Where should the UK airport expansion take place? The short answer from the country's business community is: ‘Anywhere – just do something.’
Shortly after the Conservative Party won the country's general election in May 2015, with an unexpected majority, a poll by UK-based research and strategy consultancy Populus, based on a survey of 2159 people across the country, found that the public backs plans for more air capacity by a factor of three to one. At the same time, more than 100 business leaders wrote to national newspaper The Times urging the new government to expand one of London's two major airports, Heathrow or Gatwick, to boost the economy.
Getting off the ground
Gavin Hayes, director of Let Britain Fly, the pro-aviation business group that commissioned the poll, says: "It is clear there is strong public support for the new runways and for ministers to make an early decision. Once the Airports Commission [an independent commission set up by the UK government to research the need for further airport capacity] has published its final report, the government must grasp the moment and give the go-ahead, so we can ensure spades are in the ground by 2020. With all of London’s airports filling up fast, we cannot afford any further dithering or delay."
Sir Howard Davies, chair of the Airports Commission, estimated in December that failure to address airport expansion could cost the UK economy up to £40bn ($60.7bn) over 60 years. The Confederation of British Industry (CBI) has called on the new Conservative government to commit to implementing any recommendations that the commission makes within 100 days.
Heathrow stepped up its campaign for a third runway immediately after the election, which saw the removal of some leading critics of its expansion, including former secretary of state for business, innovation and skills Vince Cable, and Ed Davey, the former climate change secretary, both of whom lost their seats in the election.
Chief executive at Heathrow John Holland-Kaye joined the chorus urging the government to ‘get on with it’. He claims that only Heathrow will connect the country to long-haul global growth, as businesses all over the UK need new connections to the world’s fastest growing markets. "Air China’s decision to pull out of Gatwick is a sign that only Heathrow can deliver these long-haul routes," he says.
According to the CBI: "Hub airports deliver the new connections to emerging markets that we desperately need. With Heathrow full and the UK slipping behind in the race for new connectivity, it is essential that the Airports Commission delivers a solution that addresses the ticking time bomb of our lack of spare hub capacity,"
Mr Holland-Kaye claims that an expanded Heathrow will include new rail links to the north, south, east and west. "It will be easier for every part of the UK to access global markets and every part of the UK will be a more attractive location for inward investment. Heathrow is an airport for the whole country, not just London and the south-east," he says.
Heathrow can count on considerable business support, according to Mr Holland-Kaye, including 32 local chambers of commerce representing more than 4000 firms of all sizes; the majority of members of the CBI and Institute of Directors; trade associations, including the Freight Transport Association and British American Business; and trade unions, including Unite and the GMB.
It is also backed by regional airports, including Newcastle, Aberdeen, Leeds-Bradford, Liverpool and Glasgow, as well as UK-based budget airline EasyJet, which is currently Gatwick’s biggest customer.
Sir Richard Branson, founder of UK airline Virgin Atlantic, also supports Heathrow. “It’s difficult to make money on a route out of Gatwick when your major competitor has got a slot at Heathrow, because business people prefer Heathrow and you’ve only got to lose half a percent market share to be loss-making rather than profit-making,” he says. Virgin Atlantic’s chief executive, Craig Kreeger, says that expanding Heathrow is “a better solution in the long run for the UK”.
Now that the Conservative party has a majority government, the political deadlock may be broken. Chancellor George Osborne is believed to favour Heathrow, but on the other hand the new Conservative MP for Uxbridge, London mayor Boris Johnson, whose own Thames Estuary airport proposals have been ruled out by the commission, is strongly opposed. "The truth is Heathrow is undeliverable. I will certainly oppose it, as will other MPs in west London," he told local radio station LBC Radio.
One of Gatwick’s key arguments is that its plans for a second runway are politically deliverable. Stewart Wingate, chief executive at Gatwick Airport, feels that no Conservative government with Mr Johnson in it has a hope of getting Heathrow expansion delivered. "There is now more stated opposition to the Heathrow expansion around the cabinet table than ever. The UK needs something to happen, and only choosing Gatwick guarantees that something actually will," he says.
Other MPs opposing the Heathrow option include development secretary Justine Greening and Conservative MP for Richmond Zac Goldsmith. "It will be a very messy battle [to build a third runway at Heathrow] and I’m not convinced the government will do it," Mr Goldsmith told the Financial Times. "[Mr Johnson] is as much a headbanger as me on this issue. There will be a major battle."
Delivering full thrust
Outside of London, Birmingham Airport serves as a good example of just how significant a boost an extended airport can deliver to a city.
