Transport CommitteeWritten evidence from Heathrow Hub Ltd (AS 80)

Introduction

1. Heathrow Hub Ltd is pleased to have the opportunity of responding to the Committee’s Inquiry. To briefly describe our interest in the Government’s Aviation Strategy, the company is the promoter and developer of Heathrow Hub, a proposed multimodal integrated transport interchange, located on a site approx. 3.5km north of Heathrow’s Terminal 5—about the same distance as that between the existing T5 and T2 (currently under construction). The interchange, including an airport processor, would be located on the existing UK rail and motorway network, allowing passengers to seamlessly transfer between road, rail and the airport, check-in for their flight, pass through security and board a fast transit system taking them, (and, on a separate system, their baggage), directly to new and existing aircraft satellites located within Heathrow’s existing site.

2. By providing new terminal capacity outside the existing constrained airport site, (one of the smallest of any major international airport),1 more space is created for aircraft—the one activity that cannot move. It also enables the existing T5 (and proposed T2) “toastrack” satellite layout to be extended across the airfield, allowing more efficient airport operations, reducing environmental impacts and creating a better passenger experience.

3. London First concluded that Heathrow’s congestion and consequent lack of resilience is a result of its inefficient layout and constrained site, not just runway capacity.2 BAA similarly confirms that runways are only one element affecting capacity. 3

4. By creating space within the airfield to allow pre-sorting of departing aircraft by weight, and removing runway crossings, it may also be possible to achieve additional runway capacity and/or resilience. Research by NATS and the Smith Institute concluded a more efficient layout could allow increases in the runway service rate, reducing delays and potentially increasing capacity. 4

5. Rerouting HS2 via Heathrow Hub would additionally increase Heathrow’s capacity by allowing high-speed rail to replace short haul flights. This follows the success of European airport interchanges such as Schiphol, Frankfurt and Charles de Gaulle.

6. We were pleased to be invited to provide oral evidence at the Committee’s 2011 Inquiry into the Strategic Case for High Speed Rail. The Committee concluded, “The Government needs to make clear how HS2 fits into its wider aviation strategy” and recommended that “Government set out more clearly for comparison the costs and benefits of routing HS2 via Heathrow (and of making it the principal interchange to the west of London) so that there can be a better understanding of the pros and cons of different options.” 5

7. We believe that Heathrow Hub is relevant to the current Inquiry as it shows the benefits of the integrated, intermodal approach that has contributed to the success of continental airports and which is also mandated by EC policy. 6 This stands in stark contrast to the UK Government’s separate, silo planning of air and rail networks, highlighted by the decision to proceed with HS2 being taken before the Davies Commission on aviation capacity has even started its work.

8. The first phase of HS2 does not serve Heathrow directly, with airport passengers required to change trains to Crossrail at a remote interchange at Old Oak Common. In a possible second phase, perhaps by 2033, HS2 would connect to Heathrow via a spur (branch line). However, European experience clearly shows that, for modal shift and air/rail substitution to be effective, airports must be served by interchanges located directly on the through high speed line, allowing much higher service frequencies (essential for time-sensitive airport passengers). This is also a more efficient way of serving airports, since even major traffic generators like Heathrow would struggle to fill trains with airport traffic alone, at the frequencies required to be attractive to passengers and in numbers sufficient to generate adequate revenues to offset operating costs.

9. Oxford University’s Transport Studies Unit,7 Jim Steer,8 Greengauge 219 and indeed DfT10 all agree on this issue.

10. It therefore appears perverse that HS2 deliberately bypasses the world’s busiest international airport, (and perhaps the one most in need of capacity and environmental improvements).

11. By the time HS2 propose to develop a Heathrow spur, in 2033, Heathrow is forecast to be handling perhaps as many as 95 million terminal passengers per annum, a significant increase on current numbers of ca. 70m. Yet air quality around Heathrow already exceeds legal limits, whilst airline’s use of increasingly larger aircraft, (responsible for the forecast passenger increase), increases pressure on both the local road network and the airport’s operational efficiency.

