Challenge Circles

AIRPORTS CHALLENGE

CAN YOU HELP PHIL GRAHAM DECIDE WHERE TO EXPAND AIRPORT CAPACITY IN THE LONDON REGION?

WELCOME

The Airports Challenge is part a series of real case studies at the London School of Economics where leaders open their greatest challenges to circles of problem solvers outside their organisation.

This challenge is based on in depth interviews with Phil Graham, who was CEO of the Airports Commission from 2012 to 2015. Phil is is seeking your views on where London should expand its airports capacity. The aim of the challenge is to introduce you to the design of major infrastructure assessments and the role of politics in meddling with assessment analytics.

There are three steps to this challenge: First an online platform giving you all the details and key data behind Phil Graham's work at the Airports Commission. You can access the full platform by registering and clicking the button above. Secondly, you will be invited to join your challenge peers in an online meeting to discuss the data and the challenge in greater detail. Finally, you will be invited to a challenge workshop where you will be able to relay your advice to Phil Graham himself.

REGISTER

The Airports Challenge is open to participants of the Executive Masters in Cities at the London School of Economics. To access the full challenge, please register using the invitation code sent to you.

WEB MEETING

You will be invited to a web meeting where we will introduce you to the other challenge takers. This will be an opportunity for you to ask any questions on the challenge and review the data that is available to you.

WORKSHOP

The culmination of the challenge is a workshop where you will be able to give your advice to Phil Graham himself.

Introduction

CHALLENGE WRITTEN BY SAVVAS VERDIS

Phil Graham was working in the private office of the Secretary of State for Transport, when the last major review on airport capacity in the South East of England was launched. The review recommended that a second runway be built in Stansted and a third in Heathrow. That was in 2003. Over a decade has passed and London remains with exactly the same number of runways since City Airport was opened in 1987. In the autumn of 2012, just after London’s Summer Olympics, Phil Graham got a call from Patrick McLoughlin, the Secretary of State for Transport. Phil Graham was no stranger to politically sensitive large infrastructure projects having just led a two year long review and case for building HS2, a new high speed rail connection between London and Northern England. Being asked to head a study on one of the most controversial projects in British infrastructure history was therefore a natural next step. Phil would act as chief executive of the Airports Commission, which would advise central Government on the necessity to expand airport capacity in the South East of England and if so, where? The commission was chaired by Howard Davies who was supported by four commissioners, Sir John Armitt, Professor Ricky Burdett, Vivienne Cox, and Professor Dame Julia King. It was Phil Graham’s responsibility to design the review process and provide critical evidence to the Commission. With this evidence, the Commissioners would shortlist a number of options that would see increased runway capacity in London.

It’s now December 2013 and with just one week to go before the interim report is published, Phil Graham is asked by the Secretary of State for Transport to review the four options that the Commission wants to put forward to the next stage. The options include, two proposals each with a new runway for Heathrow, one proposal with a new runway for Gatwick and a final proposal, pending further evidence, with a completely new airport in the Thames Estuary promoted by the Mayor of London, Boris Johnson. Your task is to review the evidence and suggest on what grounds certain options should be shortlisted and others dismissed. Does Phil Graham hold the necessary evidence and stakeholder acceptance to put the Commission’s four options forward and face the scrutiny of stakeholders and the media on December 17th?

A long history

Over 40 years of reviews and assessments

Phil Graham was not even born when the Roskill Commisssion published its report on airport capacity in the UK in 1971. Ever since the 1950’s, London has been served by a main airport at Heathrow and a second in Gatwick.  The Roskill Commission wanted to investigate the need for a new 4 runway airport to meet the growth of air traffic. It suggested that a site in North West London be developed as the city’s third airport, which was ultimately rejected by the Government. Instead a new airport was approved in Maplin Sands in Essex. That idea was shelved in 1974 due to the oil crisis and plans approved for a small scale expansion at Stansted. With the exception of one new runway at London City Airport in 1987, London has been served by the same number of runways in its five international airports since the end of the Second World War. By 2003, when the Labour Government, commissioned its White Paper on The Future of Air Transport, air travel had increased five-fold over 30 years. The paper set out a strategic framework for the development of airport capacity for the next 30 years and recommended  a balanced approach of expansion to support the economy whilst minimising the impact on the environment and people living next to the airports. It recommended that a new runway be built at Stansted by 2011-2012 and an extra runway at Heathrow  by 2015-2020 as long as strict environmental controls were met and annual air traffic movements would be capped to 605,000 by 2020.

