A new report argues that the economic case for Heathrow Airport's expansion is flawed because it assumes air travel demand will increase in future years.

As reported extensively by Airport International in articles on the Heathrow expansion plans and consultation, one of the arguments for Heathrow's development forwarded by those supporting the expansion is that a third runway and sixth terminal is needed in order to cope with the anticipated increase in global demand for air travel.

For example, Virgin Atlantic chairman Sir Richard Branson recently argued that people have a natural "desire to travel, whether for pleasure or work", and that statistics show this desire is expected to increase over the next 40 years.

However, a report by the Stockholm Environment Insitute says this forecast increase in demand may have been overstated in the consultation.

Stockholm Institute Heathrow Report

The key detail in the economic case for expansion rests on the issue of "generated user benefits" - in other words, the extra economic value generated by a third runway.

The consultation document says a third runway would add 220,000 extra flights per year to Heathrow by 2030, which the government estimates could bring an extra £9 billion.

But researchers at the Stockholm Environment Institute (SEI) say this assumes that air travel demand consistently increases over the next decade, and that oil prices remain low.

Consequently, the researchers say, the economic case for expansion is "flawed", and that actually the cost of development may outweigh the benefits.

The Stockholm researchers said in a report: "If demand for flights is smaller than the Department for Transport expects, or if airfare is higher (owing to increases in fuel prices, for example), then generated user benefits will be smaller, and so too will the total benefits of airport expansion".

They added that the predictions were "strangely out of step with common predictions for oil prices".

Airport Costs

The SEI also said the government wrongly assumed that non-fuel airport operating costs will continue to fall up to 2020.

The report said: "If the recent drop in non-fuel costs was a one-time change, resulting from the introduction of budget airlines, then those cost categories may not continue to decline - and generated user benefits will be reduced".

Anti-expansion campaigners welcomed the report, which came hot the heels of the criticism levelled at the government and BAA on Monday by MPs Justine Greening and Michael Meacher.

Meanwhile, the government and BAA both criticised the Stockholm report, both noting that it was commissioned by Friends of the Earth - a vocal anti-Heathrow expansion campaigner.

The Department for Transport said: "The government has been transparent in producing demand and emissions forecasts and we have produced much technical work to support the consultation".

A BAA statement read: "This is not a serious or impartial piece of academic research," said BAA. "It is a report which completely misunderstands or misrepresents the economic value of Heathrow airport and the way it operates".

Source - Airport International's London Reporter

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