12. As an example of the effect of this increase in Heathrow’s traffic, (whilst still restricted to two runways and a cap of 480,000 ATM’s (Air Transport Movements) per annum), an increase to 95 million passengers would result in a 41% increase in private road vehicles accessing Heathrow. This assumes public transport’s modal share would increase to 41.5%, following completion of Crossrail, (although the London Assembly’s report suggests that withdrawal of the existing Heathrow Express service, as proposed by Network Rail and following demolition of the Heathrow Express depot to allow construction of HS2), could reduce rail’s mode share of Heathrow passengers by 3%.11

13. The estimated increase in road traffic may also understate the real impacts of passenger growth since each return passenger journey by taxi or minicab actually generates double the number of road trips. 12

14. We therefore believe that Government’s current approach to aviation strategy both ignores the challenges presented by Heathrow’s short-term growth, and fails to adopt the necessary intermodal, integrated strategy necessary to ensure optimum long term planning.

Responses to the Committee’s Questions

Q1—What should be the objectives of Government policy on aviation?
(a) How important is international aviation connectivity to the UK aviation industry?

15. International connectivity is clearly vital to the UK aviation industry. In particular, Heathrow provides the UK with a unique asset, one of the world’s most important hub airports. We believe that it is essential that Government policy recognize the particular characteristics that have been responsible for Heathrow’s success, and the risks inherent in suggesting that these might easily be transplanted, replaced or duplicated elsewhere. Policy should therefore carefully consider issues such as airport catchment, connectivity, competitiveness, efficiency, environmental impacts and passenger experience, as well as the runway capacity issue that, to date, appears to have dominated the aviation debate.

(b) What are the benefits of aviation to the UK economy?

16. The connectivity that aviation provides is of vital, and growing importance to the UK economy in an increasingly competitive and connected global market. Whilst airlines have the benefit of the most mobile of assets, the UK, occupying a relatively peripheral location off the coast of North West Europe, is almost entirely reliant on aviation for its connectivity.

17. HS1 and the Channel Tunnel provide only limited access by rail from London and the South East to near-Europe, whilst the UK’s regions currently lack any current direct link to HS1. HS2 does include a link between HS2 and HS1. However, whilst providing a physical connection, it is intended to provide only a single track, shared over part of its length with existing North London Line freight and passenger services. Hence, it will provide only very limited capacity, effectively relegating the vast majority of the UK to a location at the end of a single track branch line from Europe.

18. The European airspace closure that followed the Eyjafjallajökull volcanic eruption in 2010 highlighted the need for resilience in the UK’s transport networks, and might reasonably be thought to influence a decision to ensure adequate rail capacity between the UK and Europe. There is speculation that another Icelandic volcano might erupt soon, potentially with far greater impacts.13

19. Within the UK’s aviation system, Heathrow occupies a unique position. It is the country’s single largest traffic generator,14 world’s busiest international airport,15 and UK’s only hub, directly contributing around 1% of GDP.16 Despite capacity constraints and recent route consolidation, it retains the highest business connectivity score amongst major European hubs,17 with Heathrow located on seven out of the top 10 business routes in the world.18 Together with the English language, legal system and time zone, it provides the UK with a significant competitive advantage.

20. Research consistently shows that access to Heathrow is one of the most important issues for UK regional economic competiveness,19 and a major factor in business location decisions.20 This was recognized by the Coalition Government’s first Secretary of State for Transport who emphasized the need to “think about the UK through the prism of Heathrow.”21

21. It therefore seems perverse that Government’s plans for HS2 will result in a passenger landing at Heathrow having a very different experience to one landing at Frankfurt, Schiphol or Charles de Gaulle airports. At these airports, the integrated railway station would show very frequent departures to a large number of domestic and international destinations. In contrast, Heathrow would require passengers to travel by Crossrail to Old Oak Common, where a change of trains would be required for destinations other than central London.

22. We do not believe that this provides a competitive and attractive offer today, when compared to the connectivity offered by Heathrow’s competitors, but the difference will be even greater in 2026 when HS2 is due to be completed.

23. By pursuing separate and disconnected strategies for air and rail, Government ignores the synergistic benefits to the UK economy of an integrated approach. The latest Secretary of State does appear to recognize the inherent flaws in pursuing air and rail strategies to entirely different timescales, stating that HS2 may need to be “adapted” once the recommendations of the Davies Commission were known.22 However, by the time the Commission reports, in late 2015, £0.75 billion of public monies will have been spent (by May 2015) on developing plans for HS2.23 There is therefore a real risk of abortive cost if HS2 does indeed require adaption to suit aviation policy.

