June 2013

Heathrow
best placed for Britain
Britain's global hub.
Let's build on strength.

Luton (80%)
Stansted (55%)
London City (59%)
Heathrow (98%)
Gatwick (78%*)
Percentage of capacity utilised shown in brackets (ATM capacity)
* Taking an average of winter and summer months
London Heathrow (98%)
British Airways/oneworld
Amsterdam Schiphol (62%)
KLM/SkyTeam
Frankfurt-Main (66%)
Lufthansa/Star Alliance
Paris Charles de Gaulle (71%)
Airfrance/SkyTeam
Madrid Barajas (54%)
Iberia/oneworld
Percentage of capacity utilised shown in brackets (ATM capacity)
The UK Government has set up the Airports
Main airports
Commission to make recommendations on
serving London1
Britain’s future hub airport capacity.
This capacity is constrained at the UK's only
global hub, Heathrow, which has been
virtually full since 2003. Heathrow provides
long‑haul services to direct and transferring
passengers. Other UK airports operate a
'point‑to‑point' model, providing a wide
range of direct short‑haul flights but few
long‑haul services.
Other international hub airports, such as
Frankfurt, Paris and Amsterdam, have spare
capacity and have been able to provide more
services to an increasing range of growth
markets. The UK therefore urgently needs
additional capacity at its hub airport to
compete.
The question of whether this additional
capacity should be added at Heathrow, or
Major international whether Heathrow should be replaced by
hub airports a new hub airport is becoming ever more
(Western Europe)2 pressing. This document considers some of
the issues in this debate.
This document does not cover the
environmental and sustainability issues
associated with building an additional
runway. We recently published a separate
document, ‘A Quieter Heathrow’, outlining
Heathrow’s approach to noise mitigation. In
July, we will submit options to the Airports
Commission for how additional runway
capacity could be added at Heathrow and
what the environmental impact would be of
doing so.
Heathrow
best placed for Britain

Executive summary 02
Why a hub airport is different 06
The global race 12
The choice 16
Heathrow — best placed … 17
for passengers 18
for business and the economy 28
for helping the UK compete in the global race 38
for local jobs 40
for the taxpayer 44
Build from scratch or build on strength … 46

Heathrow — best placed for Britain 1

Executive summary
The UK is in a global race
for trade, jobs and economic
growth. The international
economy is changing with
the rise of emerging markets
like Brazil, Russia, India and
China. It is projected that
by the year 2050, Growth
Markets will represent nearly
3
half (46%) of global GDP .
Heathrow is the UK’s only international hub
airport, and the only airport with the size and
scale to connect the UK to these long‑haul
destinations. Heathrow competes with other
long‑haul hub airports at Frankfurt‑Main,
Amsterdam Schiphol and Paris Charles de
Gaulle.
2 Heathrow — best placed for Britain
But Heathrow is full, operating two
runways at 98% capacity. This lack of hub UK growth depends
capacity is costing trade and jobs in the UK.
The Government has set up an Airports
on our ability to
Commission chaired by Sir Howard Davies to
recommend where and how the UK should
connect with global
expand its aviation hub capacity. markets through a
This report contends that Heathrow is the
best location for additional runway capacity.
hub airport.
It compares Heathrow to other options for a
single major international hub in the UK that
have been proposed at Stansted or in the The fastest and most
Thames Estuary.
Gatwick has not been included as a potential
cost-effective hub
location for the UK’s hub because it is only option is expansion
proposing a two‑runway solution that would
not be any bigger than Heathrow is today. at Heathrow.
Heathrow is best placed for
passengers.
Replace
For most UK passengers, a hub airport to Heathrow
the east of London would be in the wrong
place. Travel times would increase for almost
90% of hub passengers, with the average
journey time increasing by 30 minutes4.
The additional travel time cost would be Add capacity Government
at Heathrow options
equivalent to cancelling out all the benefits
of reduced journey time delivered by
High Speed 2 (HS2). Even with major new
transport infrastructure for Stansted and
the Thames Estuary, Heathrow would still
be more convenient for passengers, with
over 4.5 million more people living within
a 60‑minute travel time than the other
options5. Do
nothing

