Aviation Strategy - Transport Committee Contents

2  Demand for growth

Demand forecasts

18.  UK airports handled 221 million passengers in 2012, 1.4 million more passengers than in the previous year.[31] This growth continued the recovery which started in 2011 following three consecutive years of falling passenger numbers at UK airports in the immediate aftermath of the financial crisis of 2008. The extent to which passenger numbers will continue to grow is periodically forecast by the DfT. These forecasts are used to inform long-term aviation strategy and may have implications for the timing of any future airport development.

19.  At the time of the 2003 White Paper on the future of air transport the central forecast for demand at UK airports in 2030 was 500 million passengers per annum (mppa).[32] This figure is related to "unconstrained" passenger demand, that is, it did not take account of capacity limitations at any individual airports nor did it assume that there would be any airspace constraints. The DfT's two most recent forecasts, published in August 2011 and January 2013, showed the central forecast for unconstrained passenger demand in 2030 dropping to 345 mppa and 320 mppa respectively.[33] The corresponding forecasts for demand in 2050 were 520 mppa and 480 mppa respectively. Since 2003 there has been a trend towards lower forecasts for passenger demand in the future, due to factors such as the impact of low economic growth in the UK, higher than expected fuel prices, and environmental costs. Further details showing the range of scenarios in the low, central and high forecasts from the most recent DfT publication are given in table 1.
Table 1: UK terminal passenger forecasts (unconstrained)
YearLow forecast (mppa) Central forecast (mppa) High forecast (mppa)
2010211 211211
2015220 230240
2020240 260280
2025260 290315
2030280 320360
2035295 355415
2040315 390485
2045335 435565
2050350 480660

Source: Department for Transport, UK Aviation Forecasts, January 2013

20.  The DfT also provides "constrained" forecasts that assume no new runways or terminals are built in the UK. In the most recent constrained central forecast, passenger numbers rise from 219 million in 2011 to 225 million by 2015, 315 million passengers by 2030, and 445 million by 2050.[34] The difference between the constrained and unconstrained forecasts illustrates, in very simple terms, the extent of the capacity shortfall at UK airports in terms of meeting potential demand to use them. Table 2 shows that the capacity gap in the mid-range demand scenario (i.e. the central forecast) would be 5 mppa in 2015 and in 2030 and would rise to 35 mppa by 2050.
Table 2: UK terminal passenger forecasts (central forecast)
YearUnconstrained forecast (mppa) Constrained forecast (mppa) "Capacity gap" (mppa)
2015230 2255
2030320 3155
2050480 44535

Source: Department for Transport, UK Aviation Forecasts, January 2013

According to DfT figures, the best-case scenario, illustrated by the low-range demand forecast shows a capacity gap of 5 mppa by 2020, that is an unmet demand of 5 million passengers at UK airports in as little as 7 years.[35]

21.  The DfT also provides forecasts of passenger demand at the airport level. The most recent forecasts explain that:

In the central forecast, the five largest South East airports are forecast to be full by 2030. However, the high and low demand scenarios underline the uncertainty around this conclusion. With the range of demand used they could be full as soon as 2025 (the high case) or take until 2040 (the low case). Heathrow had effectively reached capacity in 2011 and it is forecast to remain at capacity in all scenarios.[36]

22.  The fact that Heathrow is operating at full capacity, and will remain operating at full capacity without expansion, is best illustrated by looking at runway capacity. The DfT forecasts show how airport level demand forecasts are related to the "maximum use scenario" of existing runways to illustrate when the London airports are predicted to become full and how the airports most affected by "spill" from the south east react (table 3).
Table 3: UK airports runway capacity used, 2010-2050, 'max use' capacity scenario (central forecast)
Airport2010 20202030 20402050
Heathrow99% 100%100% 100%100%
Gatwick90% 100%100% 100%100%
Stansted58% 69%100% 100%100%
Luton59% 60%100% 100%100%
London City56% 87%100% 100%100%
Southend 42%100% 100%100%
London81% 86%100% 100%100%
Manchester49% 57%55% 58%100%
Birmingham45% 56%79% 100%100%
Bristol35% 38%37% 100%100%
East Midlands22% 17%20% 43%100%
Southampton27% 36%52% 100%100%
Other modelled22% 24%28% 33%43%
National39% 43%50% 54%63%

Source: Department for Transport, UK Aviation Forecasts, January 2013. Note: 100% = runway or terminal capacity exceeded, other %s refer to runway usage. Mainland UK airports only.

