Jan 26 2008

Heathrow Expansion: Supply and Demand

Published under Climate Change, Environment, Politics

taxi queue at New York LaGuardia airportSince it’s the weekend and I have nothing better to do (read:I have a lot of things I need to do, but don’t want to do them), I’ve been thinking more about the proposed expansion at Heathrow airport. Inel has once again posted an intriguing article called End bias in favour of aviation and other stories, mostly consisting of annotated links to articles in the Guardian. The one that caught my eye was The arguments for and against Heathrow’s runway 3.

First a rant. In aviation runways are numbered by the direction in which they point. For instance, the current runways at Heathrow are 9R, 9L, 27R, and 27L. Calling the proposed expansion “runway 3″ would mean that there would be a runway pointing approximately 30 degrees east of magnetic north. That’s just wrong; nobody is proposing that. The third runway will be parallel to the existing runways.

Runway Demand at Heathrow

The is no denying that there is high demand for aircraft to operate at London’s Heathrow Airport. Stop Heathrow Expansion estimates that with the new runway, people will be exposed to an aircraft flying overhead once every 90 seconds. I highly doubt that estimate because that would mean over 1 million landings at Heathrow in a year. And for every landing there would need to be a takeoff, which brings the number of aircraft operations of over 2 million in a year. Perhaps that site is stretching the truth a little. The did you use the word “virtually”, I guess that makes it okay to tell a little fib.

Granted, during peak operation, there would be aircraft landing at intervals of less than 2 minutes. This means that people want to fly to, from, or through Heathrow Airport. But the first argument provided in the above linked Guardian article is an economic one. He argues that the return on the investment is small. The number that are given show otherwise.

The runway will cost £12bn and bring a return of about £17bn: a £5bn profit over 70 years, scarcely a great return.

I highly disagree. This is not a great return on an investment, but anything that creates a profit is good for a business. The return on investment (ROI) in this case would be 40% over 70 years, or just under 0.6% per year. Now when you start multiplying big numbers (like £12bn) by 0.6% you’re going to get a fairly big return for each year. Therefore, I reject this argument.

Exporting Money

The second argument is that by building a new runway encourages people to take money out of Britain. (Space in this paper must be at a premium since each argument is about one sentence long.) Equating a new runway to somehow exporting money from a country is ludicrous. There are three types of people that use airports: those departing, those arriving, and those connecting.

Let’s deal with the obvious two first. People catching connecting flight at an airport and those arriving at an airport contribute to the local economy. Arrivals at an airport should be obvious, so I won’t elaborate. Connections are a little more difficult though. These people import a small amount of money to the country. While they are waiting for their connecting flights, they buy food, gifts, and other crap from airport vendors.

I’ll admit that Britons departing from the UK do ‘export’ money. I am not an economist, and I didn’t stay at Holiday Inn last night, so I won’t pretend to know if that’s an actual bad thing. However, I know how I would feel if my government decided that I couldn’t travel because they thought I was exporting their money to another country. I’d tell them to go f^*$ themselves, and I’d do it anyway.

Long Haul Flights

The next argument is again silly. He states that people spend a lot of money travelling to Heathrow from West Midlands because most of the long haul flight terminate there. Because I’m an ignorant Yank, I didn’t know where West Midlands was compared to Heathrow, so I Googled it. (All hail Google.) It turns out that it’s about 110 miles away. (Google gives me the distance in miles even though I’m fairly confident distances in the UK are expressed in kilometers. Maybe they aren’t so smart.) Anyway it’s about 180 kilometers.

Call me ignorant, but I see a solution. In fact, I see more than one solution. Have some sort of public transportation from West Midlands to Heathrow. I don’t know, maybe a high speed train. That ought to do it. Or maybe have some short haul flights from an airport in West Midlands to Heathrow where they could then take their long haul flight. Or even better, since you’re flying on a long haul flight, just pony up the cash and stop bitching about it. Take your pick, but if you’re worried about the environment, I’d choose the first one. Or better yet, skip that vacation and don’t fly at all.

