Squeezed airports risk UK missing out on billions of pounds in trade

The UK risks missing out on billions of pounds in trade unless it boosts direct flights to the fastest growing world economies, according to the CBI.

New analysis published by the UK’s leading business group, reveals that adding just one additional daily flight to each of the eight largest high-growth markets would increase UK trade by as much as £1billion a year, with every increase in 1000 passengers generating up to £920,000 in new business.

Read the CBI’s Trading Places aviation report (pdf) >>

Infographic: How flights drive trade >>

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In the report, Trading Places, the CBI warns the UK is failing to keep pace with major European competitors in winning new direct connections to Brazil, Russia and China, hitting long-term export potential, damaging competitiveness and deterring inward investment.

The CBI is calling on the interim report of the International Airports Commission – led by Sir Howard Davies – to support a thriving aviation network by proposing urgent investment in the poor road and rail links to the UK’s international airports, as well as taking action on hub capacity.

Katja Hall, the CBI Chief Policy Director, said:

“Boosting exports is critical to our long-term growth. Our analysis shows that just one new daily flight to the eight fastest growing economies in the world could generate as much as £1billion a year in trade.

“Every day we delay expanding our connections, we risk falling further behind our competitors. Firms in high-growth economies are not waiting for us to make a decision before taking their business to countries with much better flight links.

“For too many businesses, our lack of direct connections means selling abroad to the fast-growing markets is simply not a realistic option. Firms need frequent direct flights to the widest range of markets.”

The interim report of the Davies Commission reports later this year and the full report is due in 2015.

Rhian Kelly, the CBI Director for Business Environment policy, said:

“The Davies Commission must be bold and set out a clear path forward. It needs to provide all of our airports with a sustainable licence to grow, with the ability to link exporters with new opportunities. This means tackling the growth pinch-points in the air and on the ground.

“Without convincing plans on aviation capacity, we risk wasting time circling, while our competitors cruise ahead.”

The CBI is calling for:

Short-Term (by 2020)

Immediate improvements in surface access to UK airports, maximising efficiency for passengers and freight and boosting the catchment area of the UK’s international airports. This should include:

• Pressing ahead with delivery of announced measures such as the western rail link from Heathrow and the station upgrade at Gatwick
• Concerted efforts to address pinch-points in road access to the UK’s network of regional airports including East Midlands, Newcastle and Bristol

Maximising capacity of existing assets if commercially viable, with more flexible ‘mixed mode’ operations at Heathrow.

Medium-Term (delivering in the 2020s)

• New runway capacity in the south of the UK – at Heathrow, Gatwick, Stansted, Birmingham or elsewhere – subject to review of the most feasible option to address current constraints at Heathrow.
• A strategy to increase public transport access to UK airports from 40% to 60% by 2030, supported by new rail links to improve access to key airports such as links to Manchester through a new Northern Hub.

Long-Term (to deliver from 2030)

Explore all options for expanding hub capacity in the South East, including a new airport for London, to meet long-term demand for passenger and freight and support trade growth with new emerging markets. A successful hub must include:

• Sufficient runway and terminal capacity to accommodate future demand projections, domestic flight connections from UK ‘spokes’ and headroom to ensure resilience.
• Excellent connectivity to London and the wider UK transport network, including motorway and high-speed rail links.

Background

The key findings from Trading Places – Unlocking Export Opportunities Through Better Air Links to New Markets are:

Trade is boosted by as much as £920,000 on average for every increase in 1000 passengers between EU countries (UK, Netherlands, Germany, Italy, Spain and France) and the eight high-growth markets sampled (China, India, Indonesia, South Korea, Turkey, Brazil, Mexico, Russia).

Each average flight to one of these high-growth economies increases trade by as much as £175,000, meaning a daily route between the UK and an emerging market is worth as much as £128m a year. It means that the UK could generate as much as £1billion in trade every year from just one new daily flight to each of the eight markets in our sample.

Limited hub capacity and constraints at non-hub airports means the UK fell behind European competitors in winning its share of new flights to key markets between 1993 and 2011– lagging in fourth place of share of new flights to China and Brazil since 1993, and fifth to Russia.

Department for Transport forecasts show that without action, all of London’s airports could reach capacity as early as 2025, with Birmingham joining them by 2040. Heathrow now operates at 99% capacity.

Hub capacity is unconstrained at our major European competitors – Amsterdam has six runways, while Paris and Frankfurt have four each. Heathrow’s growth rate has fallen behind its major competitors – only increasing by 53% since 1992, much lower than Frankfurt (84%), Paris Charles De Gaulle (142%); and Amsterdam Schipol (160%).

Civil Aviation Authority figures indicate that 65% of passengers outside London (50% in London) highlight surface access as the key determinant in choice of airport, but only 11% (25% in London) arrive by public transport.