Heathrow — best placed for Britain 3

Executive summary

A Thames Estuary Heathrow is best placed for Heathrow is best placed to

business and the economy. help the UK compete in the
airport has an global race.
A hub airport to the west of London is the
estimated cost to best location for the UK’s hub. This report Additional capacity at Heathrow could be
illustrates how the current centre of UK
the taxpayer of economic gravity is to the west of London
delivered at least seven years earlier than
any new hub airport could be built. Any
where highly productive clusters in industries
£25 billion+ and a like IT and pharmaceuticals have grown
delay is critical as the UK is already losing
some £14 billion a year in trade and export
completion date around Heathrow over the last 50 years. 202
of the UK’s top 300 company HQs are within
earnings due to constraints in aviation hub
capacity9. The UK is in a global race with our
of 2034. a 25‑mile radius of Heathrow. This compares
to only seven around Stansted and two
competitors for growth and jobs. Every year
of delay risks the UK falling behind.
around the Thames Estuary6. The Thames
Valley has 60% more international businesses
than the national UK average, 100% more
US businesses and 260% more Japanese
businesses7. Foreign owners of firms with
HQs in the Thames Valley also employ up to
75,000 workers elsewhere in the UK8.

4 Heathrow — best placed for Britain

Why build from scratch when
we can build on strength?
Heathrow is best placed for
local jobs.
This report also highlights the risk to local
jobs that moving the UK’s hub airport would
represent. More than 100,000 jobs in the
area depend on Heathrow10, and the new
analysis shows that moving the hub airport
East would risk doubling unemployment
in some of Heathrow’s local boroughs.
The 76,600 people directly employed at
Heathrow would have to be re‑located or
made redundant. This compares to the
loss of 6,500 jobs when Shotton Steel
closed in 1985 — Britain’s biggest previous
redundancy announcement on a single day11.
Heathrow — best placed for Britain
Heathrow is best placed for
the UK taxpayer.
How new hub capacity can be financed is
going to be a significant issue for the Airports
Commission to consider. Adding capacity
at Heathrow will cost the taxpayer less than
any other option. This report calculates for
the first time that since the 1970s, around
£20–25 billion of rail infrastructure with a
connection to Heathrow has been invested or
committed12. On top of that, the motorways
that serve the airport, including the M3, M4,
M40 and M25, which provide critical road
access to the airport and the surrounding
businesses, would cost around £26 million
per mile in today's prices13.
Conversely, any new hub would need to
build vast new infrastructure from scratch
using public money, with Mayor Boris
Johnson estimating that a new hub airport
would cost in the region of £70–80 billion of
which £25 billion would have to come from
public finance14.
Britain already has one of the world’s most
successful international hub airports in
Heathrow. Expanding Heathrow will connect
the UK to growth more quickly and at less
cost to the taxpayer than any other option.
Heathrow is better located for passengers,
business and jobs. Let’s build on strength.
5
Why a hub airport is
different
Today Britain does not have a shortage of
overall airport capacity — it has a shortage of
hub airport capacity.
The UK's air passengers have a wide choice
of airports and airlines and are well‑served by
point‑to‑point airports like Gatwick, Stansted,
London City, Luton and Southend for short‑
haul and leisure destinations.
Heathrow is different. It is the UK’s only
international hub airport — the only airport
with the size and scale to deliver many flights
to long‑haul destinations across the globe.
There are just a handful of hub airports in
Europe and Heathrow competes with hubs
like Frankfurt‑Main, Amsterdam Schiphol and
Paris Charles de Gaulle.
At these long‑haul hubs local passengers
combine with transfer passengers to fill large
long‑haul aircraft. The number of passengers
who want to fly direct varies on each route
6 Heathrow — best placed for Britain
by time of day, day of the week and month.
Airlines cannot adjust aircraft size each day so
Our hub airport
they fill aircraft with as many direct passengers
as possible and then fill the rest of the aircraft
creates economic
with transfer passengers. This enables airlines
to fly to more destinations more frequently
opportunities for
than could be supported by demand from the the UK.
South‑East alone. It is this ability to serve long‑
haul business destinations that makes a hub
like Heathrow different from a point‑to‑point
airport like Gatwick. Hub airports
Having a major international hub means that support more
the UK is better connected to the rest of the
world than it would be otherwise. Passengers transfer passengers,
can fly direct to 75 destinations world‑wide
from Heathrow that aren’t served by any direct routes, and
other UK airport15. Keeping a successful hub
in the UK means British passengers will have
destinations than
a greater choice of air links — particularly to
long‑haul emerging market destinations that
other airports.
are important for economic growth.
Pooling demand – At a hub airport transfer passengers
the average flight
from Heathrow to provide the critical mass that can make
Mexico City in 2012
– an example of a long haul route viable. Without these
passenger origins
on a key long haul transfers a hub airport would not be able to
route16
offer as many services to key destinations.