24. For example, if growth is to take place at Heathrow, it would seem perverse to continue to propose to serve the airport by a remote interchange or spur, (branch line), off the main HS2 route. Alternatively, if Heathrow were to be replaced by a new hub airport to the east of London, then the proposed single track cross-London link between HS2 and HS1 would be clearly inadequate in terms of the surface access that would be required between the UK regions and a Thames Estuary airport.

(c) What is the impact of Air Passenger Duty on the aviation industry?

25. Whilst not claiming to be expert in the field of taxation, we suggest that it is important that Government consider this as part of the integrated policy framework that we believe is required to guide and assess transport strategy, and which should also include environmental, economic and spatial planning considerations. Clearly, as transport investment involves long term decision-making, spanning many Parliaments, there are significant benefits in achieving a cross-party consensus on these policy issues.

(d) How should improving the passenger experience be reflected in the Government’s aviation strategy?

26. Government’s silo planning approach ignores the need for a “whole-journey” approach to the passenger experience in an increasingly competitive global aviation market. Amadeus’s recent research24 highlighted passengers’ sensitivity to friction at each point in their journey, from home or work, via the airport access journey, through the airport and onto the aircraft. The optimum passenger experience can only be achieved by an integrated intermodal approach to transport planning, and the technologies used in, for example, ticketing, security and baggage handling.

27. Instead, projects appear to be brought forward by Government without proper consideration of the passenger experience. For example, Government’s proposed western rail access to Heathrow claims to allow access to Heathrow from South Wales,25 and the West and South West of England. However, this is unlikely to allow through trains from points beyond Reading, requiring passengers from further afield to change trains to reach the airport. It is therefore important to recognize the impact of interchange (and service frequency) penalties which BAA,26 Star Alliance27 and others28 recognise act as severe deterrents to passengers choosing rail for time sensitive, luggage laden airport access journeys. HS2 Ltd’s own research similarly confirms the particular sensitivity of airport passengers making international journeys.29

28. British Airways have also expressed concern that HS2’s apparent disregard of the impact of interchange penalties adversely affects the passenger experience30 whilst the Coalition’s first Secretary of State for Transport concluded that an interchange at Old Oak Common was “not an option.”31

29. The proposed connections between HS2 and Heathrow, whether via Old Oak Common or the proposed spur, clearly provide a sub-optimum passenger experience. It is surprising that this is seen as acceptable, particularly as HS2, (even using Government’s estimates), represents the UK’s largest ever investment of public monies in a single project,32 and one presumably designed to equip the UK to compete on a world stage well into the next century.

(e) Where does aviation fit in the overall transport strategy?

30. It is difficult to answer this question due to the lack of any overall transport strategy for the UK, as the Select Committee has repeatedly noted, for example, in its various Inquiries into Transport and the Economy,33 High Speed Rail34 and DfT.35

31. The documents accompanying Government’s January 2012 decision to proceed with HS2 suggest that DfT’s Business Plan provides the necessary strategic context within which to examine transport projects.36 However, this simply contains a list of projects, with a brief summary of the Coalition Governments priorities.37

32. The HS2 decision documents also refer to the need for “co-ordination of the National Infrastructure Plan, the Growth Review and National Policy Statements—the national networks statement in particular relates to HS2.”38 This is consistent with HS2 Ltd’s assumptions, at an early stage in their developing proposals for high speed rail, that a national strategy would be necessary to provide a context within which HS2 could be properly considered—the expectation being that this would take the form of a National Policy Statement on national networks.39 However, at the time of writing, the National Networks National Policy Statement does not appear to have been published, even in draft for consultation.40

33. We suggest that there continues to be an urgent need for a national transport strategy, and that this should be subject to proper democratic scrutiny, leading to a cross-party consensus on both strategy and funding before aviation and rail proposals are then assessed. This appears better aligned with the recommendations of the Eddington study than the current approach.41

34. It is also increasingly critical when HS2 Ltd. is progressing against a background of considerable scepticism, absent of any aviation strategy and where increasingly large sums of public money are being spent.