Existing Infrastructure

Finally, he argues that the current infrastructure is not able to handle a third runway at Heathrow. I’ve never been to Heathrow airport, so I’ll take his word that the current infrastructure is not able to handle the increased traffic that a third runway would generate. However, I’m pretty sure that there must be a civil engineer or two in the UK. And given the vast land acquisition that the new runway project would need, I’m sure that would have room for a high speed rail terminal, or whatever other modes of transportation that are used. An argument against new infrastructure because current infrastructure is inadequate is, again, silly.

Conclusion

Personally, I think the arguments against a new runway at Heathrow used in the Guardian article are very week. My posting yesterday dealing with the arguments made by the advocacy group were much better thought through in my opinion. I guess if you’re keeping score at home that would be Environmentalists +1, Guardian +0.

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    • 7 Responses to “Heathrow Expansion: Supply and Demand”

    1. # inelon 27 Jan 2008 at 5:34 am

      Greetings from the Department for Transport’s Public Exhibition at the Queen Elizabeth II Conference Centre Westminster!
      (You’ll have to visit my blog to see the postcard, as I cannot include it in comments, sorry.)
      Dear Atmoz,

      Thanks for drawing attention to proposals for ‘Adding capacity at Heathrow airport‘ once again. As a public consultation on proposals for expanding Heathrow airport over the next couple of decades, the complete consultation document (curiously filenamed completecondoc.pdf) deserves to be studied widely and questioned deeply.

      Figure 1. on page 29 of the Consultation Document shows that there are currently two runways:

      The Northern Runway
      The Southern Runway

      The extra runway is referred to in official documents as:

      The Third Runway

      (It is just called runway 3 as a shorthand, much as u txt ppl.)

      Yes, these runways are parallel, but approaching and departing flight paths below an altitude of 3000 ft are not all parallel.

      an aircraft flying overhead once every 90 seconds. I highly doubt that estimate

      FYI, page 75 of the consultation document states:

      3.92 … — on average around 140 seconds between arrivals, compared with an average of 86 seconds today …

      Your last point I have time to respond to now is:

      Equating a new runway to somehow exporting money from a country is ludicrous.

      No, quite the opposite. British holidaymakers spend more when they go abroad than tourists do in our country. Vacations aside, elderly British people even ‘migrate’ to warmer climes such as Spain for the winter, to save on British home energy bills! In September 2006, Friends of the Earth released a report, Pie in the sky - why the costs of airport expansion outweigh the benefits, which explains how economic arguments have been cherry-picked to support airport expansion:

      3.1.2 UK tourism

      The aviation industry and Government are keen to stress the economic benefits to UK tourism from increased foreign visitors. However, this is yet again a one-sided analysis. At the same time as foreign visitors coming here, a greater number of UK residents go abroad, and this will increase with airport expansion. The UK runs a massive economic deficit from air travel. Foreign visitors arriving by air spent nearly £11 billion in the UK in 2004, but UK residents flying out spent £26 billion abroad – a net loss to the UK economy of £15 billion pounds a year. If airports expand as planned, this net deficit will increase to £30 billion a year by 203076. The cumulative extra cost to the UK economy in the coming decades would be well over £100 billion77.

      It is worth noticing that this is not just a balance of payments issue for the whole economy, but an acute issue for the UK tourism industry. UK tourism is far more reliant on domestic visitors (83% of spending) than foreign visitors – aviation expansion will put far greater strain on the domestic visitor component of UK tourism than it will benefit the foreign visitor component.

      This is particularly an issue for the regions of England – London is the main region benefiting from foreign visitors – where spending in is roughly the same as spending out. But in regions such as Yorkshire and Humber, the ratio of money out to money in is over 6 to 1.