Neil Rami, chief executive of Marketing Birmingham, the city’s inward investment agency, says: "Foreign businesses want to invest in locations that have excellent international connectivity. London enjoys substantial investment in its transport routes, but Birmingham is also investing in its future. Since Birmingham Airport completed its £40m runway extension last year, it has established direct routes to China, and is welcoming more frequent flights to New York and Dubai.
"The appetite for direct flights into Birmingham is only increasing, with the city attracting 944,000 international visits last year – the highest on record – which generated £300m in consumer spending. Birmingham Airport is handling more passengers than ever before. The region is also attracting unprecedented levels of FDI. The Greater Birmingham and Solihull area secured 77 projects in 2013 to 2014, a 57% rise on the previous year, and created more than 4800 jobs – the strongest performance of any English region.
"However, air routes are just part of the wider connectivity that this region is offering to investors. The arrival of HS2 [railway link] in the West Midlands region provides a one-off opportunity to integrate air, rail, road and rapid transit transport, and create integrated regional transport hubs, which are fundamental to attracting FDI."
The Manchester Airports Group (MAG) is the country’s largest UK-owned airport operator, with four airports – Stansted, Bournemouth, East Midlands and Manchester – serving about 42 million passengers every year. It believes that action is urgently needed to maintain the UK’s status as an international hub for aviation. "In the short term, our four airports can make a significant contribution to growing the UK economy and improving international connectivity by making the best possible use of the spare capacity we already have on our runways," says a spokesperson for MAG.
"For example, Stansted could operate an additional 130,000 flights today without any major investment in infrastructure, while Manchester already has two runways and the capacity to expand from 20 million to 55 million passengers a year. East Midlands and Bournemouth can also play their part in serving passenger demand from local markets. To make the most effective use of this spare capacity, it’s vital that the government and other parties step forward and play their part. In our responses to the Airports Commission, we have called for a number of well-timed policy interventions, such as improving transport links and reforming the structure of Air Passenger Duty, to stimulate the take up of existing capacity at our airports.
"In the long term, Stansted offers a range of credible, deliverable and flexible long-term options for new runway capacity."
At Enterprise M3 Local Enterprise Partnership, which covers most of Hampshire and Surrey – home to 1.65 million people – and supports 90,000 businesses, a spokesperson says: "This is an economy that depends on strong links to the UK’s international airports and where the lack of aviation capacity is viewed as limiting growth. While expansion at Gatwick would have a positive impact on the Local Enterprise Partnership area, the major benefits to our economy would be met by additional capacity being provided at Heathrow. We believe that there is a place for one hub airport in the south-east and that should remain at an expanded Heathrow. However, we think that Gatwick will continue to have a long-term role to play as a point-to-point focused airport."
Meanwhile, the 'Western gateway' project – a £250m plan to turn Cardiff Airport into Heathrow's Atlantic terminal – is a radical solution aimed at breaking the current aviation stalemate. The plan would see Cardiff, with its long runway, focus on long haul, transatlantic traffic, and nearby Bristol Airport on short-haul European flights.
"The Western gateway provides a mechanism to begin the necessary economic rebalancing of the UK economy," says a spokesperson for the project. "There is Welsh government support for the Western gateway and broad stakeholder support, something entirely lacking in the south-east England-based proposals."
Outside of the UK, the debate surrounding airport expansions is perplexing to some FDI professionals. Christina Knutsson, director at GDP Global, an economic and business development consultancy specialising in FDI, stresses the importance of good airport connectivity in investment attraction. She says: "I find the debate around Heathrow and other airport expansion options quite ludicrous, considering that many parts of the world where I have worked would do anything to have a leading international hub in their backyard. The economic benefits are enormous through the direct employment and business generation."
Ms Knutsson believes that the relevance and power of the London economy owes much to its international connectedness. "London is Europe's leading metropolis. In fact, the entire business identity of major cities in the international markets rely heavily on their airports: Amsterdam, Frankfurt, Hong Kong and Dubai would be tier-two cities were it not for their international airport credentials. My take on the Heathrow airport expansion is straightforward. Increasing airport capacity around London is needed if the city and the south of England are to remain competitive," she says.
Heathrow has been in the mature stage of its product lifecycle for some time, according to Ms Knutsson. "Without constant investment to meet future customer needs, it will become an anachronism. Without extra capacity, Heathrow's days as a leading international airport will be numbered. It will become an 'also-ran', maybe as soon as within the next 10 to 15 years. And the worst-case scenario, will be that is becomes an aged and uncompetitive European regional airport that will close within an alarmingly short time," she says.
"However, I would not be too gloomy about that scenario," adds Ms Knutsson. "It's quite possible, when and if that time comes, the land occupied by the airport will have more economic value than the airport assets that are deployed there today. And that may be what the local community would prefer."