35. Significant investment is also proposed for other transport projects, despite the lack of any overall strategy or apparent scrutiny. For example the proposed western rail access to Heathrow, included in the 2012 HLOS, requires £0.5 billion of public money,42 when its benefits are unclear, and there is the possibility of a requirement for ongoing revenue support. In addition the project is only required as HS2 Ltd. admitted ignoring their specific remit43 to consider access to Heathrow from the west in developing HS2.44

36. We suggest that a UK transport strategy should adopt the principles of EC intermodal policies, as set out in the European Commission’s 2011 White Paper.45 The benefits of this approach are made clear in various non-technical documents published by the Commission,46 and illustrating in particular the benefits arising from integration of high-speed railways and major airports at, for example, Frankfurt, Schiphol and Charles de Gaulle.

Q2—How should we make the best use of existing aviation capacity?
(a) How do we make the best use of existing London airport capacity? Are the Government’s current measures sufficient? What more could be done to improve passenger experience and airport resilience?

37. London airport capacity is only an issue in terms of Heathrow, which requires a long-term strategic and deliverable approach to ensure the UK’s future hub capability. A hub requires a dominant base carrier, with a critical mass of slots, feeding long haul flights with an extensive short haul network, offering competitive frequencies and connection times through co-ordinated “waves” of arriving and departing flights. In the UK, only Heathrow provides such capacity and functionality.

38. We do not believe that Government’s current measures are sufficient to ensure that Heathrow can continue to provide this capability. The lack of an integrated approach to air and rail strategy exacerbates the challenge, preventing HS2 from delivering the very significant potential capacity benefits that air/rail substitution could deliver in the short-medium term, replacing short haul domestic and near-Europe flights and releasing capacity for long haul services to support economic competitiveness and enhance the UK’s global connectivity.

39. Air/rail substitution has been claimed as a benefit of HS2.47 However, an optimum solution is unlikely because of the way in which HS2 has been planned, without representation from the UK aviation industry48 or acceptance of the industry’s clear recommendations49 (perhaps in part because the response of Heathrow’s airline representatives to Government’s HS2 consultation was one of those found to have been mislaid and not therefore considered prior to the Secretary of State’s decision).50

40. Government appears to acknowledge the benefits of air/rail substitution. For example, last year’s aviation consultation stated that “in the longer term, much of the demand for domestic aviation and for near-European short-haul aviation could be met by high speed rail.”51

41. However, the proposed spur serving Heathrow as a branch off the main HS2 line is, we believe, unlikely to ever be built, due to its high cost, and lack of any conceivable business case (with viability dependent on airport traffic alone generating load factors sufficient to justify the high service frequency necessary to attract time-sensitive airport passengers). In addition, Heathrow’s competitiveness may well be severely weakened long before 2033, making the cost of a spur, and the loss of HS2 capacity, difficult to justify.

42. Even if built, a spur would not be completed until 2033, when Heathrow requires urgent, short-term measures to increase capacity and resilience. And even if the spur was brought forward to phase 1 of HS2, this would provide only a north facing junction with the main HS2 line, allowing trains to only serve Birmingham and the north. It would not therefore be possible to replace short haul European flights with rail until and unless the spur was extended to form the loop that HS2 propose (at an even later date than 2033).

43. Government estimates the cost of a spur at between £2.5 billion–£3.9 billion,52 with an expectation that at least part of the cost of a spur would be met by users53 ^, 54 (presumably referring to airlines through Heathrow’s user charges). Any significant contribution appears unlikely, however, in view of Heathrow already having the 4th highest user charges in the world,55 and the concerns already expressed by the airport56 and airlines.57 If a spur is, in due course, indeed found not to be fundable, viable or otherwise deliverable, Heathrow would be condemned to reliance solely on a remote interchange at Old Oak Common.

44. Even if airlines did agree to the necessary funding contributions, (potentially including revenue support for train services over the spur), this would significantly increase the RAB,58 which, together with HS2’s phasing, could place Heathrow at a significant competitive disadvantage.59 In contrast, locating a Heathrow interchange on the through high speed line, in the first phase of HS2 as proposed by Heathrow Hub, allows very significant benefits, enabling the earliest possible modal shift from both air and road to rail.60

(b) Does the Governments current strategy make the best use of existing capacity at airports outside the south east? How could this be improved?

