Transport CommitteeWritten evidence from Foster+Partners (AS 39)

INCORPORATING TECHNICAL ADVICE FROM HALCROW GROUP LTD

Introduction

1. This joint response from the promoters of the Thames Hub (www.thameshub.com) focuses on the Committee’s questions 1 and 4. We have not specifically addressed questions 2 or 3. Also, rather than responding to each of the subsidiary questions in turn, the document is structured around four key points, which incorporate the issues raised by the subsidiary questions.

Summary

2. To sustain economic growth the UK needs additional hub airport capacity to improve its international connectivity. Heathrow, the UK’s hub airport, is full and a proposed third runway would not provide the level of extra hub capacity required over the long term. Neither can that capacity be achieved by building more runways at other, point-to-point, airports, or by splitting hub operations. A new four-runway hub airport, located on the Isle of Grain in the Thames Estuary, with flights approaching over water, is a feasible proposition that could deliver that capacity. The new hub airport offers the prospect of the complete closure of Heathrow which would provide noise relief for 700,000 people. The new hub would also offer a step change in passenger experience compared to Heathrow and be connected to Central London using existing HS1 and other rail lines and an extension of Crossrail. The proposed, more flexible, economic regulation regime for airports would enable the airport to be funded from a mix of landing charges, adjacent property development revenues and receipts from the sale and redevelopment of Heathrow as a commercial and residential centre.

3. The new estuary airport has been developed as part of a suite of individual projects which are not necessarily dependent on each other, but could provide an integrated infrastructure development strategy for the longer term. The airport can be developed as a first stage standalone project. The high speed rail links from the airport could cross the Thames, using a combined road/rail crossing and integrated flood protection/tidal energy barrier. The flood protection afforded by the new barrier could maximise the upstream land that could be developed for housing, with a levy imposed to fund the infrastructure, and would act as a catalyst for the regeneration of the Thames Gateway. The rail lines from the airport could link to a new orbital rail line to the north of London that would connect the key radial routes into the capital allowing fast direct rail services to the new airport from the Midlands, the West and the North.

Key point 1

To sustain economic growth the UK needs a significant increase in airport capacity in order to provide the required international connectivity for passengers and goods. More capacity and greater connectivity will facilitate trade and encourage inward investment, help to rebalance the economy and deliver more jobs. In recent years other European countries have overtaken the UK in terms of their international air connectivity, particularly with fast-growing emerging markets.

4. Since 1990 air passenger numbers through UK airports have risen by 4% per annum and air freight has increased by 3% per annum, although only one new runway has been built, at Manchester Airport.1 These increases have been driven by domestic factors and rapid growth in global demand. Over this period the UK’s population grew by five million (1.3 million of these in London), average incomes rose in real terms by 54% and there has been a large fall in average air fares (down 50% between 1997 and 2006).2,3,4 These rates of airport growth are similar to those experienced globally.5,6,7 This is relevant because of the Government’s desire to retain the UK’s status as a global aviation hub. Even with the global economic downturn and current airport capacity constraints, the Government’s central case estimate is that air passenger travel at UK airports will increase by 60% by 2030.8 If capacity constraints were removed, the Department for Transport (DfT) expects that air traffic would increase by 150% by 2050. This is broadly consistent with Boeing’s prediction that global air travel demand will increase by 5% per annum over the next 20 years.9

5. Failure of UK government policy over many years to accommodate growing airport demand should be of concern because of aviation’s significant impacts on the UK economy. These impacts are:

i)Direct—employment and income wholly, or largely, related to airport operations.

ii)Indirect—employment and income generated by businesses in the airports supply chain.

iii)Induced—employment and income generated due to spending by direct and indirect airport employees.

iv)Catalytic—employment and income generated by the role of airports in increasing levels of trade, improving the productivity of businesses and attracting inward investment and tourism.10

6. Recent estimates of the contribution of aviation to the UK economy range from 0.7 to 1.3% of economic output.11,12,13 The aviation industry employs around 200,000 people and a further 500,000 jobs are dependent on the industry. However, employment and income impacts are only relevant in economic terms because they result in changes in Government tax revenues. The rationale for this is that it is likely that, if people were not employed in air transport, they would be employed in other sectors.14