      Increasing the net outflow will have an overall negative effect on tourism in the UK. According to Visit Britain78 2003 UK residents spent over £59 billion pounds on tourism in the UK, nearly 5 times the amount spent in the UK by overseas visitors. Domestic tourism accounts for 83% of the spending upon which 2.2 million jobs in UK tourism rely. If more people holiday abroad, this will reduce the amount they spend in the UK.

      Details on tourism deficit79

      The Government attempts to gloss over these figures by asserting that the numbers of foreigner visitors will increase faster than the numbers of UK residents leaving, and that the rate of spending increase per foreign visitor will increase faster than that of UK visitors abroad, and then expressing the hope that if this happens then the gap might close. However this is not borne out by the evidence – the gap is not closing, it increases every year.

      There are two key assumptions to test – on inward and outward visitor numbers, and inward and outward spending per visitor.

      i) Different rates of inward and outward visitor growth

      It is more likely that outward visitor numbers will grow faster, as has been the trend of the last ten years. Since 1995 the number of visitors to the UK has been growing at an average annual rate of 1.8%, whereas the number of UK residents going abroad has been growing at 5.0% a year. This is the main reason why the UK travel deficit has grown from £3.6 billion in 1995 to £17.2 billion in 2004. It is very conservative to assume that both inward and outward visitor growth increase at the same rates: Office for National Statistics figures for 1984 to 2004 show that there has been a growth of 82% of UK overseas leisure trips by air, compared to an increase of only 38% of overseas residents’ trips to the UK by air80.

      ii) Spending per visit

      Spend per visit has consistently been growing in real terms and outward spend per visit has been growing faster than inward spend per visit.

      Some DfT analysis has optimistically assumed that inward visitor spend will increase faster than outward visitor spend. Historically, inward tourists have spent more than outward tourists. But this gap has narrowed in recent years. Over the last six years inward spending has stagnated, and fell by £20 per visit between 2003 and 2004, whereas outward spending per visit has grown in each of the last six years, and increased by £8 per visit between 2003 and 2004. Currently national average spend is £541 for inward tourism, and £517 for outward. So again it seems conservative to assume that inward and outward spending levels will stay constant relative to each other.

      The Government also states that not all the money spent by British people going abroad goes abroad – for example money spent at travel agents. But with no frills flights, little money is spent at high street agents, it’s mainly booked on-line direct with the airlines. In addition, the National Statistics Office figures are for spend abroad, not total holiday cost, so the deficit is real and not compensated for by agents fees.

      Finally, if the UK is counting tax revenue benefits of airport expansion, it should count the tax revenue loss of this tourism deficit. With a current deficit of £17 billion, VAT loss is £2.5 billion.

      [Ed: Sorry for the delay in posting, this got caught in the spam filter again. Probably because of the length and number of links. But thanks for the detailed comments!]

    2. # John Masheyon 27 Jan 2008 at 10:41 pm

      I’m Californian, and gave up flying through Heathrow years ago, so I’m not in the flight paths, BUT:f

      1) Peak Oil means the date when oil production reaches a peak, and also tends to be when about half of the gettable oil has been gotten. See Wikipedia entry, or the UK’s David Strahan’s website, http://www.davidstrahan.com/index.html . Most countries have already hit their peaks.

      2) Shell recently said the Peak is within a few years, some analysts (and famous oilman T. Boone Pickens) think it was 2006. Suppose we guess 2010 and add in the rapidly growing demand from China and India.

      3) What does that tell you about the price of jet fuel over the next decade?
      Fuel cost is currently about 25% of airline expenses.

      Airplanes will get more efficient, but will they get more efficient faster than jet fuel gets more expensive? [UNLIKELY]

      I’d claim that any long-lived infrastructure investment had better figure in the likely price of fuel over the expected life of the asset, and had better be aware of Peak Oil, and better figure that into its growth estimates.

      I didn’t see that in the consultation document, but maybe I missed it?