45. Regional airports, and indeed many South East airports, have very significant spare capacity. Making better use of such capacity appears is clearly a commendable objective. This could, for example, reduce the pressure on capacity constrained airports, improve regional connectivity and increase customer choice.

46. However, it is less clear how this could be achieved. Historic data shows that regional—and some South East—airports have suffered a steady decline in traffic. Whilst Heathrow grew 3.9% between 2001 and 2011, (from 458,000 to 476,000 ATM’s), Manchester declined 15.2% (182,000–158,000 ATM’s), Stansted declined 9.2% (151,000 to 137,000) and Birmingham declined 24.3% (111,000–84,000 ATM’s).61

47. The result is that the UK’s regional airports have very substantial spare capacity. However, this is a result of airlines, operating in a free and highly competitive market and with the benefit of the most mobile of assets, choosing to use these assets in other markets, whether elsewhere in the UK or overseas. This reflects network airlines increasingly focusing on major hub airports, leaving regional airports served mainly by point to point or interline services.

48. European hubs also follow this pattern, and explain major airport’s growing focus on maximizing the size of their catchment, and reaching markets with the highest propensity of people to fly, in order to fill increasingly large aircraft on long haul services at commercially attractive yields.

49. It may be that airline economics change as a result of the long range and fuel efficiency of the new generation of mid-size aircraft, for example the B787 “Dreamliner.” However, it would be a significant risk to the UK’s future hub capability if attempts were made to distort market forces, and actively seek to weaken Heathrow by diverting growth to other airports. Reducing Heathrow’s competitiveness may not strengthen other UK airports.

50. Government in any case has only a very limited ability to influence airline’s commercial decisions, perhaps through differential taxation or financial subsidy as means of seeding otherwise uneconomic services to meet wider policy objectives.

51. Historically, the UK has only been willing to consider very limited interventions, through imposing a PSO (Public Service Obligation) on carriers to operate specific services in remote areas and in return for financial compensation (subsidy). Other European countries appear to have taken a very different approach, with extensive use of PSO-type subsidies on domestic scheduled air services.62 It is however difficult to see that such an approach is either practical or beneficial. Instead, effort should be directed to improving access to, and the efficiency and capacity of successful international gateways.

(c) How can surface access to airports be improved?

52. Airport surface access should be considered as part of an integrated intermodal strategy, with particular attention to the overall passenger experience, rather than as separate road and rail projects in isolation. It is also important to consider surface access, not only in terms of modal shift from road to rail, but also in terms of its potential to increase UK regional competitiveness through improved access to global markets, and to enable air/rail substitution.

53. Improving surface access to Heathrow would particularly enhance hub operations.63 This is also increasingly important as the combination of fewer domestic air routes and the legacy of poor or non-existent rail surface access isolate Heathrow from markets64—adversely affecting the UK’s regions connectivity with global markets,65 regional competiveness66 and inward investment.67

54. One significant benefit of the UK coming late to decisions on airport capacity and high speed rail is the ability to learn from European examples and transport policy. These lessons do not appear to be reflected in current Government plans for HS2, western access to Heathrow and other projects.

Q3—What constraints are there on increasing UK aviation capacity?
(a) Are the Government’s proposals to manage the impact of aviation on the local environment sufficient, particularly in terms of reducing the impact of noise on local residents?
(b) Will the Government’s proposals help reduce carbon emissions and manage the impact of aviation on climate change? How can aviation be made more sustainable?

55. As discussed earlier, we suggest that an intermodal strategy, specifically designed to enable modal shift in airport access journeys from road, is essential, not only to provide a platform for forecast growth but to enable current operations within legally binding air quality limits. In addition, measures should be taken, particularly at constrained airports such as Heathrow, to reduce environmental impacts by improving operational efficiency, for example, removing runway crossings, reducing taxiing distances, minimizing holding time for aircraft on the ground68 and increasing the number of pier served stands.

(c) What is the relationship between the Government’s strategy and EU aviation policies?

