Inaction on Heathrow expansion could jeopardise growth of Northern Powerhouse, Heathrow Chief Executive warns

• Heathrow’s capacity constraints mean the Northern Powerhouse is losing out on £710m a year in trade as passengers are forced to travel via other international hub airports instead 
• Domestic hubs deliver 70% more frequent connections to domestic airports than other foreign hubs 

The Government’s ambitions to transform the North of England into a high productivity, high growth Northern Powerhouse are at risk unless the Government takes action on airport expansion, Heathrow chief executive John Holland-Kaye has warned.

In a keynote speech at the International Festival of Business, Mr Holland-Kaye trailed new research by Frontier Economics. It reveals that the cost of inaction on airport capacity to the economy of the North equates to £710m in lost import/export trade every year, based on the first analysis to show that flying via a hub airport abroad, rather than via Heathrow, generates less trade for the British economy. 

If Heathrow wasn’t constrained, then more passengers flying to and from the UK regions could fly via Heathrow instead of having to fly via another international hub. And this could help facilitate an additional £1.7bn in trade each year. 

Heathrow's role is to connect the northern powerhouse to countries and cities where there is not enough demand from other airports to put on the route. That's why Heathrow welcomes the continued growth of direct services from airports in the North of England including Manchester, Newcastle, Liverpool and Leeds including new flights from Manchester to Beijing and Newcastle to New York. Heathrow helps to ‘fill in the gaps.' But with the UK’s hub airport at capacity, many people in the UK have to rely on booking connections via hubs in Europe, Istanbul and Dubai to reach long-haul destinations with only one stop. 

Today’s figures therefore represent the ‘tip of the iceberg’ in terms of the total cost to the UK of a lack of connectivity to Heathrow from the regions, as they don’t factor in the trade that would be enabled as a result of the new domestic connections that an expanded Heathrow could provide – for example, to Liverpool John Lennon Airport, Robin Hood Airport Doncaster Sheffield and Humberside Airport in the Northern Powerhouse, or the 40 new long-haul routes expansion would provide.

Separately, in addition to facilitating extra trade, the research concludes that domestic hub airports – of which Heathrow is the only example in the UK – provide around 70% greater frequency of flights to other domestic airports than is offered by international hubs. Heathrow is therefore better placed than foreign hubs such as Paris, Amsterdam and Frankfurt to connect Britain’s regional economies to growth markets.

The findings further ratify the Airports Commission’s unanimous and unequivocal recommendation: that expanding Heathrow is the best choice for Britain.

John Holland-Kaye, Chief Executive Officer at Heathrow Airport, said:

“Heathrow is the right choice for a long-term plan to back every corner of the UK. The Government is going to struggle with the foundations of the Northern Powerhouse if a third runway isn’t built to support the region’s existing connectivity. To rebalance and strengthen the British economy, the UK needs a domestic hub airport that can compete with our unconstrained hub rivals abroad, and that’s something only Heathrow can deliver.”

Heathrow has committed £10m to a Route Development Fund, which will provide start-up support for new domestic destinations. It will enable up to five new routes to be established following Heathrow expansion, with routes from airports like Liverpool, Humberside and Doncaster/Sheffield potentially eligible.

James Ramsbotham, North East Chamber of Commerce Chief Executive, said: 

“We completely agree the lack of decision on Heathrow’s expansion is extremely detrimental to the ambitions of the Northern Powerhouse. As a region in which exports and inward investment are essential to our economy, we need global links and these can only be provided with access to the UK’s hub airport. This will enable us to build on existing connections and exploit new markets across the globe.”

NOTES TO EDITORS

Research methodology
If Heathrow were not constrained, then more transfer passengers flying to and from the Northern Powerhouse would be flying via Heathrow instead of flying via internationally located hubs. This could help facilitate extra trade worth around £700 million a year (1.7bn is the equivalent figure for the whole of the UK).

This result is based on an econometrics analysis which explains trade flows between country pairs as a function of various macroeconomic variables (such as the GDP, population, and distance between trading partners), and measures of the air connectivity between them. The connectivity measures include the number of passengers flying between the two countries: (i) on direct connections; (ii) via the domestically located hub; and (iii) via an internationally located hub. The results, which are statistically significant, suggest that a 1% switch in passengers from using an internationally-located to hub to using their domestic hub instead is associated with an increase in trade. Trade is measured as imports plus exports. Given the number of transfer passengers flying to and from the Northern Powerhouse, estimates of how many of them are currently having to use an international hub because of the capacity constraints at Heathrow and the existing level of the region’s trade in 2014, this could correspond to a £710 million extra facilitated trade.

Domestically located hubs provide 70% greater frequency to their domestic regions than internationally located hubs
Heathrow has analysed the frequencies provided by network carriers at five of the largest hubs in Europe. This is based on 2015 schedules data from OAG and covers Heathrow in the UK, Paris Charles de Gaulle in France, Frankfurt in Germany, Schiphol in the Netherlands and Madrid Barajas in Spain. Heathrow has identified 25 regional airports in these countries that are connected to their domestically located hub, and at least one other internationally located hub. For 24 out of these 25 regional airports, the connection to the domestically located hub is the most frequent. On average the frequency provided by the domestically located hub is around 70% greater than the frequency provided by the internationally located hub with the most frequent connection. 

As a consequence of Heathrow being full, domestic connectivity has fallen over the years from 18 routes served in 1990, to just eight today. The domestic connections cited in Frontier’s study do not include its most recent connection to Inverness, which started in May, as there was insufficient current data to support the analysis. 

For further information, please visit http://mediacentre.heathrow.com