7. Therefore the key impacts of aviation on the economy are its catalytic impacts on businesses and tourism, which are facilitated by greater connectivity. In effect, connectivity means the ease with which air passengers can find a route they want at a flight time that suits their needs. This concept encompasses the number of destinations offered and frequency of services. Connectivity is important for businesses, not just in terms of company location and investment decisions, but in securing more trade in goods and services through increased client contact, access to a wider set of input and output markets, and economies of scale. Air freight (including belly freight transported on passenger aircraft) accounts, by value, for 25% of the UK’s international trade in goods and 35% of manufacturing trade with economies outside the EU. To boost growth the Government wants to increase UK exports of manufactured goods and make the economy less reliant on services. Leisure travel is also important, not just in terms of the income generated, but in terms of the global connections made. In addition to holiday-makers, around one third of Heathrow’s passengers are travelling to visit friends and relatives.

Having led the world (outside the US) in the development of global aviation, Heathrow’s competitiveness has suffered due to a lack of capacity. Heathrow’s two runways operate at 98.5% capacity (based on existing operational rules) and are effectively full for the greater part of every day. As a result the airport has higher combined landing and passenger charges and operates fewer air traffic movements than its rival European hub airports, Paris Charles de Gaulle (CDG) and Frankfurt.15,16 Heathrow also serves a smaller network of destinations than these airports and Amsterdam Schiphol. By 2014 Heathrow is projected to lose its status as the world’s busiest airport for international passengers to Dubai. Heathrow’s position has not been helped by the UK Government’s imposition of Air Passenger Duty (APD) rates that are much higher than those in other countries, such as France and Germany. The Belgian and Dutch governments have recently abolished their APD regimes because they were perceived as constraining air travel.17,18

9. The lack of capacity at Heathrow, compounded by poor public transport access (other than local bus services) from places other than central London and high APD rates, has been encouraging passengers to use UK regional airports to fly to competitor European and Middle Eastern hubs rather than use Heathrow. In particular, the annual number of passengers flying from Manchester, Birmingham, Glasgow and Newcastle Airports to Middle Eastern hubs (Doha, Dubai and Abu Dhabi) has grown from a few thousand in 1996 to two million today.19 CAA airport data shows that Dubai is Heathrow’s second busiest international route and that between 1990 and 2011 Amsterdam handled an extra 400,000 passengers to and from UK regional airports.

Key point 2

The nature and level of the additional capacity and connectivity required can only be delivered at a hub airport. It will not be achieved by expanding airports where point-to-point traffic dominates. This is because transfer passengers at a hub airport supplement point-to-point passenger numbers. This additional demand enables full service international airlines to operate services to a much wider range of destinations at the frequencies required to achieve viable and sustainable financial yields. Hubbing also benefits regional and domestic carriers, as the greater choice of long-haul services at the hub helps to fill seats on feeder routes that might not otherwise be viable.

10. The reasons why Heathrow has lost its international competitiveness are the same reasons why expanding regional airports, or developing a split hub, will not provide the level of capacity required, or provide it where it can be effectively used. Airline revenues are driven by first and business class passengers who place high values on their time. These passengers demand high air service frequencies. An airport with spare capacity allows airlines to provide more frequent services, which raises yields and so makes more routes viable. This in turn enables airlines to develop new services to marginal destinations, particularly if these are supported by transfer traffic. The network effect of airport hubs means that the number of destinations that can be served by a hub airport is much greater than the number from airports serving mainly point-to-point traffic. This advantage for hubs becomes more pronounced as more routes are added.20 More capacity may be required at certain point-to-point airports, such as Gatwick or Luton, but this does not reduce the need for more capacity at the hub. There is plenty of spare capacity at Stansted Airport today but, despite much lower landing fees than at Heathrow, none of the full service airlines that use Heathrow choose to operate from Stansted.

