Airport expansion – is it really necessary?

The impact of soaring oil prices on the UK economy will significantly reduce future air passenger numbers, bringing into question the need for airport expansion, according to new independent research released by WWF-UK this week.

The case for airport expansion, including the third runway at Heathrow, is based on the premise that there will be more air passengers in future than the UK's airports can currently handle.

The research, which was conducted by transport consultancy, MTRU, reworked the UK government's air passenger forecasts for 2030, examining the impact of a more realistic price of oil, the knock-on effect this could have on the UK's gross domestic product and the potential introduction of policies encouraging a switch towards alternatives.

Higher oil prices, fewer air passengers
Combined, these factors produce an estimated figure of 350 million air passengers in 2030 – nearly 150 million fewer than the government predicts and well within the current UK airport capacity of around 425 million passengers per year.

The government's air passenger forecast assumes that oil prices today are US$60 a barrel and will fall to US$53 by 2012 and remain at that level indefinitely. At present, oil costs US$136 a barrel, with some analysts forecasting prices as high as US$200 in the near future.

By doubling the UK government's estimate to a conservative assumption of US$106 a barrel in 2030, the impact of the increased oil price on airfares alone would cause an estimated 15% reduction in the growth of air passengers.

"The UK government's current projections for passenger numbers are pie in the sky, based on estimated oil prices which border on the fantastic," says the head of transport policy at WWF-UK, Peter Lockley. "What's more, the government hasn't even examined a scenario where it makes an effort to promote alternatives to flying such as videoconferencing.”

Inaccurate economic analysis
By applying a few adjustments to the government's model, such as raising the projected price of carbon, only counting the benefits to UK passengers rather than non-UK ones and not counting taxes as a benefit - the £5 billion (US$9.7 billion) benefit claimed by the government swiftly becomes a £5 billion loss.

"Expanding the UK's airports means locking the UK into a carbon-intensive future that is incompatible with the Government's climate change targets," says Lockley. "If passengers start turning away from planes due to high oil prices and better alternatives, or we look a little more closely at the government's calculations behind projected profits, then the economic case for putting added pressure on the climate begins to look extremely shaky."

WWF-UK calculates that greater use of videoconferencing and alternative methods of travel could serve to reduce passenger growth by up to 13%. The charity’s January 2008 report, Travelling Light, found that 89% of FTSE 350 businesses expect to cut their flights in the future and a similar number believe videoconferencing is the way to achieve this.

With fewer airlines, fewer routes, fewer passengers and more videoconferencing, it could well mean that the billions of dollars being invested in expanding and building new airports would be wasted.

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