Direct passengers … made possible by

from London to transfer passengers
Mexico City …

48% direct 2 % connecting from UK regions

(163 seats) (8 seats)

32% from Europe

(108 seats)

4% from Middle East

(14 seats)
10% Spare capacity 3 % from rest of the world
33 empty seats (11 seats)

Heathrow — best placed for Britain 7

Why a hub airport
is different
Some people argue that in future London
would be best served by three competing
two‑runway airports.
Heathrow is not opposed to growth at
‘point‑to‑point’ airports like Gatwick or
those in other UK regions. Each of these
airports is valued by passengers and makes an
important economic contribution.
However, a hub airport is different. Having a
major international hub provides significant
added value for the UK by providing routes to
long‑haul destinations that three two‑runway
London airports could not.
Airlines would already operate more long‑
haul flights directly from point‑to‑point
airports if it was profitable for them to do
so. Instead, airlines that cannot operate from
Heathrow do not automatically go to another
UK airport. They go to a foreign hub airport
8 Heathrow — best placed for Britain
where they can operate profitably instead. Three competing two‑runway airports in
More than half of scheduled airlines say they London would not solve the problem that
are locating flights in other countries that Government has correctly identified — how
would have come to the UK if there was to maintain the UK’s aviation hub status.
spare capacity at Heathrow17. Gatwick’s proposal would not deliver a UK
hub with the size and scale to compete
There is a long list of airlines waiting for internationally or provide the long‑haul
take‑off and landing slots at Heathrow. China connectivity on which future jobs and growth
Southern waited eight years before acquiring depend. The UK needs one Premier League
slots. AeroMexico waited for four years. There airport to compete, not three second‑tier
is also a long list of airlines that have tried to
airports.
operate long‑haul routes from Gatwick and
failed including Korean Air and Hong Kong
Airlines in the last year.
It is not possible to have two successful hubs
in London because splitting the hub halves
the pool of transfer passengers. A successful
network depends on having a central hub —
the transfer passengers on every arriving flight
support the viability of every departing flight.
The UK's point-to-point airports lack the transfer London and South East
airports distribution of annual
passengers to enable airlines to profitably serve passenger numbers (millions)
and % of spare Air Transport
long-haul business destinations. Stansted and Movement (ATM) capacity18

