This year will prove pivotal for the UK’s long-term economic prospects. After May’s General Election, a highly anticipated – and delayed – report into Britain’s airport capacity will be published. Depending on the supposedly binding outcome, London and the south-east of Britain will finally make headway in an area that has been neglected by subsequent governments for generations.
In the report, put together by economist and former Financial Services Authority Chairman Sir Howard Davies, a decision will be made on expanding the airport capacity of the UK. It comes at a time when air travel has reached breaking point in London’s numerous airports, with severe delays and overcrowding hitting Heathrow and Gatwick repeatedly over the last few years.
Airport capacity in the south-east of Britain has been at breaking point for a number of years now
However, the choice on offer to the British government is between two distinctly different types of airport. One, an expansion of Heathrow, would represent an embracing of the hub airport model that has been favoured by many cities and countries over the last two decades, allowing international travellers easy and quick transfers within a single airport. The second option, expanding Gatwick, would be an approach that favoured a number of smaller regional airports, encouraging transferring passengers to pass through London on the way.
Breaking point
Airport capacity in the south-east of Britain has been verging on an ultimatum for a number of years now. London has long served as the gateway between the US and Europe, as well as destinations into Asia. Heathrow Airport, London’s biggest, is the busiest airport in Europe, with around 73 million passengers passing through its terminals each year (see Fig. 1). And yet, Heathrow has been woefully overcrowded and operating at near full capacity for a decade, while Gatwick has also faced challenges in handling the number of passengers arriving. Other regional airports like Stansted and Luton may be popular with short-haul, budget airlines, but are not capable of serving the lucrative Asian and American markets.
The issue of a hub airport in the south-east of England has been debated for many years. A decision had previously been made to build a third runway at Heathrow by the last Labour government. However, this was ultimately scrapped by the coalition government in 2010 after years of vociferous campaigning by local residents determined not to have even more planes flying above them, creating even more noise.
In a report published in 2009, the British Chambers of Commerce laid out its arguments for such an airport. Then director general David Frost said in the report that air travel was vital for the UK economy. “As an island nation, the ability to move people and goods effectively and quickly to and from these shores is of vital importance to British business. As a trading nation we rely on our ability to connect with the rest of the world. Many of the industries in which we are globally competitive, such as electronics, pharmaceuticals, biotechnology, insurance and telecommunications, are dependent on aviation. No other form of transport can match aviation in its speed, efficiency and global reach. Airports are gateways to the world, vital for business activity, family and leisure travel.”
Hub hubbub
Hub airports have risen to prominence over the last few decades because of the way they cut back on the amount of unnecessary and costly flights between smaller destinations. Instead of airlines offering services to a series of small airports, a main hub airport is used as a central point at which all flights travel to. It is predominately advantageous to airlines that want to keep costs down and remain profitable, but this can often be passed on to a passenger through more frequent services to the hub, rather than occasional flights between smaller airports.
Hub airports also allow for more flights to more destinations, offering travellers a wider breadth of potential trips. It also allows the economy where that hub airport is based to benefit from increased global access, not just in business but also through airfreight. While some travellers might not even leave the airport, passing through the departure lounges and buying goods will also bring money into the local economy.
The increasing competition between airports has meant them offering attractive incentives to airlines to base their operations at a particular destination. In Europe, British Airways mostly flies from Heathrow, Lufthansa from Frankfurt, and KLM from Schiphol in Amsterdam. Other regions have similar arrangements, such as Emirates basing its operations at Dubai and Malaysia Airlines at Kuala Lumpur International Airport.
Hub airports have proven popular across Europe and Asia, with many large new airports being constructed over the last few decades and others gaining considerable expansion. In Europe, Heathrow is starting to see its position as the busiest airport challenged by some of its continental rivals.
Charles de Gaulle Airport in Paris is the second busiest in Europe, with just over 63 million passengers last year. With four runways, it has plenty of capacity and is able to receive flights 24 hours a day. Germany’s Frankfurt Airport is the third busiest in Europe with 58 million passengers in 2014.
One of the newest airports in Europe to seize a huge amount of air traffic is Amsterdam’s Schiphol. It is the fifth busiest airport in terms of passengers in Europe, but is set to capture more business thanks to its six runways and ideal location. It is seen as London’s biggest challenger as a hub destination, offering good connections between the US, the rest of Europe and Asia. With KLM based there and Delta Air Lines using it as its European hub, it is emerging as one of the most important destinations on the continent. As with Charles de Gaulle and Frankfurt, it is capable of receiving flights all day and night.
On the other hand, one city that used to be the focal point for most air travel in Europe has seen it decline as a destination because of its lack of investment in a hub airport. Before the Second World War, Berlin acted as the main European hub airport, offering more flights to destinations than any other. These included long-haul services, and it turned Berlin into one of the most important cities in the world. After the war and with the city split in two, its status dramatically declined.
As the British Chambers of Commerce pointed out in its report, Berlin has fallen behind other German rivals because of its lack of a hub airport, despite its history as a central European destination for air travel: “With the reunification of Germany in 1989, Berlin was expected once again to become a leading world city. However, it was in the unusual position of having three airports. Lufthansa resumed services to Berlin, operating up to 74 flights daily to European destinations, as well as long-haul routes, such as New York and Tokyo. But the fractured nature of services across three airports meant that transfers often required a cross-city journey, so passenger numbers on major routes were lower than expected. Major carriers pulled out, including Lufthansa who chose Munich and Frankfurt as their hubs, over the capital.”