23.  The forecasts raised two key questions that we sought to answer:

i.  There is a capacity gap predicted by 2020 but future national demand forecasts have been steadily reduced since the 2003 White Paper: does that mean that there is a less urgent need for increased UK aviation capacity?

ii.  Heathrow is full but there is capacity in other south east airports until at least 2025 and maybe until 2040: can demand for travelling from Heathrow be shifted to airports operating below capacity?


24.  While some witnesses pointed out that the DfT's future demand forecasts have been lowered since the 2003 White Paper and suggested that there was no longer any urgency in the requirement for additional airport capacity,[37] others noted that the forecasts do still predict growth.[38] Willie Walsh, Chief Executive of the International Airlines Group (IAG)—the holding company of British Airways and Iberia, told us that:

The idea that we are in a recession and there is no growth is a nonsense. Yes, we went through a recession in 2008 and 2009, but most countries have come through that, certainly in terms of airline passenger numbers, and have seen significant growth. That growth is taking place right across the world.[39]

25.  The main argument for urgent action on aviation capacity is an economic one. We have already noted the concerns from business groups about the UK economy losing out in the future if connectivity is not improved through the provision of new services.[40] Concerns about poor connectivity can be ascribed to a lack of capacity, and in particular, a lack of capacity at the main hub airport. The international economic landscape has changed in recent years, making the need for connectivity more urgent, as Colin Matthews, CEO of Heathrow Airport, noted:

The need for jobs and investment in trade is now even greater. Growth has moved from local developed economies to far-flung emerging ones. Since 2003, Paris, Frankfurt and Amsterdam have put on many more routes. They have put on 1,500 more flights a year from those hubs to cities in mainland China than we have from the UK, so the urgency, in particular, has changed.[41]

We note that the hub airports in Frankfurt, Paris and Amsterdam have four, four and six runways respectively, compared to the two situated at Heathrow in London.

26.  Dale Keller, CEO of the Board of Airline Representatives in the UK (BAR UK), indicated that competition from other major hub airports in Europe, each having between four and six runways, was an issue that the UK needed to address.[42] Further afield, competition from airlines and airports in the Middle East over the past decade has also grown. This was an issue of concern raised with us during our visit to Frankfurt Airport. Willie Walsh told us:

in 2001, Dubai international airport ranked No. 99 in the world in terms of international passengers. Heathrow was No. 1. In 2010, Dubai was thirteenth. In 2011, it was fourth. It has seen growth to the end of October of this year of 13.5% versus growth at Heathrow of 0.6%. It will overtake Heathrow as the No. 1 international airport in the world certainly within two years—three years at a push. It is doing that at the expense of growth in the UK.[43]

27.  Growth in demand for air travel is inevitable. The UK is currently well connected to the rest of the world but there is no room for complacency at a time when the UK's hub airport is faced with increasing global competition. Building greater capacity—in the form of new runways, terminals, or airports—takes time. It would therefore be prudent to acknowledge the long-term upward trend in demand for air travel and act now to maintain the UK's international standing in aviation. We set out our recommendations on how this should be achieved later in our report.

Accommodating demand within existing capacity

28.  The environmental groups we heard from did not support the construction of new airports or new runways. Instead, they favoured either reducing demand,[44] or making better use of existing capacity within the UK.[45] They suggested that demand could be reduced by promoting the increased use of video-conferencing as a substitute for international travel.[46] However, they believed that this would only reduce demand for business travel. Video-conferencing is therefore likely to have very limited, if any, impact on demand and no impact on discussions about making better use of capacity.