56. Whilst Government’s strategy appears to be broadly aligned with EU transport aviation policies generally, we do not believe that it provides the intermodal approach that is specifically required by European transport policy.

Q4—Do we need a step-change in UK aviation capacity? Why?
(a) What should this step-change be? Should there be a new hub airport? Where?

57. Advocates of a step-change increase in capacity appear to focus largely on an unfavourable comparison of Heathrow’s two runways with Frankfurt and Charles de Gaulle’s four runways, and Schiphol’s six. We believe this is highly misleading and only partly relevant to the real issues of capacity and demand.

58. By comparison, there has been relatively little debate on a proper assessment of the extent to which Heathrow’s capacity constraints suppress demand. Frontier Economics 2011 “Connecting for Growth” report for BAA69 is therefore helpful in comparing Heathrow’s capacity and demand with its European competitors;

“Another way to think about Heathrow’s potential is to consider what it would look like if it was not capacity constrained at all. Paris Charles de Gaulle provides a useful benchmark for this thought exercise, since Paris and London are comparable as global centres (albeit of different economic scale) and have similar geographical locations. The difference is that Heathrow is capacity constrained whereas Charles de Gaulle is not. If Heathrow could fulfil its potential it might operate on a similar scale relative to the London economy as Charles de Gaulle does relative to Paris. We have assessed this by comparing the ratio of long-haul seats flown relative to GDP of the city. Charles de Gaulle flies 81 long haul seats per million EUR of Paris GDP. Heathrow flies only 68 long haul seats per million EUR of London GDP. If Heathrow could achieve a similar seat to GDP ratio, this would imply 31 million long haul seats out of Heathrow each year instead of 26 million; an uplift of 18%.”

59. BAA suggest that air/rail substitution could release between 45,000–91,000 ATM’s.70 The higher of this range is equivalent to a ca. 18% increase in Heathrow’s capacity, exactly the shortfall suggested above. This would increase passenger numbers from ca. 70 million pa currently to ca. 113 million passengers pa (assuming BAA’s forecast of 198 passengers per ATM (Air Transport Movement) by 2030.71 This is equivalent to 87% of the additional capacity that a third runway was forecast to provide (ca. 130 million passengers pa).

60. In addition, there is evidence that growth, particularly in business travel, is slowing, with a 25% decline in business flights since 200072—perhaps reflecting cost cutting, increasing availability of teleconferencing but also initiatives such as WWF’s One in Five campaign that seeks to reduce businesses carbon emissions.73 This suggests that there may not be a case for the drastic step-change in airport capacity that is suggested by the Mayor.

61. Clearly, there must be a direct relationship between demand, a function of an airport’s catchment, and the capacity required to meet that demand. This is illustrated by actual numbers of ATM’s, (Air Transport Movements), at Heathrow’s European competitors, which are within a much narrower range than runway capacity alone might suggest. For example, in 2011, Heathrow handled 476,197 ATM’s,74 Schiphol 420,249,75 Frankfurt 487,16276 and Charles de Gaulle 514,059.77

62. Whilst Heathrow is constrained by number of runways, its competitors also have their own constraints whether as a result of local noise controls (as at Schiphol)78 or configuration of runways (eg; Schiphol79 or Charles de Gaulle).80

63. The importance of a large catchment, with a high propensity to fly, is seen in the importance attached, and investment in, surface transport infrastructure at Heathrow’s competitors. These have led to integrated air/rail interchanges, located on through high speed and classic rail routes rather than branches or spurs, allowing high frequency services to a wide range of destinations. Schiphol (33m people accessible by rail within 200km)81 Frankfurt, (35m within 200km)82, Charles de Gaulle and Brussels, see a commercial imperative in expanding their markets by direct connection to both classic and high speed rail services serving a cross-border hinterland.83 In Belgium, Infrabel’s Project Diabolo has converted the former spur serving Brussels airport into a new through high speed line between France, Germany and the Netherlands, solely in order to improve connectivity.84

64. Meanwhile, in the UK, 11.5% of Heathrow’s UK origin and destination passengers come from the local area of Berkshire and Buckinghamshire, whereas only 2.8% come from the major conurbations of Birmingham, Manchester, Liverpool, Leeds, Sheffield, Newcastle, Edinburgh, Glasgow, Cardiff and Bristol combined.85 Bristol, only 90 miles west and in what should be Heathrow’s core market, instead sees 10,000 passengers a week interline through competing European hubs.86