The consequence of the lack of a single hub has been that rival cities have taken over as the main connecting destination for long-haul flights, while Berlin has had largely cheaper short-haul services. This has led to the city falling behind rivals in its economic growth. “With a lack of major network carriers Berlin has become a key centre for low cost airlines which provide short-haul services with little interlining. In the 20 years since reunification Berlin has not become the world city that many expected and its place on the world aviation network has been fairly peripheral. Academic research has suggested a key reason for this has been the lack of large hub airport for city”, reads the British Chambers of Commerce report.
The city did finally start building a new airport – the Berlin Brandenburg Airport – after decades of delays. However, it has been beset with funding problems and, despite originally being scheduled to open in 2010, is said to still be two years away from completion.
Regional rivals
While there are clear advantages to hub airports – mostly for airlines – there is debate over how much impact they have on domestic economies. While people passing through a terminal on their way to a connecting flight elsewhere may spend some money, it is negligible compared to what they would spend were they to spend some time in the city before travelling on.
For all the trumpeting of the economic benefits of a hub airport, the cost and upheaval to communities of actually building one may outweigh any financial advantages. Those against argue for smaller, regional airports that are connected by surface transport links.
Proponents of a more regional approach to airport expansion point to the benefits it would have for the cities the smaller airports surround. By forcing connecting travellers to pass through the city, it encourages them to spend some time and therefore paying more into the economy.
In the UK, Gatwick is one of the larger airports, yet it only has a single runway. Were it to be granted an additional runway, it would match Heathrow’s two runways. Some supporters of expanding Gatwick say it should be connected to Heathrow by a high-speed rail link, creating a hub airport without favouring one over the other. Other smaller airports, like Stansted and Luton, have so far failed to attract demand at the same level as their larger counterparts, but new rail links built connecting them all may prove more attractive.
In the US, some states have adopted a more regional approach. New York has three main airports that serve a range of destinations. John F Kennedy primarily serves international flights, while LaGuardia is more for domestic services. Newark International, in neighbouring New Jersey, combines both domestic and international. This means New York often acts as the focal point for people passing through the eastern coast of America and onto destinations in Europe and beyond.
Regulation control
Conditions for smaller airports have got harder over the last few years as airlines shift their operations to larger hubs. Whereas smaller airports had enjoyed a wave of business thanks to the advent of budget air travel, they are now facing a challenge from hub airports and traditional mainstream carriers. In Europe, airlines like Lufthansa and British Airways have sought to recapture much of the business they lost over the last two decades by slashing costs and offering cheaper flights. This has meant that their traditional bases – Europe’s larger hub airports – are proving more attractive to travellers than their cheaper, smaller rivals. In order to match these cheaper flights, budget airlines like Ryanair and Easyjet have started to move their operations to the easy access hubs.
Speaking to Reuters last year, Tanja Wielgoss, a partner at analysts AT Kearney, said that the shift represented a considerable challenge for smaller airports. “At first, people were prepared to travel (to smaller, often remote airports) because fares were so much cheaper, but now the cost of flying from large airports has come down. It’s always been hard for smaller airports, but now it’s even harder.”
With many of these smaller airports propped up by state financing, pressure is mounting on governments to discard their holdings in order to save money. Last year, the European Commission announced that it would cease to allow state aid to EU airports that serve more than five million passengers each year. Aid for smaller airports would also be phased out over a 10-year period.
The impact of this ruling could be that many smaller airports are forced to close. Albeit, this is not necessarily what customers want, says Doerte Nordbeck, an analyst at research company GfK. He told Reuters, “If you take out Frankfurt and Dusseldorf, then around 60 percent of holiday traffic in Germany goes via smaller airports. There is a trend to move flights to larger airports but that’s driven by the airlines rather than by what customers want.”
On the horizon
For the UK, the advantages of a hub airport have been touted by many businessmen and politicians, but the decision over where to put it continues to be hugely contentious. London’s Mayor, Boris Johnson, has long campaigned for a new hub airport. However, instead of expanding the existing hub at Heathrow, Johnson has been passionate about his desire for a new four-runway airport in the Thames Estuary, off the coast of east London. Completely altering the location of the UK’s largest airport would take a huge amount of work – and money – and has therefore been rejected by the Davies Commission as being impractical. Johnson has continued to push for it to be considered regardless, and has maintained his staunch opposition to a third runway at Heathrow.
Writing in an article in The Daily Telegraph in October, Johnson said: “Studies by the Greater London Authority and Transport for London have concluded that a new hub in the east would have a sensational and beneficial effect on the UK economy – creating 222,000 jobs for Londoners in the Thames Gateway, and supporting 336,000 jobs across the country as a whole.
“By 2050 the airport would be contributing £92.1bn [$136.5bn] per year to the UK economy – far more than Heathrow; a point the Davies Commission has already acknowledged. You would have a four-runway, 24-hour service and at last Britain would be able to stop our rivals eating our lunch. Finally we could re-connect London, by air, with other cities around the UK who have been seeing a steady reduction in services.”
Certainly London needs to expand its airport capacity if it is to compete with the likes of Schiphol and Paris, but air travel trends could be changing towards more regional approaches. It will inevitably come down to what passengers want and which countries want to entice them into spending more time in their stop-over cities and contributing more to the economy.
