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http://www.businessweek.com/news/2012-11-14/heathrow-limit-costs-u-dot-k-dot-14-billion-pounds-airport-says

Bloomberg News

Heathrow Limit Costs U.K. 14 Billion Pounds, Airport Says

November 14, 2012

Limited capacity at London’s Heathrow Airport costs the U.K. as much as 14 billion pounds ($22.2 billion) a year in lost trade as other European hubs boost connections to growing economies like China and Peru, the airport operator said.

Twenty-six emerging market destinations are connected with daily flights to other European cities, Heathrow Airport Ltd. said in a report released today in partnership with consultant Frontier Economics. Among destinations lacking links are Chengdu and Hangzhou in China, Manila and Lima.

The U.K. needs a single hub airport to maximize the nation’s connectivity and boost economic growth, Heathrow Chief Executive Officer Colin Matthews told reporters in London. The government must either increase capacity at Heathrow, Europe’s largest hub, or build a new hub airport, the executive said. The trade gap could almost double to 26 billion pounds by 2030 if nothing is done to improve the country’s air transport links, according to the report.

London’s airports are suffering a capacity squeeze, with Gatwick and Heathrow close to full as Boris Johnson, the city’s mayor, pledges to block any expansion in favor of a new hub in the Thames Estuary. Prime Minister David Cameron, who decided in 2010 not to sanction a third Heathrow runway, ordered an inquiry into capacity requirements that’s due to report after the next U.K. election in 2015.

Runway Capacity

The airport attracted 69.4 million passengers in 2011 and is operating close to the capacity of its two runways, with 480,000 flights annually. Unable to add new routes without cutting links to existing destinations, the hub is losing traffic to Paris and Frankfurt, which both have enough runway capacity to serve about 700,000 flights a year. More than 1,500 flights are flown to mainland China’s three largest cities out of Paris and Frankfurt than from Heathrow, Matthews said.

Heathrow also needs to add capacity to accommodate new links, while maintaining existing connections that wouldn’t be lucrative from other airports, Matthews said. The hub connects to 75 long-haul destinations that are not served and would not be served by any other airport in the U.K., he said. By operating through Heathrow, airlines are able to pool travelers willing to pay a premium to fly direct with transfer passengers looking for cheaper fares, he said. Daily direct long-haul flights to destinations like Hyderabad, India, or Mexico City would be uneconomic without transfer traffic, he added.

To contact the reporter on this story: Kari Lundgren in London at klundgren2@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net


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