UK Regional Dependence on Foreign Hubs …and the role of London Heathrow Dr Pere Suau-Sanchez Centre for Air Transport Management, Cranfield University Dr Augusto Voltes-Dorta University of Edinburgh Business School Mr Héctor Rodríguez-Déniz School of Economics, University of Palmas de Gran Canaria West Midlands Economic Forum Coventry, 20 June 2014

1.Background: Airport connectivity in the UK 2.Research objectives, Data and Methodology 3.Results 4.Conclusions and policy recommendations Structure of the presentation

Divide: South East vs. UK Regions Importance of the Connectivity to London Tool for “Regional development and national cohesion” …But also… Role of South East airports as gateways (399 international destinations in 106 countries) 1. Airport connectivity in the UK: the context

Congestion and lack of capacity at Heathrow force airlines to: Increase the focus on long-haul routes and bigger aircraft. Reduce flights to UK regions Number of international destinations at LHR is stagnated. 2. Airport connectivity in the UK: the context Increasing importance of foreign hubs for UK regions: Amsterdam and Paris-CDG have more flights than LHR to UK Regional airports. Implications?

1. Airport connectivity in the UK: the context Implications 1.The traditional view of LHR as the main hub for the UK is challenged. Foreign hubs can connect better the UK regions to the rest of the world. 2.The danger of decoupling UK regional airports from London. (Independent Transport Commission, 2013) Reduction in domestic connectivity. UK passengers connecting via non-UK hubs. Dependence on foreign policies to ensure regional connectivity. 3.Wide range of mitigation strategies and policies to ensure the connectivity of UK regions. Among them the proposal to extend fifth-freedom rights to regional airports. Fifth-freedom rights allow an airline to carry passengers between foreign countries in services that originate or terminate in the airline’s home country

1)Determine whether London Heathrow is still the most important hub “for the UK” 2)Expand the ITC evidence on the decoupling of regional airports and assess the level of dependence on foreign hubs to access international markets 3)Measure the impact of fifth-freedom traffic on international connectivity of European airports to evaluate whether this can provide a significant connectivity for UK regional airports. 2. Research objectives, data and methodology Research objectives We do not only expand previous connectivity studies: Where previous publications have employed CAA passenger survey statistics statistics, we use a complete MIDT dataset on worldwide passenger demand (May, 2013).

2. Research objectives, data and methodology Methodology Contribution of airport’s traffic generation to the total market Contribution of the airport as a connecting gateway in a market ODx = 3/8 = 37.5% Cx = 3/5 = 60% Example: Proportion of connecting passengers served by an airport with respect all connecting passengers in a market YZ X W 2 8 C’x = 2/10 = 20% Example Measuring airport “hubbing” 2 dimensions: traffic generation and connectivity Flow-based centrality (Rodríguez-Déniz et al., 2013) Measuring airport “hubbing” 2 dimensions: traffic generation and connectivity Flow-based centrality (Rodríguez-Déniz et al., 2013) Traffic Generation Flow Centrality Connectivity

Europe↔Worldwide Markets Intra-EEAUK↔International AirportCi'CiODiAirportCi'CiODiAirportCi'CiODi Frankfurt8.7%1.9%3.3%Frankfurt10.5%1.0%2.9%Dubai10.0%1.3%1.0% Istanbul Ataturk6.9%1.5%3.4%Munich9.1%0.8%3.3%Amsterdam9.9%1.3%2.7% Heathrow6.0%1.3%6.3%Amsterdam5.7%0.5%3.9%Heathrow8.1%1.4%26.7% Amsterdam5.3%1.1%3.4%Oslo5.6%0.5%3.5%Frankfurt5.0%0.7%1.0% Paris CDG5.2%1.1%4.7%Copenhagen5.2%0.5%3.2%Paris CDG4.1%0.5%1.2% Munich4.4%0.9%2.7%Rome Fiumicino5.0%0.5%3.7%Istanbul Ataturk3.0%0.4%0.5% Dubai4.2%0.9% Madrid4.8%0.4%4.4%Doha2.4%0.3%0.2% Madrid3.2%0.7%3.4%Paris CDG3.8%0.3%4.0%Singapore Changi2.2%0.3%0.4% Rome Fiumicino2.8%0.6%3.1%Zurich3.5%0.3%2.3%Abu Dhabi2.2%0.3%0.2% Sheremetyevo2.7%0.6%2.0%Stockholm3.4%0.3%3.2%Chicago O'Hare2.1%0.3% Zurich2.2%0.5%2.0%Vienna3.3%0.3%2.0%Munich2.1%0.3%1.0% Vienna2.1%0.4%1.7%Heathrow2.9%0.3%4.7%Newark1.9%0.2%0.6% Doha1.8%0.4%0.2%Barcelona2.6%0.2%5.5%Dublin1.7%0.2%3.5% Copenhagen1.8%0.4%2.3%Duesseldorf2.0%0.2%2.7%Atlanta1.6%0.2% Oslo1.5%0.3%2.2%Berlin Tegel2.0%0.2%2.7%Madrid1.5%0.2%1.0% Total Passengers: 66,959,805Total Passengers: 38,028,897Total Passengers: 14,865,572 Connecting rate: 20.6%Connecting rate: 8.9%Connecting rate: 12.9% Lack of capacity may damage long-term status of LHR as worldwide gateway LHR has a role secondary to Gatwick (5.5% OD) in intra-EEA markets Dubai and Amsterdam serve more UK connecting passengers LHR benefits from traffic generation to remain the most “central” hub for the UK 3. Results (1) The role of Heathrow as a hub airport

3. Results (2) UK regions’ gateways to worldwide markets

3. Results (2)