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London Business Matters

54 BUSINESS TRAVEL In it for the long haul: airports, competition and post-Brexit trade If there is one thing that is certain following the Brexit referendum, it is the need to develop existing – and forge brand new - trading links with non-European markets. The UK’s airports will play a key role making these connections happen, but to get the best deal, business needs a competitive network of airports. Competing airports – more choice, lower prices The UK is fortunate in that at least two of its airports currently have extensive long haul networks, with both Heathrow and Gatwick offering more than 50 long haul routes. The competition between the two airports continues to grow which provides increasing choice and drives down airfares. With the vast majority of cargo going in the hold of passenger planes, cheaper airfares also make it cheaper for UK businesses to export goods by plane – the fastest route possible. Following the introduction of new fuel efficient aircraft that can fly longer, more cheaply, other UK airports are also putting on more direct flights to long haul destinations. This also boosts competition and makes it cheaper to get airfreight to market. Forty per cent of UK trade by value travels by air yet to help ensure the UK flourishes in a post-Brexit world, trade to these long haul destinations must grow substantially, and this will require a commensurate increase in flights serving these locations. Forecasts suggest that passenger demand will be enough to support the required increase, but it is vital that all major UK airports can benefit from this growth. Long haul routes, cargo and balanced UK growth Recent findings demonstrate the important connection between long haul air routes and trade. The amount of cargo an airport exports has been shown to be driven principally by the number of long haul routes it serves rather than anything else, including the airport’s location, cargo handling infrastructure, or even costs. This is encouraging for the UK’s other major airports as growth in their long haul network can be matched by growth in their freight volumes. It is also good news for businesses outside the south east as more cargo can be flown out directly from local producers. Manchester Airport can now proudly boast that its largest cargo markets are the Far East, North America and the Middle East. Glasgow says it has had a significant increase in traffic on its Emirates and Virgin long-haul routes and Birmingham reported a 27 per cent jump in its long haul passenger totals. These direct long haul flights are encouraging more balanced economic growth across the UK. After Brexit, it is vital that the long-term economic interests of the home nations and regions is represented in the country’s vision for growth. Ensuring that the UK has a competitive network of airports - with their own choice of direct long haul routes to market – can help make this happen. UK airports and competition policy The Government set a precedent of delivering more competitive airports when the Competition Commission forced three airports under BAA to be sold. The idea was that increased competition between airports would have a positive effect on capacity and route development, service levels and pricing. And so it has proved. Airport investment, especially at Gatwick, and the number of direct international routes increased. Airport charges generally remained steady, while at Gatwick they fell to among the lowest in Europe. The Commission’s decision ranks as one of the most successful UK industrial policy decisions of recent times and this success must be capitalised on to foster more and balanced growth across the UK and boost international trade post-Brexit. Airports across the country have done a great job growing their long haul networks, and effective competition with Heathrow must continue to ensure cost-effective access to the international export market for all the UK.


London Business Matters
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