Last month, the government approved Heathrow Airport’s plans to construct a third runway. Faced with mounting costs and long-standing opposition by pressure groups, will the expansion project ever get off the ground – and is it even necessary?
The fraught topic of whether a third runway should be built at Heathrow Airport has lingered in the public consciousness since the 1980s. Abandoned by successive Prime Ministers and even blocked by the Supreme Court, Keir Starmer himself once voted against plans for the airport’s expansion, citing environmental concerns.
In 2015, alarms bells were sounding about the future of the UK’s biggest and busiest airport. The Airports Commission Final Report, published that year by the organisation’s chair, Sir Howard Davies, made the ominous claim that “Heathrow is operating at capacity […] the entire London system will be full by 2040.” The report’s arguments in favour of a new runway remain highly influential over a decade on.
Faced with these enduring claims of impending disaster, some observers remain sceptical. The Chartered Institute of Logistics and Transport (CILT) is one of them. In a statement, the organisation said that the market and operating environment has changed since 2015, and the case for expansion is therefore “no longer clear-cut”.
The economic landscape has changed – and so has transfer traffic volumes
According to Chris Tarry, Chair of the CILT (UK) Aviation Policy Group, Britain’s economic circumstances look very different to what was forecast a decade ago. This affects passenger volume as people have less disposable income to spend on travel, among other factors.
“Essentially, traffic is driven as a function of GDP,” he says. “Over the 2015-2019 period, the UK’s GDP grew at 75% of the rate used in the report, and since 2023 it has only grown by 25%.”
He adds that one of the key drivers of activity at Heathrow is transfer traffic, which accounts for 21% of its total passenger volume. This, too, has continued to decline, particularly as other airports’ capacity for point-to-point traffic has risen over the past decade.
The impact of innovation in long-range narrowbodies was not taken into consideration in past forecasts, he says, allowing smaller airports to offer more point-to-point routes and eliminating the need for passengers to transfer at Heathrow in many cases.
Heathrow’s role as a major “hub” airport, serving as a demand aggregator for airlines and offering multiple flight connections, is therefore not as pivotal as it used to be.
“The unique catchment area for Heathrow is quite small,” he says. “In terms of inbound traffic, most passengers are indifferent to which airport they fly into […]. We’ve already been seeing Gatwick taking on more long haul flights.”
This phenomenon is not exclusive to Heathrow, and has played out in other parts of the world. For example, Tarry highlights that more flights originating from North America are now going to destinations in Europe and beyond, while Air India has introduced more routes to Canada and the US.
Last month, Manchester Airport inaugurated the North’s only direct service to the world’s most-visited city, Bangkok.
Other London airports have added capacity
Moreover, other major London airports, such as Gatwick and Luton, have scaled up their infrastructure and added slot availability since the Davies report was published, reducing the pressure on Heathrow.
“Look at where the demand has grown in London – airports other than Heathrow have grown in capacity,” Tarry says.
“Gatwick has had the go ahead [for expansion] – if they are able to reach the service requirements, that will bring 95,000 extra slots, and [the Luton expansion] adds another 85,000.
“We need to look at what is going on now, and what the market is going to be like in the future,” he adds.
Will the cost be worth it?
Tarry points out that Heathrow’s third runway proposal in its current form lacks detail, leaving some questions unanswered. “One of the things conspicuous by its absence is the impact of charges,” he says.
Notably, there has been some concern over the £49 billion privately-financed price tag for a expansion project at what is already one of the most expensive airports in the world, despite its charges falling by 19% in real terms since 2014.
EasyJet’s CEO recently confirmed that the airline would be willing to schedule flights out of a future Heathrow with added slot availability “if the price is right”. However, he caveated that this scenario is unlikely to occur should the airport become more expensive. Tarry estimates that the increase in charges at the airport as a result of the cost of the expansion may be equivalent to three quarters of EasyJet’s average fare.
Heathrow partly blames its elevated charges on uniquely high costs of energy and construction and the prevalence of long-haul flights at the airport. In contrast, Heathrow Reimagined, a campaign group made up of airlines and local businesses, cites a “flawed regulatory model” that incentivises over-investment in capital projects.
“[There has been a] clear recognition by Heathrow about how much more overcrowded terminals are going to get, and the passenger experience is not going to improve,” Tarry says.
“The new runway has to be fit for purpose for how markets are going to be and what airlines are going to want. It has to be affordable and comply with environmental regulations.”
The runway’s final design is still uncertain
In November, the government announced that it had opted for Heathrow’s own proposal to build a 3,500m runway over hospitality giant Arora Group’s plans for a shorter, 2,800m design. Arora had argued that its alternative would deliver around £10 billion in savings and avoid the need to move the M25.
Notably, Sean Doyle, CEO of British Airways, voiced his support for the expansion, but expressed a preference for a shorter runway to prevent works on the motorway.
However, there is a long way to go before the first plane takes off from the expanded airport, with the government’s 2035 deadline representing a highly optimistic target.
A consultation on the Airports National Policy Statement (ANPS), a document providing the basis for decision making on expansion at Heathrow, is set to take place next summer, while the UK Civil Aviation Authority (CAA) will undertake a review of Heathrow Airport’s regulatory model.
“The regulatory environment is not in place for [the expansion] to go ahead,” stresses Tarry. “What we saw was a decision on one project over the other, but at the same time a recognition that it may come out in a different form.”
“We need transparency – the most important thing is to go into [a consultation] with an open mind of what the market really needs,” he adds.
Regulation may need to change
The debate about Heathrow’s regulatory framework is almost as well-worn as the controversy over its third runway. Among other responsibilities, the CAA sets price controls that limit what the airport can charge for airport services, and signs off on overall budgets for each project.
These budgets are jointly agreed upon by both the regulator and airlines, and the detailed design and cost of every project must secure four layers of approval before construction can begin.
However, Heathrow Reimagined has long called for changes to how the airport is regulated, citing high costs, declining passenger experience and ageing infrastructure.
Its members include Arora Group, as well as organisations such as Heathrow Airline Operators’ Committee, American Airlines, International Airlines Group and Virgin Atlantic.
The group said: “It is now critical that expansion is delivered affordably, with a regulatory model that effectively controls Heathrow’s capital efficiency and delivers competition to improve value for money for consumers and businesses.
“The [CAA]’s review creates a much-needed opportunity to reimagine the flawed model […]. A new approach can create a global hub fit for the future, driving economic growth.
“Fundamental reform is essential to ensure that costs don’t rise further, and that the benefits to UK plc are delivered in full.”
Does Heathrow need a third runway?
Despite claims that arguments for a third runway are based on outdated evidence, Heathrow remains the busiest airport in the UK and the most well-connected airport in the world.
Seemingly each month, the airport breaks another record for the number of passengers passing through its doors. Proponents argue that an expansion is necessary to bolster the economy and keep the airport competitive as an international hub.
The runway could provide new routes to a minimum of 30 destinations, allowing the airport to handle as many as 756,000 flights and up to 150 million travellers each year. Some claim that this would drive down fares through increasing choice and competition, as well as boost GDP by 0.43%.
However, the need to acquire planning permission, the purchase of expensive land and the potential legal challenges launched by those hostile to the runway and its environmental impact, including London Mayor Sadiq Khan himself, are all likely to cause significant delays.
Moreover, the nearby villages of Harmondsworth and Longford risk being at least partially demolished to make way for the airport’s new infrastructure.
With Keir Starmer suggesting that the government will do “whatever it takes” to ensure that there are “spades in the ground” by 2030, it remains to be seen if this timeline will hold steady – and whether the Heathrow project will one day take flight.