By the time detailed plans were drawn for the third runway at Heathrow in 2009, the general election was one year away with David Cameron promising no new runway at the airport if he was elected Prime Minister. This put David Cameron in a long line of politicians who considered Heathrow expansion a very sensitive topic as it affected local communities in what were marginal electoral seats. The political obstacles were simply too great. Within a year of the new coalition government being formed, concerns rose of London losing its global role as a hub airport with major competitors emerging with better access to rapidly developing economic regions. The Mayor of London, Boris Johnson had already put plans on the table for a new hub airport in the Thames Estuary. The Government hoped, that with a renewed study, it would be able to reconsider all proposals in a timely manner. Moreover, in the decade since the last report, the aviation sector was radically different due to the formation of  new networks and alliances and the arrival of new entrants such as low-cost and Asian airlines. With that in mind, the Airports Commission was launched in September 2012.

London’s Airport System

  • 1. Heathrow

    UK’s busiest airport and main base for British Airways. Due to the consolidation of the carrier industry into large networks and alliances, Heathrow has reinforced its position as the most important international gateway. One third of its passengers are transfers to other destinations. It is also the principal freight airport in the country and is surrounded by a dense infrastructure of logistics companies. Its proximity to London is both an advantage and disadvantage acting as a major employment generator along the M4 motorway but a major noise hindrance to communities below the flight path. That said, because of newer aircraft, the impact of noise has remained static since 2000 despite an increase in air traffic movements. The airport is operating at 98% capacity, which causes arrivals and departures delays and there is no resiliency to recover from major weather related delays.

    Passenger Numbers

    DISTANCE FROM CENTRAL LONDON

  • 2. Gatwick

    London’s second largest airport and the world’s busiest single runway airport. Since the breakup of the British Airports Authority in 2009, (which historically owned London’s largest airports) Gatwick’s new owners, Global Infrastructure Partners have began a £1.2 billion investment programme and new long-haul routes have been introduced to emerging market destinations.

    Passenger Numbers

    DISTANCE FROM CENTRAL LONDON

  • 3. Stansted

    Large airport serving leisure passengers through low cost and legacy carriers owned by the Manchester Airports Group. Currently operating at 55% capacity, the airport is undergoing an £80 million investment programme in its terminal facilities.

    Passenger Numbers

    DISTANCE FROM CENTRAL LONDON

  • 4. Luton

    A small site, medium capacity airport geared to leisure destinations with low cost carriers.

    Passenger Numbers

    DISTANCE FROM CENTRAL LONDON

  • 5. London City

    Small site airport flying to business destinations mainly.

    Passenger Numbers

    DISTANCE FROM CENTRAL LONDON

Image

Although there is no immediate crisis, by 2030 most of London’s Airports are projected to be at capacity. Heathrow is already at 98%

Heathrow

Gatwick

Stansted

Luton

London City

Phil Graham is entering 50 years of aviation policy history
1963 Stansted recommended as the location for a new London airport
1966 Government sets up Interdepartmental Committee to revisit case for Stansted
1967 Ministerial statement announcing decision to develop Stansted
1968 Government sets up the Roskill Commission to recommend a new London airport
1971 Roskill Commission recommends Cublington, as new airport for London Government selects Maplin Sands
1974 Maplin Sands proposal abandoned by the Government
1978 Aviation White Paper identifies Heathrow capacity as ‘restricted’
1979 ‘Gatwick Agreement’ between BAA and West Sussex County Council that there would be no second runway at the airport before 2019
1990 Government commissions the study on airport capacity ‘Runway Capacity in the South East Study’
1997 Study concludes that expanding Heathrow ‘would afford the greatest benefits’. Planning permission granted for second runway at Manchester Airport
2001 Second runway at Manchester Airport completed
2002 Government publishes South East of England Regional Air Services Study with options for new runway capacity in the South East
2003 Air Transport White Paper supports a third runway and sixth terminal at Heathrow and second runway at Stansted
2006 Government Progress Report confirms commitment to third runway at Heathrow and second runway at Stansted
2007 Government consults on expanding Heathrow
2009 Government backs a third runway decision (subject to conditions) and rules out mixed-mode operation of existing runways at Heathrow
2010 Coalition Government reverses third runway decision and rules out new runways at Gatwick or Stansted
2011 Government publishes ‘scoping document’ on a ‘sustainable framework for UK aviation’
2012 Independent Airports Commission established in November

