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Heathrow Says Capacity Limit Costs U.K. 14 Billion Pounds

Nov. 15 (Bloomberg) -- Limited capacity at London’s Heathrow Airport costs the U.K. as much as 14 billion pounds ($22.2 billion) a year in lost trade as other European hubs boost connections to growing economies like China and Peru, the airport operator said.

Twenty-six emerging-market destinations are connected by daily flights to other European cities while lacking a direct link to the London hub, Heathrow Airport Ltd. said in a report released today in partnership with consultant Frontier Economics. Among destinations without London Heathrow routes are Chengdu and Hangzhou in China, as well as Manila and Lima.

The U.K. needs a single hub airport to maximize the nation’s connectivity and boost economic growth, Heathrow Chief Executive Officer Colin Matthews told reporters in London. The government must either increase capacity at Heathrow, Europe’s busiest airport in terms of passenger numbers, or build a new hub, he said. The trade gap could almost double to 26 billion pounds by 2030 if nothing is done to improve the country’s air transport links, according to the report.

London’s airports are suffering a capacity squeeze, with Gatwick and Heathrow close to full as Boris Johnson, the city’s mayor, pledges to block any expansion in favor of a new hub in the Thames Estuary. Prime Minister David Cameron, who decided in 2010 not to sanction a third Heathrow runway, ordered an inquiry into capacity requirements. The Airports Commission is due to report after the next U.K. parliamentary election in 2015.

‘Monopoly Past’

“The Airports Commission needs to look to the future and not to Heathrow’s monopoly past,” Gatwick Airport Ltd. said in a statement today. “It will need to decide whether a competitive airports network in London, delivering more passenger choice, connections, convenience and lower prices, is more preferable to propping up an outdated and unnecessary expanded Heathrow.”

Heathrow handled 69.4 million passengers in 2011 and is operating close to the capacity of its two runways at 480,000 flights annually. Unable to add routes without cutting links to existing destinations, the hub is losing traffic to Paris and Frankfurt, which both have enough runways to serve about 700,000 flights a year.

Chinese Ties

Mainland China’s three largest cities have a combined 1,500 more flights a year out of Paris and Frankfurt than from Heathrow, Matthews said.

Heathrow also needs to accommodate new links while maintaining existing connections that wouldn’t be lucrative from other airports, Matthews said. The hub connects to 75 long-haul destinations that aren’t served by, and wouldn’t have ties to, any other airport in the U.K., he said.

Airlines at Heathrow are able to pool travelers willing to pay a premium to fly direct with transfer passengers looking for cheaper fares, Matthews said. Daily direct long-haul flights to destinations like Hyderabad, India, or Mexico City would be uneconomical without transfer traffic, he said.

To contact the reporter on this story: Kari Lundgren in London at klundgren2@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net

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