29.  We have already established that there is a specific problem at Heathrow. It is the UK's only hub airport, it has been short of capacity for a decade, and it is currently operating at full capacity.[47] London First and Biggin Hill Airport suggested that smaller business aircraft could be shifted away from Heathrow to designated business airports.[48] However, this would have limited impact as business aviation represents only a very small number of aircraft movements at Heathrow.[49] Jean Leston, Senior Transport Policy Adviser at WWF-UK, accepted that runway capacity was an issue at Heathrow and suggested that the solution might be "to free up capacity by moving flights of lower economic value, predominantly leisure flights, to other airports where there is lots of spare capacity".[50] However, she was unable to explain how the airlines might be persuaded to do this.[51]

30.  We questioned a number of airlines about whether this would be possible and were told by Sian Foster, from Virgin Atlantic Airways, that "the leisure passengers, the business passengers, the cargo, the point-to-point and the connecting are all travelling on the one plane. Trying to separate them out and try different solutions at different airports would be very challenging, if not impossible".[52] She explained that this sort of approach had been attempted in Tokyo:

The Japanese Government have tried to make Narita the international hub for most of the day and Haneda the local regional hub for most of the day. They have a bizarre rule where they switch over some time during the evening and it is incredibly complex. In the time that they have been trying to enforce these rules locally, they have seen Japan's primacy dip as an international hub for south-east Asia. They have been overtaken by other airports in that region so it hasn't worked particularly effectively for the airlines, the passengers or the Japanese economy.[53]

31.  Simon Buck, CEO of the British Air Transport Association (BATA) concurred that moving flights away from capacity constrained airports would be the wrong approach.[54] Andrew Cooper, from Thomas Cook Group, and Eddie Redfern, from TUI Travel, added that people generally prefer to travel from their local airport and that any attempt to shift flights in this way would result in passengers incurring greater costs as they travelled to airports further away.[55] Furthermore, the Civil Aviation Authority (CAA) told us:

The real challenge is the fact that demand is "peaky". It peaks geographically in the south-east but also by time of day. Even Stansted, which has seen a massive reduction in usage in the last five years, is still pretty crowded at the peak. It has not seen fewer planes in that 7 to 9 am peak. Intervening in the market to shift people away from those peak hours, despite very attractive pricing, hasn't worked. Political intervention to try and shift would almost certainly be unsuccessful.[56]

32.  Other witnesses suggested that despite the specific capacity problem at Heathrow, too much emphasis was placed on growing the hub airport. Tim Johnson, from the Aviation Environment Federation (AEF), told us that "if you look at the origin of the demand, the capacity exists in each of the regions that people want to fly from, including the south-east".[57] However, airlines are commercially driven enterprises and will operate services only where there is a viable market. While hub airports are thought to be more conducive to establishing new services, particularly to the emerging markets, Gatwick Airport told us that there was a trend away from "hubbing" and towards direct point-to-point services.[58] Over the last year Gatwick has been successful in setting up connections with Air China and has also set up the first direct connections between the UK and Ho Chi Minh City and Hanoi in Vietnam, with services to Jakarta starting in the near future.[59] However, Gatwick has not always been successful in maintaining such connections,[60] for example, a service started by Korean Air last year has now been suspended.[61] Willie Walsh, of IAG, told us that:

The reality of it is that despite the attraction of Gatwick—and it is a much cheaper airport to operate to than Heathrow—most of the long-haul carriers flying into Gatwick want to fly into Heathrow. Gatwick Airport won't say that, but I know because the airlines that are flying into Gatwick contact me and say, "Is there any way we can get slots at Heathrow?" If they had the opportunity to fly from Heathrow, they would.[62]

33.  There is a specific capacity problem at Heathrow Airport. It is the UK's only hub airport, it has been short of capacity for a decade, and it is currently operating at full capacity. Furthermore, there is a lack of capacity to meet demand during peak hours across all airports in the south east. There may be some scope to shift small business aircraft to designated business airports. However, this will have limited impact. The vast majority of aircraft movements at Heathrow are commercial flights, which carry a mixture of leisure passengers, business passengers and cargo. It is therefore impractical to suggest that Heathrow's capacity problem can be resolved by shifting commercial flights of a "specific" type (for example, leisure flights) to another airport. Furthermore, we note that airlines make decisions on where services operate based on commercial reasons. We also note that some non-hub airports may have a role to play in providing flights to emerging markets and that the HS2 rail project offers the potential for other airports such as Birmingham and East Midlands to attract more passengers from London and the South East. For example, with HS2 the rail journey time from central London to Birmingham airport will be less than 40 minutes, not dissimilar from journey times to the main London airports. This, however, is not a substitute for increased hub capacity.