65. European experience is clear87 and demonstrates the benefits of airport interchanges directly located on high speed rail lines.88 Direct interchanges assist in expanding airport catchments89 and encourage modal shift to rail.90 Interchanges in an airport access journey act as a very significant deterrent to rail use91 and appear contrary to the intent of European transport policy.92

66. We suggest that a detailed analysis of the impact of improved surface access to Heathrow, and the effect on both capacity (modal shift from air to rail) and demand, (increasing the airport’s catchment), is a necessary first step in accurately assessing the UK’s hub airport capacity.

67. Expanding Heathrow’s market catchment by better surface access would also maintain the feeder and transfer traffic that is essential to sustain high frequencies of flights serving a wide range of destinations.93 This would also protect the viability of hub operations in a competitive market by providing economies of scale94 and supporting higher yields.95 Frankfurt’s experience demonstrates how such intermodality strengthens an airport’s hub function,96 and which could be replicated at Heathrow.97

68. It would additionally assist the UK’s competitiveness,98 increasingly important as the combination of a declining number of domestic air routes serving Heathrow, and the legacy of poor or non-existent rail surface access to the country’s hub, increase the peripherality of UK regions.

69. A separate exercise is required to model catchment and demand for any new hub airport locations. This should also consider the potential impact on the UK economy, where economic success is a result, at least in part, of proximity to Heathrow. For example, the Thames Valley ranks 7th in Europe for Gross Domestic Product (GDP) per capita,99 contains the European HQ of 11 of the top 30 global brands, has the UK’s highest density of IT professionals and generates £30 billion annual output (19% of the South East).100

70. It seems likely that at least some businesses would re-consider their future in the Thames Valley if the UK’s hub airport was no longer readily accessible. An Isle of Grain site for a new airport, for example, would be ca. 160km from Reading, (measured as a straight line distance). In reality, access would either require circumnavigation of the M25 motorway, adding time and uncertainty, or by the new orbital rail link proposed by the Foster scheme.101 Even assuming that, as the scheme report suggests, “up to 60% of airport passengers will arrive using fast, frequent services from across the country,” the remaining 40% of the 150 million passengers envisaged as using the airport would presumably rely on road access. It is difficult to see how the South East’s road network could accommodate this amount of additional traffic.

71. Some businesses may choose to relocate to be closer to any new airport—but some may relocate elsewhere in Europe, particularly as the Thames Estuary does not offer the skilled labour pool, easy access to UK regional markets or attractive living environment that the Thames Valley and surrounding areas offer.

72. There is evidence of real damage already being inflicted on the UK economy as a result of the way in which transport strategies are being developed. Merely the suggestion that Heathrow might be closed or downgraded is already proving to have a severely detrimental effect on potential inward investment in the Thames Valley.102

73. Equally important, but more difficult to quantify, are the impacts on long term investment decisions by businesses currently located in the UK and dependent on Heathrow’s unique connectivity, and by airlines, who are of course able to make global decision on employment of scarce and valuable assets.

74. The Mayor appears now to suggest that Heathrow could remain open following development of a new hub airport, abeit downgraded to a “single runway, premium leisure” airport.103 Setting aside the question of the Mayor’s powers to specify the layout, capacity and market segment of Heathrow, this raises the question of which airlines would therefore choose to leave Heathrow.

(b) What are the costs and benefits of these different ways to increase UK aviation capacity?

75. Government’s current planning approach makes it almost impossible to compare alternative ways of increasing capacity. Without an integrated intermodal approach, it is, for example, impossible to properly assess the benefits of an HS2 route directly via Heathrow, in terms of enabling air/rail substitution, releasing airport capacity, or expanding the airport’s catchment.

76. There are many factors that fall to be considered in assessing the costs and benefits of proposals for new airport capacity.

77. If Heathrow, with its excellent location and established market, can only support ca. 18% additional capacity, it is extremely doubtful that a new airport to the east of London, with a much poorer location relative to UK markets, and a much smaller catchment area, (effectively halved as a result of its coastal location), could be economically viable, (even if Heathrow were to be closed or downgraded).

