Heathrow Falls Behind Rival European Airports

September 22, 2011

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London's Heathrow is falling further behind rival European airports in the battle for lucrative routes to emerging markets, according to a study released on Thursday.

The report by Frontier Economics, commissioned by Ferrovial-controlled BAA -- the owner of Heathrow -- said a lack of direct flights to emerging markets was already costing the UK around GBP£1.2 billion a year as trade goes to better-connected competitors.

UK businesses trade 20 times as much with emerging market countries that have a direct daily flight to the UK as they do with those countries that do not, said the report.

It added that international hub-airports like Heathrow are crucial to promoting economic growth and that the amount of through traffic means significantly more flights to emerging market destinations are feasible.

"Paris (Charles de Gaulle) and Frankfurt already boast 1,000 more annual flights to the three largest cities in China than Heathrow... there are 21 emerging market destinations with daily flights from other European hubs that are not served from Heathrow; including destinations such as Manila, Guangzhou, and Jakarta," said the report.

The UK's Department for Transport last month said airports in the south-east of England would be full to capacity by 2030 and that all growth beyond 2040 would occur at regional airports.

Britain's Conservative-led coalition government blocked development of a third runway at Heathrow when it came to power last May and is currently undertaking a review of its aviation policy. London's Mayor, Boris Johnson, supports building a new airport in the Thames estuary instead of expanding Heathrow.

The government sees high-speed rail as the solution to relieving congestion at British airports - much of it caused by domestic flights - but analysts believe this solution is unlikely to be available for at least 20 years.

The government is also considering a GBP£5 billion rise in spending on non-aviation infrastructure in a bid to kick-start the UK's struggling economy, according to a BBC report.

A slew of bad news from the economy, the ongoing euro zone debt crisis and rising tensions in financial markets have stoked fears that Britain could slip into recession again.

The International Monetary Fund on Tuesday cut its forecast for UK growth to 1.1 percent from 1.5 percent this year, and to 1.6 percent from 2.3 percent for next year.

Frontier's report said Heathrow could increase its share of European transfer passengers to 21 percent from 16 percent if it was able to fulfil its potential. Up to 45 destinations could be viably added to the route network at Heathrow, including 15 routes to emerging markets, it added.

"The centre of gravity in the world economy is shifting and Britain should be forging new links with emerging markets. Instead we are edging towards a future as an island cut-off from some of the world's most important markets," said BAA chief executive Colin Matthews.

(Reuters)