business transport

Can an airport affect a whole economy?

A 3rd runway now, and hold the common sense.

This week saw a rearranging of the deckchairs on the good ship coalition, with promotions and demotions in the UK cabinet. Most of it is for the sake of the Conservative backbenches and is irrelevant to the running of the country, but the London papers are rattled about one move. Justine Greening, a vocal opponent of the third runway at Heathrow, has been replaced. Many are taking this as a sign that the Conservative party, if not the government, will reverse its position on the runway. David Cameron certainly won’t rule out a change of direction at the next election.

I wrote last week about the uphill struggle that any such project would be, and the weighty case against expanding Heathrow. I’m going to just a little more to that, as a briefing on the economic case for the 3rd runway came out on Monday. It’s from PRIME, (Policy Research in MacroEconomics) and it’s written by Ann Pettifor and Jeremy Smith.

When advocates for the third runway make their case, it’s a fairly simple one. Direct flights mean closer relationships with other countries and thus more business and exports, which is good for the economy. In the last decade or so Paris CDG and Schipol have grown much faster than Heathrow, and they are commanding an increasing share of the market. If we don’t step up and expand capacity, Britain will lack direct routes to emerging economies and the economy will miss out on trading opportunities with the BRIC nations.

That’s all reasonable enough, except that the repeated assertion is that having a leading hub airport is not just good or useful for the economy, but critical. If we don’t outgrow the European competition, it will “stifle growth” and “hold back the recovery”. Britain will “fall behind”.

“a new approach [to aviation] could not only energise the sector but also provide a firm foundation for the UK’s economic recovery.” says Labour MP Brian Donohoe.

“In every other leading country, aviation is expanding and is injecting much needed growth across the wider economy.” says a Virgin spokesman

“The lamentable failure to increase airport capacity means that jobs are already being lost to our competitors” says the Institute of Directors.

You will hear these sorts of soundbites every time the 3rd runway is discussed in the media, and as I mentioned before, it appears to be based more on the lobbying of Heathrow owner BAA than actual evidence. It assumes that an airport can affect the performance of an entire economy. So let’s test that, say Pettifor and Smith.

As we keep hearing, Paris CDG and Schipol are growing, encroaching on Heathrow’s status as Europe’s largest airport. (That’s a title Heathrow still holds by 8 million passengers, something we should remind ourselves of when people like Tim Yeo describe our airports as “third world“). Here’s a comparison of Heathrow’s three big competitors.

Airport

Size in 2011

Growth, 2000-2011

Heathrow

69 million passengers

6.2%

Frankfurt

56 million passengers

14%

Schipol

52 million passengers

25%

Paris CDG

61 million passengers

27%

As you can see, Schipol and Paris have grown dramatically, while Heathrow and Frankfurt have grown more modestly. If hub airports are as important to an economy as the runway cheerleaders say, you’d expect this airport growth to be reflected GDP figures, right?

By the BAA logic, the French economy should be the envy of Europe with an airport growing 27% in a decade, and Holland should be soaring ahead of earthbound laggards like Britain and Germany.

No such correlation exists because airports are just not that important, and because the economy is complicated and involves thousands of different factors. Airports and direct routes aren’t necessarily, and they certainly create jobs and retail opportunities locally, but national economies do not pivot around their airports. This inflated view of aviation is a gigantic exaggeration, a fiction put about by an airport-owning corporation and believed all too quickly by politicians desperate for solutions to a failing economy.

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