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John Busby

Britain and particularly Heathrow don’t need another runway

Bigger planes mean runway capacity does not need to increase, despite the findings of the Airports Commission, argues John Busby.

The Airport Commission issued its final report in July and was immediately disbanded. It had unanimously concluded that the proposal for a new Northwest Runway at Heathrow Airport, in combination with a significant package of measures to address its environmental and community impacts presents the strongest case.

But the Commission failed to make the case for the need for any more runways in the UK as it took no cognisance of the Department of Transport's (DfT) aviation statistics, or if it did, it failed to recognise their significance.

"There  is no need for another runway at Heathrow, or in the UK as the overall runway usage has declined by 13.5% since 2007 when it peaked. Even at this level in 2007 there was adequate, standby runway capacity at Stansted"

DfT publishes traffic statistics annually at the end of July (see graphs (1) and (2)). These two plots show the overall runway use in the UK and for Heathrow.

UK Runway usage and landings per annum (1), peaked in 2007 and has since reduced by 13.5% in 2014. Passengers carried in 2014 increased by 13% from 2010 post-recession, but the associated runway usage by only 2.8%. The ratio of passengers carried to flights has increased due to the deployment of bigger aircraft. (Click on the graphs to enlarge).

Heathrow trends shown as indices (2) show that since 2007, passenger numbers have increased by 8% and freight tonnage by 14%, but the number of take offs and landings has remained virtually the same.

Airbus has announced the next development of its A380 will take 30% more passengers than a Boeing 747, so it seems that the trend to deploy ever bigger aircraft will continue for the foreseeable future.

Emirates has announced the augmentation of a 8,588 mile service from Dubai to Panama City taking 17 and a half hours from 1 February 2016. This will avoid landing charges at an intermediate hub and also the excessive fuel use of landing and taking off. It also saves on staff logistics. If long-haul flights are a continuing trend, it means that Heathrow's expansion to increase its role as a hub is questionable.

The Heathrow Airports Holdings Limited (HAHL) ownership structure is interesting in relation to the idea of building a new runway. The make up is as follows: Ferrovial 25%, Qatar Holding 20%, Caisse de dépôt et placement du Québec 12.62%,  Government of Singapore Investment Corporation 11.20%, Alinda Capital Partners 11.18%, China Investment Corporation 10%, Universities Superannuation Scheme 10%

At the end of the year the company had borrowings of over £12bn with financing costs of £980M eating up its operating profit of circa £1bn, leaving a profit of just £105M before tax for a turnover of £2.7bn. 

It appears that the company is paying 8%/annum interest on its borrowings so that the cost of its financing of the £17bn expansion will require a similar sum in interest on construction progress payments over the construction period. Due to the interference to its business of the infrastructure activities, such as the tunnel over the M25, the airport’s revenue will be reduced and it is fair to wonder what its plans are for servicing the current debt in that situation along with the additional borrowings for the new runway.

"Emirates has announced the augmentation of a 8,588 mile service from Dubai to Panama City taking 17 and a half hours from 1 February 2016. This will avoid landing charges at an intermediate hub"

The taxpayer is expected to fund the £6bn infrastructure needed, but which government agency (or agencies) will organise the destruction of whole communities and the relocation of houses, a school and many businesses, including the energy from waste plant, is far from clear. Is this a fair charge on the taxpayer and burden on the government's resources to support a company with largely foreign ownership?

I would conclude that there  is no need for another runway at Heathrow, or in the UK as the overall runway usage has declined by 13.5% since 2007 when it peaked. Even at this level in 2007 there was adequate, standby runway capacity at Stansted.

With no real need for a third runway it is difficult to support such a great expenditure and interference to local social and business activity. 

HAHL will need its finances restructuring to fund around £30bn of additional borrowing to add to its current borrowings of £12bn.

There is a strong case to improve the passenger and luggage handling at Heathrow to be able to accommodate ever bigger aircraft arrivals and departures, but no case for the construction of a third runway I conclude.

(1) https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/450380/avi0101.xls

(2) https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/450479/avi0102.xls

John Busby is a former project manager turned researcher and writer  http://www.after-oil.co.uk/articles.htm