Heathrow airport constraints costing UK economy 1.2b

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heathrow airport runways
A bird's eye view of the runways at London's Heathrow Airport.

Capacity constrains atLondons Heathrow airport may be costing the UK economy as much as 1.2 billion ($1.9 billion; AED 6.98 billion) a year in lost trade, according to a report commissioned by BAA.

The UK is missing out on trade opportunities with emerging market economies as the airport does not have the capacity to accommodate sufficient direct flights, according to the report by Frontier Economics. Should Heathrow fail to expand it will likely fall behindFrankfurtairport and Paris Charles de Gaulle by 2021, the report’s authors warned.

The centre of gravity in the world economy is shifting and Britain should be forging new links with emerging markets, Colin Matthews, chief executive officer of Heathrows owner BAA Ltd., said in a statement. Instead we are edging towards a future as an island cut-off from some of the worlds most important markets.

Local companies trade 20 times as much with emerging market countries that have a direct flight to the UK as with those that dont, the report found. Paris and Frankfurt have 1,000 more annual flights toChinas three largest cities than Heathrow, according to the document, which seeks to show how a hub airport contributes to economic growth.

MIXED-MODE OPERATIONS

BAA reluctantly accepted ministers would not reverse their decision to scrapplans for a third runwayat Heathrow, which is already operating at full capacity but the company insisted there were short-term measures that could boost the airports ability to provide more flights to developing countries.

One controversial idea BAA wants to pursue is the mixed-mode operations at Heathrow, whereby two existing runways could be used simultaneously for take-offs and landings, to increase the number of flights. Such arrangements could be unpopular with local residents and the government is against mixed-mode operations.

Heathrow already serves fewer emerging markets with daily flights than airports in Frankfurt and Paris. For example, Heathrow does not have flights to Guangzhou in the Pearl River Delta, Chinas main manufacturing centre.

Emma Gilthorpe, BAAs director of regulation, said the company accepted a third runway at Heathrow which was off the governments agenda. What we are asking for is a credible aviation policy, and quickly.

The government has promised to produce anew aviation framework by 2013.

Theresa Villiers, aviation minister, said a successful Heathrow would be a key part of any aviation strategy. She added the government was determined to deliver a new approach to aviation policy: one that ensures the aviation sector both supports economic growth and addresses the environmental impact of flying.

BAA is owned bySpainsFerrovial SA.

BRITISH STRUGGLE

The UK’s Department for Transport last month said airports in the south-east of England would reach full capacity by 2030 and that all growth beyond 2040 would occur at regional airports.

The government sees high-speed rail as the solution to relieving congestion at British airports – much of it caused by domestic flights – but analysts believe this solution is unlikely to be available for at least 20 years.

According to a BBC report,the government is also considering a 5 billion pound rise in spending on non-aviation infrastructure in a bid to kick-start the struggling British economy.

A slew of bad news from the economy, the ongoingeuro zonedebt crisis and rising tensions in financial markets, have stoked fears that Britain could slip into recession once again.

The International Monetary Fund this week cut its 2011 forecast for UK growth to 1.1 percent from 1.5 percent, and to 1.6 percent from 2.3 percent for next year.

Frontier’s report noted that Heathrow could increase its share of European transfer passengers to 21 percent from 16 percent if it it fulfils its potential. Up to 45 destinations could be viably added to the route network at Heathrow, including 15 routes to emerging markets, the report concluded.

Sources: Bloomberg, FT, Reuters

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