London Airport Expansion: Heathrow vs Gatwick

Added on - 03 Dec 2019

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LITERATURE REVIEWChanges in UK's aviation industry can allow the sector to continue to respond to these trendsand this can also change UK's policy obligations. Aviation industry accounts for less than 7% ofUK's overall carbon dioxide emission and air travel has an extremely high carbon cost as comparedto other sources. A prospering aviation sector is important to UK's residents and businesses andabout half of the population travel by air in last many years. The majority of flights are taken to visitfriends and family who live far away from the family (Griggs and Howarth, 2004). However, a fewpeople visit to different places for holiday and other purposes. Hence, it is evident that the leisuretravel is not only critical to aviation market but also it is significant for the entire economy of UK.Aviation sector generates around £12 billion of economic output in the year 2014 and it employedmore than 116,000 workers for the same industry. It also provides a valuable source of governmentrevenue through collection of air passage duty and this consistently increases the revenue ofindustry. But certain problems have been started due to effects of constrained airport capacity inLondon (Jarach, 2001).For many years, Heathrow is full and Gatwick is operating at more than 85% of its capacity.Thus, it remains full at peak times. Therefore, this makes it more difficult for the airlines to operateefficiently. On the other hand, long haul carriers are more reliant on the high volumes of demandand this can only be achieved at the country's biggest airports. As a result, it creates high fares andreduces the connectivity aspects. Increasing delays, cancellations and unreliability causes frustrationamong customers. Thus, it has a direct economic impact on the airline and on the passengers.Ultimately, it changes the productivity aspects of UK (Janic, 2004). Airport capacity constraintsaffect the extent to which airlines can serve demand and this is also a significant barrier to entry fornew players. Hence, it can put pressure on the level of fares in the long haul market. Another crucialconsequence is the decline of domestic services from other areas of UK and this is an issue atHeathrow where domestic destinations are getting priced out by more lucrative long haul routes.There must be expansion in context to airport at London for more development and sustainability.In the year 2013, UK Commission invited proposal to augment the UK's aviation capacitywhere more than 50 options were accessed in detail and three schemes have been identifiedproperly by proper short listing (Howarth and Griggs, 2013). Several projects were accessed duringthat period and a few were taken forward for further development and expansion purposes. Thecommission also carried out detailed studies of the proposal for a new hub airport in the innerThames Estuary. The commission also determined five scenarios about the development of aviationsector and all five aspects are carbon capped and carbon traded forecasts of future aviation demand.2
This includes assessment of need where future demand is primarily determined by the centralprojections for economic growth. Further, it includes global growth which sees higher globalgrowth in demand for air travel in the future (Forsyth, 2007). This is a combination of lower airlineoperating costs. Relative decline of Europe includes growth of passenger demand in emergingeconomies. Another segment is low cost where low cost carriers strengthen their position in theshort haul market. This is expected to capture a substantial share of the long haul market. Lastconsiderable aspect is global fragmentation in which protectionist policies are included whichseems decline in passenger's demand in all world regions.Heathrow Airport plays a central role in maintaining London aviation market position as it isthe largest and most valuable in the world. It provides more than 70% of UK's long haul flights andalso carries more freight by value than all the UK's other airports combined. Providing new capacityto the airport would support trade and it can also enhance the productivity (Givoni and Banister,2006). Along with the same, it can cluster around the airport and thus, the overall economy canexperience long term growth. Heathrow expansion is seen as the best short term option to keepBritain’s competitiveness with other European rivalries such as Amsterdam Schiphol and ParisCharles de Gaulle. The subsequent airport is a bid employer; hence, it has direct effect onbusinesses in the same country. The money to build new runway will be raised privately; hence, byconsidering this aspect, the UK government has postponed its decision over the expansion of airportcapacity. It was supposed to decide by the end of 2015 and government thought to build a thirdrunway at Heathrow Airport to the west of London (Starkie, 2001). The government also decided tobuild a second runway at Gatwick Airport to the south, apparently due to additional need of airport.Demand for flights is expected to double by 2050 and according to a recent surveyconducted by the Confederation of British Industry with AECOM; nearly half of UK businessesthink that air transport is linked to their increasingly important emerging market trade partners. Thevast majority of UK businesses regarding expansion of airport capacity in UK's crowded South Eastare essential because major number of clients is experiencing problems due to inadequate provision.The airport commission was established by the Department of Transport in the year 2012 with themandate to set out the way in which UK can maintain its status as an international hub for aviation.Most of the economists articulated that London needs to have an additional airport so as to securethe country's status as a major economic power (Carruthers and, 2011). Heathrow hasovertaken as the world's busiest airport, Dubai International and during that period, Gatwick andHeathrow hosted more than 100 million travelers last year. Furthermore, airport expansion has beena thorny issue since 1970's when the first Airport Commission's proposal for a new airport to thenorth- east of capital was rejected by the conservative government. A new third runway at Heathrow3