the destinations each hub serves, there is a logic related to the economy, politics and cultural links of each host country.

If the concept of a single European market is to have any sense, we must overcome the idea that every member state requires its own all-purpose hub. It is far more sensible to co-operate, using the strengths and roles of each hub to common advantage.