BUILDING THE EVIDENCE

The Airports Commission published its Operating Protocols in November 2012. From the outset, it wanted to make the review process as open and transparent as possible through two core ideas:

    1. Keep a holistic and integrated view: Look at the economic, social and environmental impacts of additional airport capacity equally. What are the impacts of air connectivity and the economy? How is this related to climate change? How does it impact the local environment?
    2. Keep the process collaborative: Allow both stakeholders and airport owners to suggest long term options for expansion and allow interested parties to suggest and scrutinise the assessment criteria. This meant that the Commission would not suggest its own options for airport capacity, but choose the most appropriate solution from a list of options submitted by the airport owners and other promoters. This was important because the UK is unique in that all airports are privately owned.

The Commission started its work by revising the UK’s future airport capacity requirements and published a series of discussion papers, on demand forecasting, the economic benefits of air connectivity, aviation noise, aviation and climate change and airport operating models. All of these papers were open to public scrutiny.

Prior to the launch of the interim report, the Commission had collected enough evidence to demonstrate the need for additional runway capacity as both Heathrow and Gatwick were the most heavily used single and twin runway airports in the world.  

Although the UK’s airports served more destinations on a daily basis that other European countries, they performed poorly when it came to destinations in BRIC countries that were seeing the largest economic growth. Dubai had surpassed London in daily services to these countries since 2010. More worryingly, because Heathrow served profitable long haul routes, it was less well connected to UK destinations in 2013 than it was in 1990. This had led some UK passengers to use alternative international hub airports such as Schiphol than Heathrow.

The Commission’s studies on the the role of aviation on noise and climate change showed that even if annual transport movements would increase by 60% by 2050, greenhouse emissions would remain at 2005 levels due to advances in technology. Newer aircraft also meant that since 1980, three times less people were affected by noise levels at Heathrow even though air traffic movements had more than doubled.

The Commission concluded that although London’s system of airports was operating successfully today, it would be looking for additional capacity by 2030 on even the most pessimistic of passenger demand scenarios. It recommended that one net new runway be built by 2030 and two net new runways by 2050. If London could not deliver these runways, over £18 billion of annual socio-economic costs would incur to the National Economy by 2050.

The Commission’s key evidence base was summarised in twelve charts that were going to be presented to the media on the 17th of December

Department for Transport, The Treasury, Heathrow Airport Holdings, Manchester Airports Group, Global Infrastructure Partners, HACAN, Mayor of London

Stakeholders

Local, national and global organisations influenced each stage of the review

National Government

The Department for Transport, the Treasury and the Office of the Prime Minister David Cameron all remained at arms length during the Commission’s work and wanted to remain hands off. Although they were not influencing the process, Phil Graham wanted them to remain informed so that the Commission’s work would not create a political backlash.

Heathrow Airport Holdings Ltd

The owner of Heathrow Airport. From the outset, they wanted to build a third runway and submitted three proposals to the Commission for consideration.

Global Infrastructure Partners

Owners of Gatwick airport. They were open to a second runway but what they did not want was for Heathrow to get a third. The only proposal for a new runway in Gatwick came from Global Infrastructure Partners.

British Airways

Major airline that has over the years consolidated most of its London services to be based out of Heathrow. They were in favour of Heathrow expansion but did not favour any specific option. This was mainly due to their CEO, Willie Walsh who heavily argued for a new runway from 2003-2010 and who saw his efforts unanswered.

Old Service Airlines

This cluster includes traditional airlines such as Lufthansa, Emirates and Virgin who compete with British Airways. They saw expansion of Heathrow as an opportunity to compete with British Airways that has historically owned most of the take-off and landing slots.

