A report by The Confederation of British Industry (CBI) into capacity constraints at the UK’s airports has highlighted the economic value of new air services. In its Trading Places - Unlocking Export Opportunities Through Better Air Links to New Markets study, the CBI, one of the UK's leading independent employers' organisations which represents over 250,000 public and private sector and lobbies policymakers on behalf of more than 240,000 business across multiple sectors, says capacity issues at the UK airports mean the country risks missing out on billions of Pounds of trade. According to the CBI, one daily flight to key emerging markets could boost UK trade by as much as £1 billion a year.

In the report, 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. Its analysis shows that adding just one additional daily flight to each of the eight largest high-growth markets would increase UK trade by as much as £1 billion a year, with every increase in 1,000 passengers generating up to £920,000 in new business. This is a formula calculated by looking at the EU countries of the UK, Netherlands, Germany, Italy, Spain and France and the destination high-growth markets of China, India, Indonesia, South Korea, Turkey, Brazil, Mexico and Russia.

“CBI analysis claims that adding just one additional daily flight to each of the eight largest high-growth markets would increase UK trade by as much as £1 billion a year, with every increase in 1,000 passengers generating up to £920,000 in new business.”

The Confederation of British Industry (CBI)
Trading Places - Unlocking Export Opportunities Through Better Air Links to New Markets report

According to the CBI, 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 £128 million a year. The UK has fallen behind its European rivals and the CBI data shows that 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.

In fact the capacity issue is so serious that 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 already operates at 99 per cent capacity. Meanwhile, Hub capacity is unconstrained at the UK’s 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 per cent since 1992, much lower than Frankfurt (84 per cent), Paris Charles De Gaulle (142 per cent) and Amsterdam Schipol (160 per cent), says the CBI report.

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.

“Boosting exports is critical to our long-term growth. 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,” said Katja Hall, Chief Policy Director, CBI. “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, 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.”

“Boosting exports is critical to our long-term growth.  Every day we delay expanding our connections, we risk falling further behind our competitors.  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.”

Katja Hall
Chief Policy Director, CBI

In the Short-Term up until 2020, the CBI is calling for 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. These 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 and maximising capacity of existing assets if commercially viable, with more flexible ‘mixed mode’ operations at Heathrow.

In the Medium-Term covering the 2020 decade, the CBI says new runway capacity in the south of the UK – at Heathrow, Gatwick, Stansted, Birmingham or elsewhere – is required, subject to review of the most feasible option to address current constraints at Heathrow, while a strategy is required to increase public transport access to UK airports from 40 per cent to 60 per cent by 2030, supported by new rail links to improve access to key airports such as links to Manchester through a new Northern Hub.

In the Long-Term, The CBI says the Commission must 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. This hub, it says, must include sufficient runway and terminal capacity to accommodate future demand projections, domestic flight connections from UK ‘spokes’ and headroom to ensure resilience as well as excellent connectivity to London and the wider UK transport network, including motorway and high-speed rail links.