The Future of Airport Capacity in the UK

CRITICAL THINKING AT THE CRITICAL TIME™ FTI Consulting LLP • 1

“At 344 pages in length, the report examines multiple facets of government policy and offers numerous recommendations as to the future of this key driver of economic growth but its findings are likely to be summarised in just two words: “Heathrow expansion”

The independent Airports Commission has today (Wednesday 1 July) published its long-awaited

report into the future of aviation capacity in the United Kingdom.

At 344 pages in length, the report examines multiple facets of government policy

and offers numerous recommendations as to the future of this key driver of

economic growth but its findings are likely to be summarised in just two words:

“Heathrow expansion”.

Upon examination of three proposals for boosting air capacity – a second runway

at Gatwick, an extended northern runway at Heathrow and a new third runway to

the North West of Heathrow Airport – the Commission unanimously selected the

latter option as offering “the greatest strategic and economic benefits – providing

around 40 new destinations from the airport and more than 70,000 new jobs by

2050.”

The extension of the existing northern runway was ruled out on the grounds of

failing to match either the economic or capacity benefits provided by a new, third

runway.

The Commission were keen to stress that the recommendation in respect of a

new, North Western runway were different to those proposed in the past. With the site being located further to the west than previous

proposals, the Commission hoped to mitigate some of the fears that exist about the impact of excessive noise and pollution upon West

London and the Home Counties. A ban would continue to be maintained on flights between 23:30 and 06:00, with a further

recommendation that the government rule out any further expansion of the site to include a fourth runway. Further recommendations

were made in respect of the need for roughly £5 billion in road and rail upgrades to the airport in order to provide greater ease of

access to the airport and mitigate challenges regarding excessive traffic in West London.

INFRASTRUCTURE SNAPSHOT

The Future of Airport Capacity in the UK

The Future of Airport Capacity in the UK

CRITICAL THINKING AT THE CRITICAL TIME™ FTI Consulting LLP • 2

Business backing

A survey published last year by the Institute of Directors (IoD)

showed that only 3% of business leaders believed the UK’s

current airport infrastructure was sufficient to ensure the UK’s

long-term economic growth. 61% of IoD members favoured

Heathrow expansion, compared to 39% who chose Gatwick.

As such, the Commission’s findings have been met with an

enthusiastic response from the business community.

IoD Director General General Simon Walker has said the

government should “move quickly” on the issue and that

“there can now be no further delay from politicians” on the

matter. The British Chamber of Commerce’s Director General

John Longworth has called for an “irreversible government

commitment to a new runway at Heathrow by the end of 2015,

with planning complete and diggers on the ground by the end

of this parliament in 2020”.

A glimmer of hope for Gatwick?

While much of the attention on the report will be focussed

upon the recommendation to press ahead with a new runway

at Heathrow, it is important to note that the report did not seek

to rule out or discourage expansion at Gatwick either.

The airport’s proposal was praised by the Commission from

the perspective of boosting capacity for short-haul European

flights yet was seem as failing to deliver on the objective of

boosting London’s connectedness to rapidly-growing markets

in Asia.

Gatwick's Chief Executive, Stewart Wingate described the

airport as still being “very much in the race” and sought to

draw attention to the “very significant environmental

challenges at Heathrow such as air quality and noise impact”.

The end of “Boris Island”

Arguably the most prominent opponent of Heathrow expansion

in recent years has been the Mayor of London Boris Johnson.

Supported by his Deputy Mayor Kit Malthouse (now the

Member of Parliament for North West Hampshire), he has

instead supported a proposal for the construction a new

airport in the North Kent Thames Estuary.

While the Mayor and his advisors claim the new airport would

provide a significant boost for job creation and allow for the

gradual shifting of flights away from the densely-populated

West London area, financial and planning considerations

mean the plan has never received particularly serious

consideration at the heart of government.

Even with the “Boris Island” airport proposal now dead in the

water, the Mayor is unlikely to back down from his opposition

to Heathrow expansion. In comments issued from City Hall

this morning, he described the suggestion as “catastrophic”.

He can be expected to use his new position as Member of

Parliament for Uxbridge and South Ruislip to oppose

expansion on the floor of the House of Commons, as well as

from City Hall.

For those in the press who have been desperately looking for a

“wedge issue” between the Prime Minister, Chancellor and

Mayor, this may well be it.

Cabinet tensions

Boris Johnson is not the only senior figure to oppose Heathrow

expansion.

Indeed, it is likely that the issue will cause ructions around the

cabinet table with the International Development Secretary

Justine Greening and Foreign Secretary Philip Hammond both

staunchly opposing the plan. In the case of Greening, her

departure as Transport Secretary in September 2012 was

partly linked to her staunch views on the issue; no doubt

influenced by pressure from constituents in her affluent, West

London constituency of Putney.

