Aviation Strategy - Transport Committee Contents

Annex B: Commissioned research: Would a new hub airport be commercially viable?

Executive summary

The Transport Committee is conducting an inquiry into the UK's aviation strategy.[282] Commissioned by the Committee and prepared by Oxera, this report assesses the conditions under which a new hub airport is, or is not, likely to be commercially viable.

The assessment does not evaluate a specific proposal for a new hub; rather, it includes a range of scenarios covering various airport designs, demand forecasts, cost estimates and assumptions about the level of airport charges.

In all of the examined scenarios, Oxera's analysis suggests that a new hub airport would not be commercially viable. Specifically:

  • all the scenarios have a negative value at a rate of return that a private investor would require; and
  • the analysis implies that substantial public support/subsidy would be needed (in the range of £10-30 billion in today's money for the base-case scenarios examined).

Nevertheless, from a public perspective, the project may still offer good value for money, depending on the scope of wider benefits that the airport could facilitate.

282   See http://www.parliament.uk/business/committees/committees-a-z/commons-select/transport-committee/news/aviation---tor/. Back

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Prepared 15 May 2013