Low Cost Airlines

Airlines such as Easyjet and Ryanair felt that expansion was good, but most important to them were the costs of airport expansion. This group felt that the capital investment by the airport owners to increase runway capacity would be reflected by increased airport taxes. Easyjet later eased their position as they wanted increasingly to enter the business market.

London Business

The London Business community represented by groups like London First were in favour of Heathrow expansion. Ultimately, they wanted a decision to be taken quickly because of the historical delays that have plagued airport expansion in the past.

National Environmental Groups

This cluster included organisations such as Friends of the Earth, Greenpeace, Aviation Environmental Federation and Natural England who did not want expansion as it was unrealistic within current climate targets.

Local Environment Groups

The Heathrow Association for the Control of Aircraft Noise (HACAN) submitted evidence on a number of occasions stating that their concern was with noise and not necessarily the expansion of Heathrow. Other campaign groups such as the Richmond Heathrow Campaign and Stop Heathrow Expansion run very emotive campaigns against expansion all together.

Local Authorities

The Local Authorities around Heathrow Airport were divided into two camps. The more prosperous Richmond and Wandsworth areas were against expansion in any form. Hounslow and Slough on the other hand saw Heathrow as a major employment centre for low skilled jobs and were in favour of expansion. 

As the Commission progressed through its work, it was clear than a number of groups wanted to shape, influence and even undermine the process. This included the owners of Gatwick Airport and the Mayor of London. Compared to Heathrow, Gatwick consistently questioned the review process and methodology of the commission and tried to undermine Phil Graham on a number of occasions. Ultimately this group were concerned that the Commission relied on the outdated demand model of the Department for Transport that consistently under represented demand in Gatwick. Above all however, it was Boris Johnson with Daniel Moylan a Local Councillor at Kensington and Chelsea and the Mayor’s aviation strategy advisor, who became the most vocal opponents of the process.
Boris Johnson literally run a parallel process spending over £1 million of London taxpayer’s money to identify the right option. Ultimately the Mayor backed an option for a new hub airport in the Thames Estuary. Together with Zach Goldsmith, the Member of Parliament for Richmond who was running a media campaign to stop Heathrow Expansion, these two politicians were eagerly anticipating the Commission’s interim report launch on December 17. 

From the outset, it was evident that certain stakeholders wanted to influence the review process from start to finish. The diagram below summarises which stakeholders wanted to influence the final decision most.

Image

The chart shows the extent to which stakeholders wanted to influence Phil Graham’s process. Stakeholders closer to the centre were more influential.

  1. No 10 Downing Street
  2. The Treasury
  3. Department for Transport
  4. Mayor of London
  5. Local Authorities of Richmond & Wandsworth
  6. Local Authorities of Hounslow & Slough
  7. Global Infrastructure Partners
  8. Heathrow Airport Holdings
  9. Manchester Airports Group (owners of Stansted airport)
  10. British Airways
  11. Other Airlines
  12. National Environmental Groups
  13. Local Heathrow Groups
  14. Local Gatwick Groups
  15. London Business Community
 

THE ASSESSMENT CRITERIA

The Commission developed its assessment criteria in order to provide an integrated look into the economic, social and environmental impacts of each of the options. The criteria were informed by the HM Treasury’s Green Book which provides a standardised methodology of project assessment – but they were also informed by over 40 suggestions and submissions from stakeholders. A number of recurring themes emerged for each of the proposals that was central to the Commission’s shortlisting work:

  • Is there effective community engagement?
  • Is there existing surface access availability? If not, what are the costs involved?
  • Is the proposal financially viable? Will the private sector finance it?
  • What are the local economic impacts?
  • Importance of climate change impacts

With the assessment criteria published, the Commission requested interested parties to submit outline proposals for increasing long term runway capacity by the 19th of July 2013. At this early stage, the Commission wanted a list of credible proposals that would fit the overall objectives set by the assessment criteria.

In particular, the Commission wanted to first hear from each of the promoters, how their projects would impact the national and local economies. What would be the impacts on trade, foreign investment and tourism? What would be the impacts on local employment, regional business growth and housing stock? Secondly, each promoter had to explain how airport users (business, leisure and freight) would access the site. Would additional infrastructure be required? If so, who would pay for it?