London Mayoral race: threat or opportunity for

the Tories?

The debate about the future of Heathrow Airport has long been

a controversial one – particularly amongst Conservatives –

and will have wide-ranging implications for the party’s mayoral

primary.

During his campaign to be elected as Member of Parliament

for Richmond Park in 2010, the now-frontrunner for the party’s

2016 Mayoral nomination Zac Goldsmith pledged to resign his

seat and force a by-election in the eventuality that the party

backed Heathrow expansion. Goldsmith’s closest competitor,

the Kingston-upon-Thames-based MEP Syed Kamall has been

less forceful in his opposition to the plan but is nonetheless on

the record as opposing both a third runway and sixth terminal

at Heathrow.

Peculiarly, while the issue of Heathrow expansion could cause

internal ructions in the Conservative Party, the issue may be a

boon for the party’s Mayoral hopefuls; allowing them to put

clear blue water between Downing Street and their own

personal political “brands”.

Goldsmith, in particular, has made his staunch opposition to a

third runway his political hallmark – and, given that his

majority rocketed from 4,091 to 23,015 in May, he appears to

neatly reflect the political sentiments of his constituents in

wealthy South West London – a vote-rich Tory area. His

opposition will not be dimmed by today’s report.

Labour: a divided race

With the selection of the Labour candidate for Mayor now far

advanced, the majority of the party’s City Hall hopefuls have

also been clear to stress their opposition to Heathrow

expansion.

The Future of Airport Capacity in the UK

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The front-runner for the nomination, Dame Tessa Jowell, has long

been seen as a supporter of Heathrow expansion and has begun

to draw criticism from Labour groups in West and South West

London for her position. Hammersmith MP Andy Slaughter has

described Heathrow expansion as a “politically toxic issue” and

stated that a Labour candidate supporting it “would lose the

support of swathes of voters in West London”. Merton Council

leader Stephen Alambratis was more blunt, claiming “it is

impossible for Tessa Jowell to win the London Mayoralty… she

simply can't beat Zac Goldsmith while she is in favour of

Heathrow expansion and he is opposed”.

Jowell’s close competitor Sadiq Khan has drawn criticism from

some quarters for performing what is seen as a policy U-turn on

the issue, having previously supported expansion while serving

as a Transport Minister in Gordon Brown’s government.

With the party’s leadership election currently underway, it is

unclear as to whether they will continue to hold the pro-

expansion policy it did in the last Parliament. Initial reports,

however, suggest that Shadow Transport Secretary Michael

Dugher is inclined to accept the Commission’s findings.

Northern Powerhouse

In making the recommendation to expand Heathrow, the report

was not ignorant of the needs of the rest of the United Kingdom.

In particular, it makes reference to the need for rail capacity

surrounding the airport to be addressed with a Western Rail Link

to Reading providing for direct services from the airport to the

West, South West and Wales. The Commission also referenced

the benefits of the High Speed 2 rail link, which would bring

journey times from Manchester and Leeds to Heathrow down

from over three hours to less than 100 minutes.

It is notable that the report does not see Heathrow expansion as

a panacea for the UK’s air capacity challenges, yet part of a

wider programme of airport upgrades across the United

Kingdom. In the case of Manchester, the airport already serves

43 long-haul destinations (including Hong Kong and New York),

while Birmingham has strong links to China and the Asian

subcontinent.

Heathrow expansion would augment, not replace, the ongoing

growth of Manchester and Birmingham as passenger and freight

destinations.

What next?

It is crucial to note that while the government had pledged to

closely examine the Airport Commission’s recommendations,

they are not duty-bound to accept them.

Political pressure, particularly from environmental groups and

powerful Conservative interests in West London, is likely to be

intense. In the event of any decision to proceed with the

Commission’s plans, legal challenges are a foregone conclusion.

Mindful of this, the government has issued the most muted of

statements in respect of the report’s publication. Downing Street

has ruled out making a “snap judgement” on its findings. The

Secretary of State for Transport Patrick McLoughlin stated only

that his department had “received the final report from the

Airports Commission and will now consider that advice in detail.”

He is due to make a statement to Parliament this afternoon,

where it is likely that opponents of Heathrow expansion will seek

to eviscerate the report’s findings.

Even though the Commission’s deliberations were two and a half

years in the making, nobody expects a swift resolution to this

debate – with even the most optimistic of Heathrow supporters

in agreement that no new runway would function until 2025 at

the earliest.

This is now a battle between populist politics and economic

necessity.

Daniel Hamilton is a Senior Director at FTI Consulting