London’s future as a world city: Why the UK needs a new hub airport

Richard de Cani Director of Transport Strategy & Planning Transport for London

London has been a global leader in aviation

• As a small island nation, connectivity with the rest of the world has been key to the development of London as a global city • Originally a military airport, ‘London Airport’ opened for commercial operations in 1946 • Even in the 1960s, the busiest airport in the world with 8 million passengers per annum • Heathrow has been the primary international gateway to London and the UK for the past 60 years 4/25/2020 2

The growth of London’s airport network

LONDON HEATHROW LONDON LUTON LONDON STANSTED LONDON CITY LONDON SOUTHEND LONDON GATWICK

• But even as Heathrow prospered in the 1960s, Gatwick was being developed and Stansted was on the way • London took a historic turn in the path and decided on multiple, unlinked airports, not a single large hub 4/25/2020 3

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Expansion at London’s airports

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This has benefited London’s economy

• London receives more FDI than any European city: as of 2011, London received 323 FDI projects, more than twice than its closest competitor Paris (with 148 projects), and more than countries such as the Netherlands, Belgium, Russia, Poland, Ireland and Switzerland.

• In 2010/11, over 94,000 jobs were created and safeguarded in the UK by FDI • London attracts more international companies from the ICT, electronics, financial services and creative industries than any other European city, • London is home to more European HQs than any other city in Europe with 420 FDI projects between 2003 and 2011, 19% of all EU share during that period. Closest competitors are Paris and Dublin, with only 81 and 64 respectively. 4/25/2020 5

London is the worlds global city

• More than 233 languages are spoken in London • Over a third of London residents were born outside the UK 4/25/2020 6

The current situation

• In total, London’s airports accommodate more passengers than any other city in the world • However, Heathrow, the only hub airport, is full with 99% utilisation and rising • Gatwick is filling up at 76% utilisation and rising • And yet Stansted is empty?,39% utilisation and falling...

• Highlighting the significance and agglomerative effects of the hub 4/25/2020 7

London is growing

• London is growing at its fastest rate since the second world war • Currently 8.4 million people - now forecast to grow to 10 million people by 2040 7.1

6.9

6.7

6.5

8.5

8.3

8.1

7.9

7.7

7.5

7.3

Pre-Census (2011) mid year estimates Population (millions) 4/25/2020 8

We need a clear aviation strategy for the UK

• The UK government has reviewed its demand forecasts for aviation • This highlights that UK-wide demand will increase in a central case from around 230 million passengers per annum now to 320m by 2030, and 480m by 2050.

• Given lead in times to plan for new capacity, decisions need to be taken now to enable this capacity to come on stream by 2030

DfT capacity unconstrained demand forecasts for

Heathrow

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Total Destinations Served has been falling

Total number of destinations served

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Heathrow

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Weekly departing seats to mainland Chinese destinations (OAG, June 2011)

London Heathrow Amsterdam Schiphol Paris Charles de Gaulle Frankfurt Madrid Barajas Seats 8,915 11,008 15,078 17,583 1,250 10

The Mayors vision for London

• The Mayor’s vision is for London to be the best big city in the world.

• For London to be the World Capital of Business, and to have the most competitive business environment in the world; to be one of the world’s leading low carbon capitals, for all Londoners to share in London’s economic success and for London to maximise the benefits of the 2012 Olympic and Paralympic games.

• For London to achieve this and to sustain its current status as a global city, it needs to maintain and enhance its connections to the rest of the world 4/25/2020 11

The network of global connections will need to expand and grow as the world changes

OAG Schedules data, June 2011

Changes in connectivity to destinations served at Heathrow, 2002-2011

OAG Schedules data, 2002 and June 2011

Growth in GDP of leading world economies, 2009-2050

PriceWaterhouseCoopers, the accelerating shift of global economic power: challenges and opportunities, 2011

Fastest growing cities in terms of total GDP growth between 2007 and 2025

Mckinsey Global Institute, Urban world: mapping the economic power of cities, 2011

Current weekly frequencies from London to 25 cities with forecast highest GDP growth between 2007 and 2025

OAG, OAG Schedules data, June 2011 & Mckinsey Global Institute, Urban world: mapping the economic power of cities, 2011

We have a decision to make

• Whatever the rest of the world thinks, it naturally matters to Londoners that their city should continue to feature on the world stage • The UK Government has set up a Commission to ponder these things – it will report in 2015 • The key question is whether to: – continue with a policy of building up disconnected airports, drawing mainly on the O/D market; or – make an historic decision to invest in a new hub airport, with four runways to start and room to grow? 4/25/2020 17

Could we continue with multiple airports?

• London is home to 8 million people – growing to 10 million with twice that in the wider South East of the UK • Many are relatively well-off, natural aviation consumers and this adds up to one of the strongest underlying Origin-Destination markets in the world • But, reliance on O/D market leaves us in sub-optimal position if we ignore transfer traffic • If our objective is to maximise connectivity to the rest of the world – a hub is the model which best achieves this 4/25/2020 18

It has to be a hub

• Transfer traffic makes viable a wider range of routes with higher frequencies of flights • Even with a very strong O/D market, it still helps to add transfer traffic on top • The success of other countries’ airports has proven the case for a hub • Not least of these is here in Dubai: DXB is now the second busiest airport globally (after Heathrow) and tipped to move into first place by 2015

Some routes at Heathrow that rely on transfer traffic for viability

Hyderabad Chennai Mexico City Montreal

Transfer passengers

80% 72% 61% 56% Vancouver 52%

Source: Frontier Economics, Connecting for Growth, Sept 2011

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But it cannot be at Heathrow

•

The noisiest airport in the world

Responsible for 28% of all the people in Europe affected by aircraft noise (766,100 people) •

Highly constrained site

More passengers than Paris Charles de Gaulle but half the size Hemmed in by major national motorways •

Already operating under stress

99% full means zero resilience for coping with e.g. bad weather No room for growth 4/25/2020 20

Number of people exposed to noise exceeding 55dB Lden from Europe’s principal hub airports 21

A new site: the Mayor’s emerging view

LONDON

4/25/2020 • A new four-runway hub airport to the east of London Either in the Thames Estuary or on the site of London Stansted Airport

NEW LONDON AIRPORT?

• Allowing us to compete with Europe and the rest of the world

NEW LONDON AIRPORT?

• Unprecedented regenerative intervention in South East UK • A stimulus to the whole UK economy • A chance to be a world city that is

world class

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A new airport as part of a wider strategic plan for the UK

But how can we make that happen?

• • • • Only with support

Politically

UK Government support key

But also in the industry

Not in the interests of the incumbents – both Heathrow and the airlines

Doing nothing is not an option

What is better for airlines: 8-year wait to get into Heathrow or the chance of an unconstrained new airport?

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Challenges

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There would need to be a clear policy statement addressing the future of Heathrow; any changes in regulation and approaches to surface access and environmental mitigation

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There would need to be a public commitment of funding support and clear involvement of the private sector

• •

There would need to be support from airlines The UK is at a key decision point that will set the direction of our global connectivity for the next 60 years

•

There are many challenges to overcome but with Government and industry support these could all be addressed – this has been done elsewhere

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