11. The lack of capacity at Heathrow, where 35% of passengers are transferring (due to its hub operation), has meant that it has had to focus on serving its core routes with larger aircraft and has retrenched from low viability “thin” routes.21 Heathrow, which handles 70 million passengers and 476,000 aircraft movements (an average of one movement every 45 seconds of the operating day), is only able to operate at this high level because a ten minute average delay is built into planned slot times at the airport. In the second quarter of 2012, 27% of departures from Heathrow were over 15 minutes late.22 It is routine for aircraft to have long taxiing times prior to departure (20–40% higher than at Paris CDG, Amsterdam or Frankfurt) and to be held in stacks prior to final descent, due to the lack of runway capacity.23 These delays are inefficient, resulting in longer end-to-end journey times for passengers and additional fuel costs for airlines. They are also environmentally damaging as each delayed aircraft emits more CO2 and other pollutants.

12. This over-scheduling in the use of the runways at Heathrow also reduces the airport’s resilience in that it is less able to cope with, and recover from, events that disrupt arrival and departure schedules, such as bad weather or technical failures. Because of its role as a hub airport for Europe, disruption at Heathrow also has knock-on effects that quickly result in delays at many other European airports.

13. The high levels of landing and passenger charges and prices at which runway slots are traded—Continental Airlines recently paid US$116 million for a pair of slots at Heathrow—are indications of the high level of latent passenger demand to use Heathrow.24 Based on comparable growth at similar hubs, it is likely that the additional capacity provided by a third runway—if used to increase aircraft movement and passenger numbers—would be used up within 10 years of opening. It would also “lock in” current delay levels and the existing poor passenger experience provided by Heathrow.25 The additional capacity could be used to reduce average delay times and thereby increase the airport’s resilience and improve the passenger experience.26 However there would then be little increase in the overall number of air traffic movements or passenger numbers using the hub airport, which is the fundamental requirement for the UK.

Key point 3

The nature of airport hub operations, combined with the UK’s geographical size, means that the country can only sustain one hub airport. Dividing the transfer traffic that hubbing depends on reduces the choice of connections and dilutes the transfer passenger demand that supports routes and frequencies. The hub airport also needs to be located close to London, the largest air service market overall and the only area capable of supporting viable hub operations. Over 50% of its traffic comes from Central London and effectively Heathrow is London’s airport. However proximity to high speed rail provides an opportunity for the location of a new hub airport to serve and provide economic benefits for the rest of the UK.

14. Unlike the United States, which is geographically large and has enough domestic traffic to support multiple hubs, such as those at Atlanta, Chicago and Los Angeles, the size of the UK means that it can only support one hub airport. Attempts by British Airways to operate split hubs have not been successful. In response to the development of slot allocation rules by the government, British Airways attempted to operate Gatwick as a second hub in the late 1990s. It spent many millions of pounds operating large numbers of flights from Gatwick alongside its core operations at Heathrow. However, the venture was not commercially successful and BA ceased its hub operations at Gatwick. Now that Gatwick and Heathrow have different owners, it is even less likely that a split hub would work financially. The Heathwick proposal, which involves constructing a £5 billion high speed rail between Heathrow and Gatwick, would be uncompetitive. Transfer passengers would not accept the long transfer times involved—and would go to other hub airports—and the capital and operating costs would have to be paid for by the airlines. This is because it would not be viable to require transfer passengers to pay fares to use the rail service when they can transfer without cost at other hubs. In addition the proposal would not generate any more runway capacity and would not provide any environmental benefits.

15. A new UK hub airport outside the South East would not be viable. With 80% of Heathrow’s demand coming from passengers in the South East, the location of hub airport capacity has to remain close to the capital. These passengers would not accept the high costs of getting to an airport outside the South East. However, the UK’s regions would benefit from better public transport access to the UK’s hub airport.

Key point 4

In deciding where additional hub airport capacity should be provided, the Government needs to consider four key issues––noise, passenger experience, capacity and integration with surface transport modes. Having carried out studies on these topics, we believe that, rather than expanding Heathrow with a third runway, a new four runway hub airport, with an ultimate capacity of 150 million annual passengers and capability to operate 24 hours a day, should be developed in the Thames Estuary and that Heathrow should be closed.

