Fixing the airport bottleneck is crucial for the UK economy

By delaying airport expansion in London, Britain is throttling one of its most successful industries

BY Kristian Niemietz   /  26 October 2016

“The Government continues to support the development of a third runway at Heathrow […]

Demand at Heathrow is now far in excess of runway capacity […] Heathrow is in an increasingly uncompetitive position […] it has less runway capacity than competing major European hub airports […]

As a result, Heathrow’s route network is now largely static. Without additional runway capacity, Heathrow’s competitive position will diminish to the disadvantage of the UK economy”

The idea of a third runway at Heathrow is not new. The passage above is from a Department for Transport White Paper published in 2006. If the government had pressed ahead with it at the time, the third runway would be finished by now.

With this in mind, don’t overrate yesterday’s announcement: we have been here before. All it means is that the government (well, most of them, at any rate) has now picked a favourite expansion plan. Up next is a public consultation, lots of campaigning, lots of protesting, lots of angry letters, quite possibly legal challenges, and party-internal strife. This decision could still easily be derailed, and put on hold again. Something tells me that it will be.

And more’s the pity. Let’s remember the bigger picture here. In the mid-1980s, the UK was a pioneer in liberalising air travel, well ahead of the rest of Europe. This gave rise to a great economic success story. In the early 1980s, about 60 million passengers passed through the UK’s airports every year. Today, Heathrow alone handles more passengers than that. The cost of air travel has dropped in real terms, and a much greater variety of airline operators and destinations has become available. Air travel used to be a luxury good, which only the well-off could afford on a regular basis. It is now a mass-market product, affordable for the vast majority of the population. A few years ago, a passenger survey showed that over 13 million UK passengers (although this figure must include some double-counting) had annual incomes of less than £17,500.

But as the industry has grown, runway capacity has remained practically static. We are trying to squeeze the air traffic volume of a modern economy into the infrastructure of the 1950s. For a long time, it did not matter too much. Airlines and airports managed to fit more and more flights into the existing infrastructure. But the sector has long begun to choke on its own success. Runway capacity has become its bottleneck. Heathrow, in particular, has mostly missed out on the growth opportunities of the past fifteen years. The demand is there, but Heathrow simply does not have the capacity to accommodate it, and the situation at Gatwick is not much better. We are throttling one of our most successful industries.

And this is far from over. Ultimately, to solve this problem once and for all, we need to take the politics out of the decision-making process, and find a way to reconcile airports with the communities around them. The situation would be very different if most of the tax revenue generated at and around an airport remained in the local area. Noise would then be seen as a price to pay for lower local taxes and better local public services, and I suspect that when faced with such a trade-off, communities would be much more willing to reach an agreement with the airport operators. We could then take the national government out of the process altogether, and turn airport expansion into a local and/or regional planning matter. The current arrangement serves neither the aviation industry nor the communities who live around airports. Let’s try something else.

Dr Kristian Niemietz is Head of Health and Welfare at the Institute of Economic Affairs.