      Consider looking up “stranded asset”.

    3. # N. Johnsonon 27 Jan 2008 at 11:42 pm

      If they did not factor in peak oil that would have been very short sighted.

    4. # meanmetaon 28 Jan 2008 at 8:24 am

      Heathrow has more problems than just runway deficiency. I have taken a great many “long haul” (in fact “longest haul”) flights to Heathrow. The 13 hour non-stop flight from Singapore often has to circle Heathrow for up to an hour, or (even more exasperating) wait in a holding area on the ground, until parking space becomes available at the terminal. I can never understand why this is not better planned, but the arrival of a fully-laden747B at the same time every morning seems to catch them unawares.
      Anyway, back on topic, and the satirical humorist Ben Elton’s analogy works very well in this runway debate. He pointed out in “Gridlock” that adding another lane to the ever-congested M25 motorway was akin to having a 2nd wastebin in the kitchen. Far from reducing the amount of rubbish, it just means there will be two overflowing bins needing to be emptied, rather than one.

    5. # Maxon 29 Jan 2008 at 5:52 pm

      Sorry to say but you artical is somewhat missing to point. the problem is to have aircrafts spoiling your life, kids life, making you sick, distressed and unhappy. This will affect hunderds of thousands. This will be very costly in terms of publics health.

      I am a resident in West london, a few year ago BAA said there would be no further expansion after the 5th terminal and here we are. I never asked for this and this is going to spoil my life.

      Last, take my advice: do better things (i.e the things you should do but you don’t want to do) that writing such pretentious articals or go under an existing flight path to experience what resident of west london will have to bear with this 3rd runway if it is built.

    6. # Atmozon 29 Jan 2008 at 7:53 pm

      I am under an existing flight path. Albeit not at an airport that has as much traffic as Heathrow. I am 5 miles from the end of the runway.

    7. # Markon 05 Feb 2008 at 8:53 am

      It’s intriguing to see what pro-expansion people “Presume” but then, what else can they do?

      They doubt that aircraft fly overhead every 90 seconds. Have they ever stood in a garden beside the A4 and the Picadilly line? The Blast of the A4 and underground are trivial compared to the overhead roaring of planes. I doubt if these flight freaks have.
      and yoh es I have timed it in my garden.IF LUCKY there is a 90 second break.
      Are they aware that most non holiday destination planes are half-full (at best) I DOUBT IT
      Im sure they’re oblivious to the fact that EMPTY planes: yes EMPTY planes land at Heathrow so they can reserve their slots. I DOUBT IT
      And I’m sure they’re completely oblivious to the weak case DfT has presented in its Consultation document. (it was amusing to see one person spell it week!!! He/She is obviously an expert on these matters!!!!!)

      1.
      They refused to publish the ANASE report for over 2 years because it contained evidence about noise being against the “official” government guidelines. - what cowards-
      2.
      They only consulted 100,000 people when 3 reports have stated that over 2 million people will be affected if this 3rd runway goes ahead. - what cowards-

      3.
      They only gave out a questionaire asking how many times you has flown from Heathrow! If you hadn’t there was no room to say so and the reaoins why. - what cowards-

      4.
      They refer to publications published,at the latest, in 2003 for most of their presumptions. Oil at $50 a barrel “!!! can you believe it???
      oh dear, if only!!!! Once again, -what cowards-

      5.
      they refused to publish the new flight paths.! Why? it wasn’t faverable to the consultation. - what cowards-

      6. They have chosen a year when concorde screched overhead everty day to compare noise values. Why? They knew the EU would be down like a ton of bricks otherwise. -what cowards.-

      I can go on and on.- There are 25 such “blunders” in this document-

      To be honest, I think this Government is worried about BAA - oops sorry the Spanish firm FERRIVIAL going BUST due to he £9 billion debt figure. That shows it all

      Its MONEY-MONEY-MONEY and sod the electorate as usual.

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