16. Four key issues should guide the Government’s decisions about hub airport capacity.

1.) Noise: The UK’s prevailing south-westerly winds mean that, because of the airport’s location, 760,000 people suffer from aircraft noise due to Heathrow (one quarter of all the people impacted by aircraft noise within Europe).27,28 A third runway at Heathrow would lock in and exacerbate this noise nuisance. Noise impact also means that night-time operations at Heathrow are strictly limited. Even with significant improvements in noise emissions from newer aircraft, this issue is always likely to be a major factor for Heathrow. This would be much less of a constraint for a new hub airport in the Thames Estuary, where most of the time aircraft could approach over water. Departure routes, and arrival routes when there are easterly winds, could be planned to avoid urban areas. Such an airport would provide noise relief for around 700,000 people.29 In addition planning controls could be implemented to ensure that any future new housing developments are built outside aircraft noise footprints. A recent study by the Massachusetts Institute of Technology found that the southwesterly winds that result in noise problems around Heathrow also cause 100 extra deaths per annum compared to a Thames Estuary Airport, due to the transport of aircraft air pollution over London.30

2.) Passenger Experience: The lack of spare runway capacity at Heathrow directly harms the passenger’s experience at the airport. To make more slots available, delays are built into aircraft departure and arrival schedules. This is inefficient, environmentally damaging and reduces the airport’s ability to cope with, and recover from, events that disrupt these schedules. The impact of disruptions is quickly transferred to other European airports. Unless the capacity provided by a third runway was used to reduce delays and improve resilience, the additional aircraft movements and passenger numbers from an additional runway would “lock in” current delay levels and poor passenger experience provided by Heathrow.

3.) Capacity: It is recognised that the construction of a third runway at Heathrow would require a major reconfiguration of the whole airport. This would introduce major risks to the current operation of the airport that could adversely impact its capacity whilst the reconfiguration took place. Such a runway would also not provide the level of additional hub airport runway capacity and connectivity required for the UK over the long term. It would take around 10 to 12 years to plan and construct the runway and this could be only a two to three years less than the time to plan and build a completely new hub airport. This is because the statutory planning processes would be the same for both.31 The current level of latent demand by airlines for runway slots at Heathrow is an indication that an extra runway would be full within ten years of opening. Given that it would be very challenging to build a fourth runway at Heathrow, the difficult issue of where to provide more hub runway capacity would have to be revisited again and would be even harder to resolve. Further, with just one extra runway, Heathrow would not benefit from the full scale of construction efficiencies that a brand new, purpose designed airport could provide. We estimate that an estuary airport, with an appropriate initial rail access strategy, could be opened by 2028 with an initial capacity of 110 million passengers per annum. At a later date the airport could be expanded to an ultimate capacity of 150 million passengers.

4.) Surface Access: Apart from its current links to Central London (and Crossrail connection from 2017), Heathrow is poorly connected to the rest of the UK by rail. This factor has contributed to the erosion of Heathrow’s global competitiveness and limited its ability to act as a hub that can benefit people across the UK. Greater use of rail, including its use for access to airports, could be encouraged by the development of a national transport policy framework that optimises road and rail journeys to reflect their economic costs and minimise carbon emissions. However the provision of additional hub airport capacity must include competitive surface transport links. In this regard what matters most to passengers is not an airport’s geographical location, but the overall time, cost and convenience (including minimal changes) of their journey to an airport. High speed rail links could connect an estuary airport to multiple London termini and have the potential to provide faster access times to and from the rest of the UK than are achievable at Heathrow.

