Economic impact of Hub Airports

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Presentation of our work on the economic impact of hub airports

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  • Concentrate mainly on methodology and findings but worth giving some background about the role of LHR as a hub airport and its competitive position
  • Study looked only at impact on business users
  • LHR fulfils different function than other UK airports – a third of a passengers are interchanging – and of those a quarter are interchanging to/from flights to other UK destinations
  • Hub airport means interchanging passengers can support routes that otherwise wouldn’t be supportable Slide shows destinations served from Heathrow with high proportion of interchanging passengers and the number of flights that could be supported if there were no interchanging passengers. For example, Mexico City could not be served on a daily basis without interchanging passengers Not just London that benefits – eg Accra again would not be served without interchanging passengers of whom a significant proportion are interchanging from flights to/from other UK destinations
  • Not only is LHR different in that it is a hub but it is also different in the nature of destinations served with the vast majority of passengers travelling on long haul services.
  • As LHR is capacity constrained the number of destinations it supports is fewer than key rivals Nb LGW serves more destinations but this is due to infrequent seasonal flights to holiday resorts (eg Greek islands etc)
  • Capacity constraints has led to use of larger aircraft which again restricts the number/type of destinations that can be served
  • Capacity constraints has also led to fewer and more dominant airlines operating out of LHR compared to competing hubs thereby reducing competition
  • High proportion of passengers travelling to key European hubs are interchanging – loss of business to LHR thereby reducing range of destinations served Domestic short haul from Newcastle/Manchester to LHR are predominantly interchanging (won’t transfer to high speed rail)
  • Lack of capacity at LHR means UK poorly connected to key growing economies such as China, Brazil and Russia compared to competitors. Even India where long term relationships new hubs by Indian airlines have gone to Frankfurt and Brussels due to lack of capacity at LHR
  • 60 yr npvs LHR assume to operate up to 86% capacity 6 new domestic destinations added (Leeds, Inverness, Jersey, Liverpool, Durham and Plymouth) 20 new international destinations added (based on major centres not presently served – mainly China, S America, SE Asia and Russia)
  • Economic impact of Hub Airports

    1. 1. Economic impacts of hub airports COLIN BUCHANAN
    2. 2. Contents <ul><li>Introduction </li></ul><ul><li>Hub airports </li></ul><ul><li>Methodology </li></ul><ul><li>Findings </li></ul>
    3. 3. Introduction <ul><li>Study commissioned by BCC to </li></ul><ul><ul><li>Address lack of understanding of economics of hub airports </li></ul></ul><ul><ul><li>Set out the economic consequences of a constrained Heathrow </li></ul></ul><ul><ul><li>Determine the economic impacts to UK and the regions of expanding Heathrow </li></ul></ul>
    4. 4. Heathrow is UK’s hub airport
    5. 5. Hub supports thin routes
    6. 6. Heathrow long haul
    7. 7. Number of destinations served Text Text Text
    8. 8. Number of passengers per ATM
    9. 9. Average ATM per airline
    10. 10. Proportion travelling to hubs who are interchanging
    11. 11. Leading EU airports serving China
    12. 12. Methodology <ul><li>Calculated </li></ul><ul><ul><li>Direct economic benefits </li></ul></ul><ul><ul><li>Wider economic benefits </li></ul></ul>
    13. 13. Direct economic benefits <ul><li>Standard economic appraisal using DfT methods and values taking account of </li></ul><ul><ul><li>Delay </li></ul></ul><ul><ul><li>Reliability </li></ul></ul><ul><ul><li>Frequency </li></ul></ul><ul><ul><li>New destinations </li></ul></ul><ul><ul><li>Regional connectivity </li></ul></ul>
    14. 14. Five scenarios modelled <ul><li>These looked at how the additional capacity would be used – combinations of </li></ul><ul><ul><li>Increased flight to existing destinations </li></ul></ul><ul><ul><li>New destinations – especially domestic </li></ul></ul><ul><ul><li>No new flights – improve reliability and reduce delays </li></ul></ul>
    15. 15. Results – direct economic benefits
    16. 16. Wider Economic Benefits <ul><li>Seek to identify where present constraint impacts on </li></ul><ul><ul><li>Productivity growth </li></ul></ul><ul><ul><li>International competitiveness </li></ul></ul><ul><ul><li>Market imperfections </li></ul></ul>
    17. 17. Connectivity to productivity elasticities
    18. 18. Results - WEBS
    19. 19. Conclusions <ul><li>Substantial economic benefits of expansion of LHR </li></ul><ul><ul><li>28.6-32.8bn (60yr npv) </li></ul></ul><ul><ul><li>60% of benefits accrue outside London and South East </li></ul></ul><ul><ul><li>WEBS higher than for HSR and Crossrail </li></ul></ul>

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