Transcript London’s future as a world city: Why the UK needs a new

London’s future as a world city:
Why the UK needs a new hub airport
Richard de Cani
Director of Transport Strategy & Planning
Transport for London
London has been a global leader in aviation
• As a small island nation, connectivity with
the rest of the world has been key to the
development of London as a global city
• Originally a military airport, ‘London Airport’
opened for commercial operations in 1946
• Even in the 1960s, the busiest airport in the
world with 8 million passengers per annum
• Heathrow has been the primary international
gateway to London and the UK for the past
60 years
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The growth of London’s airport network
LONDON
LUTON
LONDON
STANSTED
LONDON
CITY
LONDON
HEATHROW
LONDON
SOUTHEND
• But even as Heathrow prospered
in the 1960s, Gatwick was being
developed and Stansted was on
the way
• London took a historic turn in the
path and decided on multiple,
unlinked airports, not a single
large hub
LONDON
GATWICK
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3
Expansion at London’s airports
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4
This has benefited London’s economy
• London receives more FDI than any European city: as of 2011, London
received 323 FDI projects, more than twice than its closest competitor
Paris (with 148 projects), and more than countries such as the
Netherlands, Belgium, Russia, Poland, Ireland and Switzerland.
• In 2010/11, over 94,000 jobs were created and safeguarded in the UK
by FDI
• London attracts more international companies from the ICT, electronics,
financial services and creative industries than any other European city,
• London is home to more European HQs than any other city in Europe
with 420 FDI projects between 2003 and 2011, 19% of all EU share
during that period. Closest competitors are Paris and Dublin, with only
81 and 64 respectively.
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London is the worlds global city
• More than 233 languages are spoken in London
• Over a third of London residents were born outside the UK
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The current situation
• In total, London’s airports accommodate more passengers than any
other city in the world
• However, Heathrow, the only hub airport, is full with 99% utilisation
and rising
• Gatwick is filling up at 76% utilisation and rising
• And yet Stansted is empty?,39% utilisation and falling...
• Highlighting the significance and agglomerative effects of the hub
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London is growing
• London is growing at its fastest rate since the second world war
• Currently 8.4 million people - now forecast to grow to 10 million
people by 2040
8.5
Greater London Population (millions)
8.3
8.1
7.9
7.7
7.5
7.3
7.1
6.9
6.7
Pre-Census (2011) mid year estimates
Population (millions)
6.5
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We need a clear aviation strategy for the UK
• The UK government has reviewed
its demand forecasts for aviation
• This highlights that UK-wide
demand will increase in a central
case from around 230 million
passengers per annum now to
320m by 2030, and 480m by 2050.
• Given lead in times to plan for new
capacity, decisions need to be
taken now to enable this capacity to
come on stream by 2030
DfT capacityunconstrained demand
forecasts for
Heathrow
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Total Destinations Served has been falling
Total number of destinations served
Weekly departing seats to mainland Chinese
destinations (OAG, June 2011)
Heathrow
Seats
London Heathrow
Amsterdam Schiphol
Paris Charles de Gaulle
Frankfurt
Madrid Barajas
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8,915
11,008
15,078
17,583
1,250
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The Mayors vision for London
• The Mayor’s vision is for London to be the best big city in the world.
• For London to be the World Capital of Business, and to have the
most competitive business environment in the world; to be one of the
world’s leading low carbon capitals, for all Londoners to share in
London’s economic success and for London to maximise the
benefits of the 2012 Olympic and Paralympic games.
• For London to achieve this and to sustain its current status as a
global city, it needs to maintain and enhance its connections to the
rest of the world
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The network of global connections will
need to expand and grow as the world
changes
OAG Schedules data, June 2011
Changes in connectivity to destinations
served at Heathrow, 2002-2011
OAG Schedules data, 2002 and June 2011
Growth in GDP of leading world economies,
2009-2050
PriceWaterhouseCoopers, the accelerating shift of global economic power: challenges and opportunities, 2011
Fastest growing cities in terms of total GDP growth
between 2007 and 2025
Mckinsey Global Institute, Urban world: mapping the economic power of cities, 2011
Current weekly frequencies from London to 25 cities with forecast
highest GDP growth between 2007 and 2025
OAG, OAG Schedules data, June 2011 & Mckinsey Global Institute, Urban world: mapping the economic power of cities,
2011
We have a decision to make
• Whatever the rest of the world thinks, it naturally matters
to Londoners that their city should continue to feature on
the world stage
• The UK Government has set up a Commission to ponder
these things – it will report in 2015
• The key question is whether to:
– continue with a policy of building up disconnected
airports, drawing mainly on the O/D market; or
– make an historic decision to invest in a new hub
airport, with four runways to start and room to grow?
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Could we continue with multiple airports?
• London is home to 8 million people – growing to 10
million with twice that in the wider South East of the UK
• Many are relatively well-off, natural aviation consumers
and this adds up to one of the strongest underlying
Origin-Destination markets in the world
• But, reliance on O/D market leaves us in sub-optimal
position if we ignore transfer traffic
• If our objective is to maximise connectivity to the rest of
the world – a hub is the model which best achieves this
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It has to be a hub
• Transfer traffic makes viable a wider range of
routes with higher frequencies of flights
• Even with a very strong O/D market,
it still helps to add transfer traffic on top
• The success of other countries’ airports
has proven the case for a hub
• Not least of these is here in Dubai:
DXB is now the second busiest airport
globally (after Heathrow) and tipped
to move into first place by 2015
Some routes at Heathrow that
rely on transfer traffic for
viability
Transfer
passengers
Hyderabad
80%
Chennai
72%
Mexico City
61%
Montreal
56%
Vancouver
52%
Source: Frontier Economics, Connecting for Growth, Sept 2011
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But it cannot be at Heathrow
• The noisiest airport in the world
Responsible for 28% of all the people in Europe affected by aircraft
noise (766,100 people)
• Highly constrained site
More passengers than Paris Charles de Gaulle
but half the size
Hemmed in by major national motorways
• Already operating under stress
99% full means zero resilience for coping with e.g. bad weather
No room for growth
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Number of people exposed to noise exceeding 55dB Lden
from Europe’s principal hub airports
Compiled by ERM from various sources
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A new site: the Mayor’s emerging view
• A new four-runway hub airport
to the east of London
Either in the Thames Estuary or on
the site of London Stansted Airport
NEW LONDON
AIRPORT?
• Allowing us to compete with Europe
and the rest of the world
NEW LONDON
LONDON
AIRPORT?
• Unprecedented regenerative
intervention in South East UK
• A stimulus to the whole UK economy
• A chance to be a world city
that is world class
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A new airport as part of a wider strategic
plan for the UK
But how can we make that happen?
• Only with support
• Politically
UK Government support key
• But also in the industry
Not in the interests of the incumbents
– both Heathrow and the airlines
• Doing nothing is not an option
What is better for airlines: 8-year wait to get into Heathrow or the
chance of an unconstrained new airport?
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Challenges
• There would need to be a clear policy statement addressing the
future of Heathrow; any changes in regulation and approaches to
surface access and environmental mitigation
• There would need to be a public commitment of funding support
and clear involvement of the private sector
• There would need to be support from airlines
• The UK is at a key decision point that will set the direction of our
global connectivity for the next 60 years
• There are many challenges to overcome but with Government and
industry support these could all be addressed – this has been
done elsewhere
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