34.  Forecasting is inherently uncertain and the factors that underpin forecasts of future air passenger demand are difficult to predict. The DfT addresses this uncertainty by producing a range of forecasts showing low- mid- and high- demand scenarios. The publication of these forecasts, and the methodology used to devise them, allows interested parties to scrutinise them and test their robustness. In February 2013, the Airports Commission published a discussion paper seeking views on aviation demand forecasts. While we have not looked in detail at the methodology used, we have no reason to doubt the overall analysis of national demand. There is, however, a question mark as to whether the analysis of demand fully captures potential future long-term economic and demographic changes. There are also a number of anomalies contained within the figures, for example, anomalies relating to the way in which traffic (including "hub" traffic) is reallocated when Heathrow reaches capacity. For example, the DfT models show that when Heathrow fills up, long-haul traffic is forecast to move to Stansted in 2030 but inexplicably Stansted is then expected to lose this traffic in 2050.[63] We are therefore concerned that the detailed airport level forecasts may not present an accurate picture of demand and capacity requirements at the individual airport level. In addition, we are concerned that future demand forecasts may not take into account factors which may affect the evolution of the UK economy, such as the impact of HS2.

35.  While forecasting is inherently uncertain we have no reason to doubt the overall analysis of national demand. There are, however, questions remaining about the long-term forecasts. We welcome the Airport Commission's discussion paper on aviation demand forecasts and hope that the Commission will address some of the anomalies we have identified. We note that it is important that the drivers of hub demand are better understood as this will help to identify the extent to which hub demand might be relocated.

31   Civil Aviation Authority press notice, Passenger numbers at UK airports up 1.4 million, but still below 2007 peak, 18 March 2013 Back

32   Department for Transport, The Future of Air Transport, December 2003, Cm 6046, Annex A Back

33   Department for Transport, UK Aviation Forecasts, August 2011; and Department for Transport, UK Aviation Forecasts, January 2013 Back

34   Department for Transport, UK Aviation Forecasts, January 2013, p 7 Back

35   Department for Transport, UK Aviation Forecasts, January 2013, Comparison of tables 4.1 and 5.1 Back

36   Department for Transport, UK Aviation Forecasts, January 2013, p 8 Back

37   For example: Q 183 [Anthony Rae]; Q 185 [Brian Ross]; AS 008, para 12 [Gatwick Area Conservation Campaign]; and AS 081 [Aviation Environment Federation] Back

38   Q 136 [Nick Barton] Back

39   Q 243 [Willie Walsh] Back

40   Paragraph 5 Back

41   Q 148 [Colin Matthews] Back

42   Qq 88-90 [Dale Keller] Back

43   Q 243 [Willie Walsh] Back

44   Q 661 [Jean Leston]; and AS 073, para 17 [Friends of the Earth] Back

45   Qq 651-654 [Jean Leston and Matt Williams]; and AS 109, para 25 [Greenpeace] Back

46   Q 661 [Jean Leston]; AS 047 [Merseytravel]; AS 054, para 14 [Stop HS2]; and AS 098, para 1.2 [RSPB] Back

47   Q 133 [Colin Matthews] Back

48   Q 437 [John Dickie]; and Q 506 [Andrew Walters] Back

49   Civil Aviation Authority, UK Airport Statistics 2010 Back

50   Q 678 [Jean Leston] Back

51   Qq 679-680 [Jean Leston] Back

52   Q 21 [Sian Foster] Back

53   Q 46 [Sian Foster] Back

54   Q 23 [Simon Buck] Back

55   Q 106 [Eddie Redfern]; and Q 107 [Andrew Cooper] Back

56   Q 359 [Andrew Haines] Back

57   Q 224 [Tim Johnson] Back

58   AS 068, para 6 [Gatwick Airport] Back

59   Q 149 [Stewart Wingate] Back

60   Q 71 [Dale Keller] Back

61   Business Traveller, Korean to suspend Gatwick-Seoul route, 29 November 2012 Back

62   Q 253 [Willie Walsh] Back

63   Department for Transport, UK Aviation Forecasts, January 2013, Annex E.9 and E.10 Back

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Prepared 15 May 2013