Gatwick have been unable to operate a critical

mass of profitable long-haul routes.
Spare ATM
Number of passengers capacity

Heathrow
2%
36.26M 32.51M 0.3M

Gatwick
22%*
4.29M 24.94M 4.63M

Stansted 45%
0.17M 17.32M 0.58M

Luton 20%
9.05M 0.47M

London City 41%

0.08M 2.97M

* Taking an average of winter and summer months. Key

Long-haul

Short-haul

Charter

Heathrow — best placed for Britain 9


The Airports Commission has asked whether
it might be possible for one of the non‑UK
based airline alliances (Star or SkyTeam) to
transfer from Heathrow to another airport,
freeing up space at the UK’s hub.
The evidence is that this would not be
desirable for airlines or the UK. The
Commission itself notes that despite the
prospect of lower charges at other airports,
and the possibility of selling their lucrative
Heathrow slots, neither the Star Alliance nor
SkyTeam has chosen to relocate.
Alliances don’t want to move because of
the unique benefits of Heathrow. It is best
placed for direct passengers because of its
convenient location for London and the UK,
and for the vital business traveller because of
its position in the heart of the UK’s business
community.
10
Any airline alliance which moved out of
Heathrow would lose access to 7.3m transfer
passengers.
It is also best placed for transfer passengers. means the alliance is now more reliant on
These passengers are used by airlines to keep feeder traffic from BA’s short‑haul network,
aircraft full every day of the year. Heathrow which it would lose access to if it moved.
is the only airport with the infrastructure and
home network carrier (BA) that make this Airlines operate on an average profit margin
possible. of just 0.6% ‑ so a loss of even 1% of
passengers could threaten operations.
Although passengers do transfer within an
alliance, nearly a third of transfer passengers In total more than 7m passengers transfer
at Heathrow last year transferred between between alliances or non‑aligned airlines
alliances or non‑aligned airlines. Among Star and would potentially be lost to any alliance
Alliance airlines, more passengers transfer that moved out of Heathrow, making many
onto their flights from outside the alliance of their routes unviable. That’s at least 7m
than from within it. reasons not to move.
The Commission says 7‑8% of Star and
SkyTeam’s traffic comes from outside of
the alliances and suggests this could be low
enough to allow them to move to another
airport. However, the Commission’s figures
date from before BMI was taken over by
BA, leaving Star Alliance in the process. That
Heathrow — best placed for Britain
“To compete internationally the UK needs one
strong hub airport, not two. Airports do different
things and the UK needs both a world-class hub
as well as successful point-to-point airports.”
Craig Kreeger, Chief Executive,
Virgin Atlantic

7.3m transfers Network airlines all benefit from being co-

located.
between alliances
and non-aligned Heathrow 2012: 25m transfer passengers,
airlines 7.3m of which were between alliances and
17.7m passengers non-aligned airlines.
transfer within 12% more passengers transfer onto Star
alliances Alliance from outside the alliance than
from within it.

Airlines average profit margin is 0.6%

- even a small loss of passengers could
threaten operations.

Heathrow — best placed for Britain 11

The global race
The UK will fall behind in the global race if
it cannot connect to growing economies.
The locus of the global economy is shifting
around us with the rise of fast growing
emerging markets like Brazil, Russia, India
and China. It is projected that by the year
2050, such Growth Markets will represent
nearly half (46%) of global GDP19.
The UK is in a global race with our major
competitors, including other European hubs,
for trade with these markets and the jobs
and economic growth that will result.
For the past 350 years Britain has benefited
from having the world’s largest port or
airport on its shores. However, while
European competitor countries have added
new runways at their hub airports, the UK
has not built a new full‑length runway in the
south‑east since the second world war.
12
International connectivity through a major
hub airport is central to a country’s ability to
compete for growth and jobs. UK businesses,
for example, trade 20 times more with
emerging markets with daily flights than
those with less frequent or no direct service20.
Page 11 shows the top 25 cities by Gross
Metropolitan Product (GMP) currently served
by other European hubs but not Heathrow.
As a result of not flying to such destinations
the UK is cutting itself off from growth and
is missing out on £14 billion per year in lost
trade21.
Analysis of a similar long‑haul hub airport has
shown that every regularly scheduled long‑
haul service generates around 3,000 jobs22.
Maintaining and growing international hub
capacity is critical for the UK economy.
The UK Government has recognised that
these constraints on aviation capacity are
costing trade and jobs in the UK and has set
up the Airports Commission, chaired by Sir
Howard Davies, to recommend where and
how the UK should expand its hub capacity.
The Commission is conducting its work
against a backdrop of prolonged fiscal
constraint, squeezed living standards and
weak economic growth. None of the
options it is considering are easy. Every
choice — including doing nothing — has its
consequences.
Heathrow — best placed for Britain
Top intercontinental
destinations by
2011 GMP not
served currently
by Heathrow but London
by other European
hubs23

Shenyang

Pittsburg Hartford

Nanjing
Memphis
Chengdu* Chongqing
Osaka
Hangzhou
San Antonio
Nagoya
Ankara Shenzhen Manila

Monterrey Wuhan

Bogotá

Porto Alegre

Campinas

Belo Horizonte

Key
Cities currently served by
Jakarta
other European hubs but
not Heathrow
Perth
European competitor hubs

All international flight

routes
* Heathrow will start flying Lima
to Chengdu from September
2013 Santiago
© Mario C. E. Freese