Thirdly, the Commission wanted to learn how each proposal would impact greenhouse gas emissions, air quality and noise levels. Since noise was such an important issue to so many stakeholders, the Commission wanted evidence on how each scheme would affect residential areas and specially designated areas.

Finally, each proposal had to be financially viable and deliverable. This would include costings of the additional capacity and surface access improvements.

Submissions had to be delivered to the Commission by July 19th, 2013.


HEATHROW, GATWICK, ISLE OF GRAIN


The four options

The Commission received 52 proposals for addressing London’s airport capacity shortfall and began a process of sifting and narrowing down the options based on the assessment criteria. After the third sift, eight proposals were shortlisted, four of which looked at additional runway capacity at Heathrow airport with further options in Stansted, Gatwick and a new airport built in the Isle of Grain in the Thames Estuary.

By November 2013, the Commission cut this list to three, with two options at Heathrow and one in Gatwick.

Heathrow’s options included one where a new runway is built to the northwest of the existing airport as proposed by Heathrow Airport Holdings Ltd. A second option proposed by Heathrow Hub Ltd involves the extension of the existing northern runway to 6,000m. Gatwick’s option promoted by the airport owners involves the construction of a new runway that can operate independently. With one week to go before the interim report, Howard Davies asks Phil Graham not to exclude the Isle of Grain option and instead to further study its credibility after the launch of the report.

 Option 1: Heathrow HubOption 2: Heathrow: North-West RunwayOption 3: Gatwick: Second RunwayOption 4: Isle of Grain
Net new runways1111
Net passengers (million per annum)30403453
Air traffic movements (per annum)190,000260,000222,500250,000
Number of London airports closed0002
Population affected by 57dbA and above noise levels180,900142,6006,3001,400
Number of listed buildings affected0458
Population within 45 minutes (millions)1714109
Population within 1 hour (millions)18161413
Population within 2 hours (millions)38362025
Total risk adjusted cost in 2030 (£bn)13-1813-1810-1354-67
Total airport income per passenger relative to Heathrow1.5x1.5x1.3x3.4x
Number of houses demolished7201,5002001,600
Index of multiple deprivation of surrounding areas (average within 5km - higher the score the more deprived the area )19211426

Challenge

Read the sift paper guidelines and go through the detailed analysis of the four options below. On what grounds do you think that each of these options should be put forward?

  • Option 1: Heathrow Hub

    This proposal extends both runways so that they can be used to each operate as two runways. It also includes a new multi-modal interchange and passenger terminal. 

  • Option 2: Heathrow - North West Runway

    New 3,500m runway constructed to north west of airport. Includes expansion of terminals a new terminal 6.

  • Option 3: Gatwick - Second Runway Option

    New runway constructed to the south of the existing runway permitting independent operation. 

  • Option 4: Isle of Grain

    New four runway airport on the Isle of grain, which will require the closure of Heathrow airport. This proposal will require all supporting new infrastructure (rail, road links and utilities) as well settlements to accommodate local jobs. 

Image
WHICH PROPOSALS SHOULD BE PUT FORWARD?

ONE WEEK TO GO

When Politics meets Analytics

Phil Graham distributed the draft findings of the interim report to the Secretary of State for Transport on December 10th. Within a couple of hours, Phil Graham was called in to explain the report. The Secretary of State was not expecting the report to be as decisive and for the Commission to shortlist options at the interim review stage. More importantly, he was concerned with the integrity of the process and the inclusion of the Isle of Grain project.

Phil Graham is now seeking your advice on the four options. Does he have the necessary evidence and stakeholder agreement to take these forward to the next stage of analysis? What options would your shortlist include based on the assessment criteria and the politics of airport expansion?

December 10

Phil Graham distributes draft report to Secretary of State for transport

December 11

Phil Graham explains the Commission’s decision to shortlist the four projects to the Secretary of State.

December 13

Zach Goldsmith questions the Airports Commission process

December 15

Phil Graham and the commissioners review the four shortlisted options a final time

December 17

Scheduled presentation of the interim report