17. We estimate that the costs of the new airport would be £20 billion, all of which could be funded and financed by the private sector.32 This figure has been independently reviewed by an international firm of cost consultants and found to be broadly reliable. The new, more flexible, economic regulation regime for airports proposed in the Civil Aviation Bill would enable the airport to be funded from a mix of landing charges (without an increase in those charges), property development revenues and receipts from the sale of Heathrow, which would be redeveloped as a commercial and residential centre.33

18. The estuary airport has been developed as part of a suite of individual projects which are not necessarily dependent on each other, but could provide an integrated infrastructure development strategy for the longer term. The airport can be developed as a first stage standalone project. High speed rail services from the airport could cross the Thames via an integrated flood defence barrier and road/rail crossing. The flood defence barrier would replace the life-expired Thames Barrier and incorporate hydropower generators, allowing the airport to be completely powered by green energy. The additional land thus protected could be developed for housing, with a flood protection levy to help fund the integrated crossing/barrier. This would provide the necessary catalyst for the long overdue regeneration of the Thames Gateway. The high speed lines could then link to a new four track orbital line around the north of London. This would include a number of interchange stations with park and ride parking, providing ten minute access times for over two million passengers and the potential to deliver high levels of public transport access to the airport.

19. The orbital line would also pick up key radial rail routes into London and connect HS1 to HS2, providing connectivity to and from the airport for most of the UK’s major conurbations and Northern Europe via the Channel Tunnel. The high speed rail lines, if supported by passing loops, also have the potential to be used by non-airport traffic. An expanded Heathrow would not address any of these wider issues. The costs of the orbital rail link, Thames barrier and crossing and other supporting infrastructure would be a further £30 billion. Our initial assessment is that the potential benefits of such an integrated project would be worth £150 billion to the UK economy.

18th October 2012

References

1 CAA Airport Statistics: http://www.caa.co.uk/default.aspx?catid=80&pagetype=88&pageid=3&sglid=3

2 Office for National Statistics: ‘2011 Census––Population and Household Estimates for England and Wales, March 2011’ (July 2012) http://www.ons.gov.uk/ons/dcp171778_270487.pdf

3 Office for National Statistics: ‘Statistical Bulletin 2011 Census––Population and Household Estimates for England and Wales’ (March 2011) http://www.ons.gov.uk/ons/rel/census/2011-census/population-and-household-estimates-for-england-and-wales/stb-e-w.html#tab-The-populations-of-the-regions-and-where-these-have-changed-the-most

4 Committee on Climate Change: “Demand for Air Travel” http://www.theccc.org.uk/sectors/aviation/demand-for-air-travel

5 Royal Aeronautical Society: Aerospace Insight Blog “London’s Thames Estuary airport plans––déjà-vu all over again” (September 2012): http://media.aerosociety.com/aerospace-insight/2012/09/07/londons-thames-airport-plans-deja-vu-all-over-again/7288/

6 Airport Watch: “2011 ICAO: Passenger traffic up 6.4% in 2011, to rise 4.5% annually going forward” (March 2012) http://www.airportwatch.org.uk/?p=1516

7 IATA: Air Transport Market Analysis (July 2012) http://www.iata.org/whatwedo/Documents/economics/MIS_Note_Jul12.pdf

8 Department for Transport: “UK Aviation Forecasts”(August 2011) http://assets.dft.gov.uk/publications/uk-aviation-forecasts-2011/uk-aviation-forecasts.pdf

9 Boeing: “Current Market Outlook 2012-2031” http://www.boeing.com/commercial/cmo/

10 Airports Council International: “The economic and social impact of airports in Europe” (January 2004)

11 Oxera: “What is the contribution of aviation to the UK economy? Final report prepared for Airport Operators Association” (November 2009)

12 Oxford Economic Forecasting: “The Economic Contribution of the Aviation Industry in the UK” (October 2006)

13 Department for Transport: “Written Ministerial Statement on Aviation” (7 September 2012): http://www.dft.gov.uk/news/statements/mcloughlin-20120907a/

14 NERA: “Representing International Business Impacts in Transport Appraisal” (April 2010)

15 The Air Transport Research Society: “Key Findings of 2011 ATRS Global Airport Performance Benchmarking project” http://www.atrsworld.org/docs/Key%20Findings%20of%20%202011%20ATRS%20Benchmarking%20Project%20-%2027July2011.pdf

16 The aviation web site “Anna aero” reports that Frankfurt serves 235 destinations, Paris CDG 234 and Schiphol 195. Heathrow’s web site currently states that it serves 183 destinations and Dubai Airport states that it serves 220 destinations. See “London Heathrow’s third runway; never let the facts get in the way of a good story…” (2009) http://www.anna.aero/2009/01/23/london-heathrows-third-runway/, http://www.heathrowairport.com/about-us/facts-and-figures and http://www.dubaiairports.ae/en/about-da/Pages/OrganisationStructure.aspx

