Monday, July 6, 2015

London Heathrow Expansion Has Ramifications for Air Freight and Logistics Groups

Polar Opposite Forces Join in Praising Sir Howard Davies' Report
Shipping News Feature

UK – The report published last week by the Airport Commission chaired by Sir Howard Davies, whilst not approved by many, seems to have a broad spectrum of support from those associated with the air freight sector. The report states that London’s Heathrow airport is the most suitable site for expanding the city’s air cargo capacity with the development of a third runway. Sir Howard expressed the opinion that the extra runway was most needed to develop long haul capacity to new and expanding markets, an aim which he believes Heathrow is eminently suitable for. This view has been backed up by a cross section of the logistics community including the Freight Transport Association (FTA), with Director of Global and European Policy, Chris Welch, saying:

“It is reassuring that Sir Howard has reviewed all the evidence and concluded that a third runway at Heathrow is the best option, ensuring the UK remains competitive in the global air freight market. Additional capacity at Heathrow is critical to allow importers and exporters to access new and emerging markets in Asia, South America and the Indian sub-continent. the FTA urges the Government to take on board these recommendations and act quickly.

“We are delighted that the Davies Commission has recognised how important air freight is to the future success of the UK economy and it is clear that this has been a key factor in today’s recommendation to expand Heathrow. Heathrow is a world-class air cargo hub, and it is vital that is it able to expand to meet the demands of UK importers and exporters to enhance connectivity to emerging overseas markets.”

The FTA says its own 'Sky High Value’ report on airport capacity in the south east, plus a report commissioned by the FTA and undertaken by York Aviation, both confirmed Heathrow as a vital hub for air cargo and underlined that a failure to invest in new runway capacity would result in UK exporters and importers losing competitive edge to continental competitors, with the real possibility of services transferring to airports on the continent. This view was also reflected by British International Freight Association's (BIFA) Director General, Robert Keen who commented:

"Over the past decades, successive UK governments have shown a singular lack of vision in the face of a massive surge in air transport and consequent pressure on existing airport infrastructure in the South East. In 2009, BIFA gave qualified support to the then UK government's decision to allow a third runway at Heathrow airport. BIFA's hope is that the recommendation delivered in today's report moves things forward in regard to getting started on an expansion of UK aviation hub capacity.

"It is now time for everyone, including politicians of all parties, to pull together in the national interest and support the bold plans to expand and improve airport infrastructure at Heathrow in order to maintain the UK's position as Europe's most important aviation hub. We trust that today's report will finally lead to some action."

The Commission’s conclusions came with a swathe of provisions to make the proposal more palatable to those directly affected by the potential increase in flights, particularly the people who live under the flightpath. These include a ban on any further expansion of LHR, guarantees that there will be no increase in noise levels and a ban on flights before 0600 hours. The Commission was tasked with considering three options, extension to the existing runway at Heathrow or a new runway at either Heathrow or Gatwick. Sir Howard said the commission rejected the runway extension scheme and had ‘unanimously’ favoured building a third runway at Heathrow. However, he said expansion at Gatwick was still a credible option. This last point was taken up by two parties generally representing opposite views in many situations, accountants KPMG and the GMB union. Mick Rix, GMB National officer, said:

"More capacity is needed at both Heathrow and Gatwick and both airports can benefit from further investment with operators at both committed to decent well-paying jobs. Heathrow is currently operating at 98% capacity. The politicians have to grasp this issue as over 76,000 people are employed directly at Heathrow, and another 38,000 local jobs rely on it. Without a third runway Heathrow would fall into decline and in a short space of time, face closure."

Meanwhile James Stamp, global head of aviation at KPMG expanded on the theme, couching the arguments for the development in more extensive terms, saying:

"We welcome the final publication of the Davies commission findings. The rigorous report has made a clear recommendation in favour of Heathrow, but equally, it has not ruled out expansion at Gatwick in the future. We expect both airports to play a very important role.

“A significant amount of time, effort, and energy has been spent at arriving at the conclusions. Strong account has been taken with the need to meet EU air pollution limits, address noise pollution concerns and move most ground traffic from road to rail. What must happen is action by the politicians: further delay would significantly damage UK plc.

“In context, the UK has not built a full-length runway in the South East since World War 2. Our neighbours in the EU have overtaken us - Frankfurt, Paris, and Amsterdam already have much more runway capacity. What this means is that we’re losing out in the global connectivity race: Paris already offers 50% more flights to China than London, for example. This is significant, because by 2025 there will be 7,000 new $1 billion companies globally, and nearly 7 in 10 will be in emerging economies. If we want to connect with these we have to act.

“With the world’s biggest cities planning 50 new runways by 2036, allowing for 1 billion new passenger journeys, we simply can’t afford any further political delay. Given that Dubai will soon have more capacity than all of London’s airports combined, it is clear that expansion of airport capacity in the South East is a must. The world is watching to see if London and the UK has the ambition to maintain its position as a Global trading hub, we’re losing ground to our competitors, and further political delay would be unacceptable.”

Heathrow already has a cargo throughput seventeen times larger and one hundred and seventy times more valuable than Gatwick’s, and in fact carries more freight than all of the UK’s other airports combined. Sir Howard Davies, who will take over as head of RBS in a couple of months, said that the new Heathrow runway would see GDP jump by 0.65% to 0.75% by 2050, whereas the same move at Gatwick would only approach half of such an increase.

With so much industry support, and a government securely in place for five years, it seems any local objections may be swept aside as the bid to maintain London as a centre of excellence for air freight proceeds apace.

Photo: Sir Howard Davies