The UK must prioritise a single hub airport with spare capacity to support trade
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Posted: 1 September 2014 | CBI | No comments yet
Decision must support UK’s emerging market air links…
Having a single UK hub with spare capacity to add new routes is critical to the UK’s long-term sustainable growth, according to a new CBI report.
With future export opportunities increasingly in emerging, high-growth economies, the CBI urges the Airports Commission to deliver recommendations to solve the UK’s shortage of runway capacity and spark new connections with the export markets of tomorrow.
Building on 2013 findings that demonstrate that eight new routes to emerging markets alone would generate as much as £1bn a year in trade, the report highlights that by drawing on both transfer passengers and local populations, hub airports are best placed to act as a catalyst for these new routes. Research by Steer Davies Gleave, for the CBI, shows that from a sample of 15 emerging markets, hub airports serve on average nearly three times as many destinations as point-to-point airports (27 to 8 destinations), while also delivering almost twice as many flights on the routes that are served – 1.5 daily flights from hubs on average, compared to 0.8 from point-to-point.
With the UK’s hub capacity at Heathrow already full, the UK is falling behind on direct flights to emerging markets. The report highlights that by drawing heavily on transfer passengers, the UK’s EU competitors with their own unconstrained capacity are creating connections to new destinations within the BRICS such as Xiamen in China and Recife in Brazil, as well as links to the major markets of the future, like Peru, Indonesia, Taipei and Chile.
Katja Hall, CBI Deputy Director-General, said:
“The Chancellor has set businesses ambitious targets for increasing the UK’s exports, and there is simply no way of achieving these goals without upping our game in emerging markets.
“Our analysis last year demonstrated that connectivity is the lifeblood of trade, but it also highlighted that the UK is already falling behind, so every day we delay making a decision, makes matters worse.
“First and foremost, UK business wants action. There can be no more excuses – we need to see the Airports Commission deliver a strong case for new capacity and a clear schedule for delivery, and politicians to commit to spades in the ground by the end of the next Parliament.
“But this research shows that while all airports have a role to play in growing the UK’s connectivity, not all airports play the same role.
“While no-one can predict the future of air travel, the track record shows that it tends to be hub airports that deliver the new connections to emerging markets that we desperately need.
“With Heathrow full and the UK slipping behind in the race for new connectivity, it is essential that the Airports Commission delivers a solution that addresses the ticking time bomb of our lack of spare hub capacity.”
The research demonstrates that spare capacity is important because where a hub becomes constrained, airlines tend to focus on strengthening routes to markets that are already popular, rather than using transfer passengers to spark new routes.
This explains why the UK has done particularly well in growing new routes to emerging markets like India: with around 1.45 million people of Indian descent living in the UK, ground passenger demand is high. It also explains why the UK’s track record with China, Brazil and Russia has been much less impressive, with the UK ranking in 4th or 5th place when it comes to capturing a share of EU flights to these markets in the last 20 years.
Ms Hall said:
“Transfer passengers are the key ingredient that help make new routes thrive, but without spare capacity, they tend to get squeezed out.
“There is little appetite from business users to land at one airport in the south-east, collect baggage, clear customs and then travel to a dedicated long-haul airport.
“This means that if we are to spark new connections that drive trade, we need a solution that creates spare capacity at a single-site hub.”
The report warns however that the Airports Commission cannot afford to ignore the UK’s wider network of airports in its recommendations if maximum connectivity is to be achieved. As well as expanding the range of direct connections on offer across the UK, the report demonstrates that where competition exists on routes, airfares are significantly reduced. Using transatlantic flights as an example, the research shows that routes that are served by multiple airports at each side tend to be as much as £500 cheaper than those served by just one destination at each end.
As a result, the report warns that the Airports Commission must deliver a solution that injects competition for routes wherever possible, urging the Commission to deliver an action plan that boosts ground access infrastructure to airports across the UK, as well as kick-starting the process of deciding where a second new runway in the south-east might be required by 2050.
Ms Hall said:
“It’s not a case of either / or when it comes to improving hub capacity in the south-east or point-to-point connectivity across the UK.
“While a hub is key to getting new routes started, at that point where emerging market opportunity turns into established trading partner, we need the means to move quickly to win new business.
“A thriving network of point-to-point airports will deliver another major plus for business users – affordability. Where demand exists, we need to take action to support the development of direct links, injecting competition wherever possible.
“Figures show that if people can’t easily get to an airport, they won’t use it, so sometimes our infrastructure on the ground is the missing link to the new air connections we need.
“We also can’t ignore the next capacity crunch which looms on the horizon by 2050. If we are to avoid yet another damaging investment hiatus that put a brake on competition in the south-east, it’s important we think ahead now.”