17 BBC fast:track: “The air travel taxes influencing how far we fly” (1 October 2010) http://news.bbc.co.uk/1/hi/programmes/fast_track/9043892.stm

18 Ministry of Infrastructure and the Environment, KiM Netherlands Institute for Transport Policy Analysis: “Effects of the Air Passenger Tax Behavioural responses of passengers, airlines and airports” (February 2011) http://english.verkeerenwaterstaat.nl/english/Images/EffectsoftheAirPassengerTax_tcm249-303066.pdf

19 Civil Aviation Authority: “Aviation Trends 2012 Q2”http://www.caa.co.uk/docs/80/RPG_AviationTrends_Q2_2012v2.pdf

20 Frontier Economics: “Connecting for growth: the role of Britain’s hub airport in economic recovery. A report prepared for Heathrow” (September 2011)

21 BBC News: “BA-owner IAG completes BMI takeover” (April 2012) http://www.bbc.co.uk/news/business-17786998

22 Civil Aviation Authority: “2012 Q2 Airport Punctuality Statistics” (September 2012) http://www.caa.co.uk/application.aspx?catid=14&pagetype=65&appid=7&newstype=n&mode=detail&nid=2172

23 Mayor of London: “A new airport for London – Part 2: The economic benefits of a new hub airport” (November 2011) http://www.london.gov.uk/sites/default/files/Anewairportforlondon_part2.pdf

24 Flight Global: “Heathrow slot values under pressure?” (November 2009) http://www.flightglobal.com/news/articles/heathrow-slot-values-under-pressure-335348

25 Civil Aviation Authority: “The Through Airport Passenger Experience: An assessment of the passenger experience and airport operations at Heathrow, Gatwick, Stansted and Manchester airports” (March 2009) http://www.caa.co.uk/docs/33/Passenger_experience.pdf

26 The third runway, at 2,200 metres, would be 60% of the length of Heathrow’s existing runways – see Department for Transport: “Britain’s Transport Infrastructure: Adding Capacity at Heathrow: Decisions Following Consultation” (January 2009) http://webarchive.nationalarchives.gov.uk/+/http://www.dft.gov.uk/pgr/aviation/heathrowconsultations/heathrowdecision/decisiondocument/decisiondoc.pdf

27 Mayor of London: “A new airport for London – Part 1: The case for new capacity” (January 2011) http://www.london.gov.uk/publication/new-airport-london

28 This is the number of people who live within Heathrow’s 55dB Leq noise contour, which the World Health Organisation says is the contour within which people suffer from health impacts. See European Environment Agency “Good practice guide on noise exposure and potential health effects. Technical Report No 11/2010” (November 2010) http://www.eea.europa.eu/publications/good-practice-guide-on-noise Many more people suffer from aircraft noise at Heathrow.

29 Foster+Partners and Halcrow: “Thames Hub Technical Annexes” (unpublished) (2011)

30 The Independent: “Heathrow third runway 'would triple pollution deaths” (October 2012) http://www.independent.co.uk/news/uk/home-news/heathrow-third-runway-would-triple-pollution-deaths-8210058.html. Here is a summary of the study http://lae.mit.edu/wordpress2/wp-content/uploads/2012/10/LAE-2012-010-R-v1.pdf and the full study report

http://lae.mit.edu/wordpress2/wp-content/uploads/2012/10/UK-airports_Part2.pdf

31The Planning Inspectorate: “National Infrastructure Planning” http://infrastructure.planningportal.gov.uk/application-process/the-process/

32 Foster+Partners, Halcrow and Volterra: “Thames Hub: An integrated vision for Britain” (November 2011) http://www.thameshub.com

33 UK Parliament: ‘Civil Aviation Bill 2010–12 to 2012–13’ http://services.parliament.uk/bills/2012-13/civilaviation.html

Prepared 31st May 2013