Heathrow — best placed for Britain 13

The global race
Analysis shows that European cities with the
most inter‑continental flights attract the most
corporate HQs24. Having an international hub
is critical for attracting inward investment
to the UK. International companies say that
the quality of transport links is an important
factor in deciding where to locate25. The UK
is a popular place for international companies
to base their European headquarters
because it is one of a handful of locations
that provides direct access to long‑haul and
European markets.
Two of the top five factors international
companies give for their decision to locate
in London are, “Easy access to markets,
customers or clients” and, “Transport links
with other cities and internationally”26.
14
The UK has a clear competitive advantage
in service industries. These service exports "Mexico, Brazil, Japan
rely on air transport, with the top five service
export industries accounting for 20% of total
and Malaysia … there is
industry spend on air transport27. a global race out there to
Global air transport provides access for our
key industries to established and emerging
win jobs for Britain and
new markets, which will help deliver
economic growth across the UK.
I believe in leading from
Moving people around the globe, quickly
the front. So I make no
and efficiently, is vital to UK trade and
investment.
apology for linking Britain
to the fastest-growing
parts of the world."
David Cameron
November 2012
Heathrow — best placed for Britain
“Heathrow is the reason we are where
we are, along with the rest of the high‑
tech industry in the Thames Valley. If
you think about all the companies in
the IT industry between west London
and Bristol there is one reason for their
location. Of the 2,000 people who are
based in our Thames Valley HQ, only
about half of them work in the UK
business. The other 50% do jobs which
are not UK specific, they have roles
which involve them in activities across
Europe, and sometimes globally. One
of the main reasons they are here is
that they do need to travel more and
they are in close proximity to the hub
airport.”
Chris Parker, Senior Director, Law
and Corporate Affairs, Microsoft
“BlackBerry’s location close to
Heathrow enables it to be close to
its carriers including O2, Orange and
Vodafone. If the UK’s hub airport
moved from its current location in
the west of London this would have
a significant impact on BlackBerry
and their business travel, potentially
reducing the amount of trips employees
make.”
Albert de Beer, Director of Facilities,
EMEA, Blackberry
“FM Global is located in Windsor
because it is only a 20 minute drive
from Heathrow airport. Our business
is dependent on being able to meet
with clients across the world quickly
and efficiently to provide our services.
As an international hub, Heathrow
is absolutely crucial because it is a
truly international airport. If you go
to Heathrow, you can fly anywhere
in the world. The idea of having to
go somewhere else would be a huge
inconvenience to us. The presence of
Heathrow was the defining factor in
choosing our location when we merged
our offices. We wanted to move away
from central London and there were
a variety of different areas we could
have chosen to relocate to. In the end,
we chose to relocate to the West of
London primarily because of its close
proximity to Heathrow.”
“25% of our companies on the Park
are actually international companies
that have come here to do business
because of the presence of Heathrow.
We also have a lot of Foreign Direct
Investment. For example, US company
Electronic Arts bought the UK computer
games company Bullfrog Productions
because it’s a good business, but also
because it’s accessible. When the
executives turn up it’s easy for them to
get to us.”
Dr Malcolm Parry, Managing
Director, Surrey Research Park

Ken Davey, Managing Director, SVP

Europe, Middle East and Africa, FM
Global

Heathrow — best placed for Britain 15

The choice
To maintain its global aviation hub status
the UK needs a single hub airport to provide
the long‑haul connectivity on which jobs
and growth depend. Three competing two
runway London airports will not deliver this
outcome. The UK needs a single hub with
the size and scale to compete internationally,
not multiple second‑tier airports.
There are three choices for the UK
Government in developing a successful single
UK hub airport:
 It can add additional capacity at
Heathrow
 It can replace Heathrow with a new hub
airport likely to be either at Stansted or in
the Thames Estuary
 Or it can do nothing and let the UK fall
behind European competitors at the cost
of lost growth and jobs
16
Gatwick has not been included as a potential
location for the UK’s hub because it is only LHR Heathrow Airport
proposing a two‑runway solution and
therefore could not be any larger than
Heathrow is today. For more information on
why having several hubs or splitting the hub
would not work see the One Hub or None
document published in 201228.
STN Stansted Airport
The rest of this report considers which of
three possible options is the best location
for the UK’s hub airport: Heathrow, Stansted A potential Thames
or the Thames Estuary. It demonstrates EST Estuary airport
that Heathrow is the most pragmatic, cost‑
effective option for the UK and the quickest
way to connect the UK to the global markets
upon which future growth depends.
Far from being in the wrong place as some
suggest, this reports demonstrates that
Heathrow is the best location for the UK’s
hub.
Heathrow — best placed for Britain