78. Instead, Heathrow Hub provides the necessary capacity increase to maintain Heathrow’s competitiveness and the UK’s global connectivity. The direct connection which we propose between Heathrow and the high speed rail network allows rail to replace short haul domestic and European flights, releasing ca. 18% of Heathrow’s capacity for new long haul routes.

79. In addition, BA’s recent acquisition of Bmi also effectively increases Heathrow’s capacity, providing BA with 46 additional daily slot pairs, some of which, serving formerly duplicated routes, allow new destinations to be served.

80. It is clear that an entirely new airport east of London, as promoted by the Mayor, would suffer from a number of major disadvantages. Its catchment area would be inevitably reduced by perhaps 50%, simply as a result of its coastal location resulting in half its hinterland being in the sea. Its remaining catchment would be far less attractive to airlines, since it lacks the range and density of business that has, over time, been attracted to areas around Heathrow.

81. In addition, the cost of a new airport would be so great, even assuming the public purse meets the £30 billion cost of road and rail access identified by the Mayor, that airline user charges would be likely to be far higher than Heathrow’s. The airport’s Regulated Asset Base of £13.8 billion at December 2011 generates the 4th highest user charges of any airport in the world. A new airport costing ca. £20 billion would be likely to be the most expensive airport in the world for airlines to use, inevitably needing to be reflected in fare increases which, together with the relative inaccessibility of the airport, would lower demand.

82. If Heathrow were to be closed or downgraded, in order to improve the viability of a new airport, the UK could suffer a catastrophic decline in GDP if businesses dependent on ease of access to global markets choose to relocate overseas, rather than to a new Thames estuary location. The impact could be particularly severe on South Wales and regions such as the South West, which are already remote from Heathrow, but whose peripherality would be further increased if Heathrow were to close.

83. The likely result of Heathrow’s closure would be passengers choosing, for reasons of cost and convenience, to fly from regional airports to interline at mainland Europe hub airports. Far from the UK gaining new hub airport capacity, the result could be the loss of a UK hub airport altogether.

84. Alternatively, if Heathrow remained open, as the Mayor now suggests, then it is impossible to envisage a scenario where Heathrow’s existing airlines would choose to relocate to a new airport, remote from markets and with very high user charges. It is also difficult to see new airline entrants to UK markets establishing a scale of operations adequate to justify the cost of a new airport, as well as its surface access and associated infrastructure.

85. This is particularly the case where new entrants are more likely to have a low cost, point to point business model, rather than that of a legacy network carrier. Only the latter require a very high capacity—and high cost—hub model, able to support the waves of incoming and departing aircraft at peak periods.

86. A Thames Estuary airport therefore faces severe challenges, even before issues of, for example, airspace design, environmental impact and birdstrike are considered.

87. It is also, we believe, highly unlikely that any alternative proposal for a totally new airport on an inland site, requiring less new infrastructure and located closer to markets, is deliverable in the context of increasingly onerous statutory designations to protect landscape and habitats and a growing public awareness of, and sensitivity to, environmental issues. It is also relevant that attempts to create dual hubs in the UK have not been successful, as seen in BA’s attempt to integrate operations between Heathrow and Gatwick.

88. Yet another proposal has been made for “Heathwick”, connecting Heathrow and Gatwick by a dedicated high speed railway paralleling the M25, to allow both airports to operate together as a single unified hub.104 In addition to the vast capital and operating cost of a railway serving airport passengers alone, and its environmental impact, it is difficult to see how linking two capacity constrained airports, some 45 miles apart, could offer additional capacity or compete with, for example, the attractive 30 minute airside connections offered between flights at competing European hubs.

89. We do not therefore believe that there are credible alternative proposals to retaining Heathrow as the UK’s hub airport.

90. Proposals for additional capacity in the form of a “third runway” outside the existing airport, whether at Sipson, as promoted by BAA, or Northolt,105 as now suggested, also face very serious challenges, particularly in exposing entirely new areas to aircraft noise as described earlier. We believe that the political sensitivity of this issue, as well as the seriousness of the environmental impacts, makes such proposals effectively undeliverable and, to a significant extent, is responsible for recent support for a new airport to the east of London.

19 October 2012