“Substantial” taxpayer support of between £10 billion and £30 billion is likely to be needed for the building of a new hub airport in the London area.
The warning comes today from consultancy firm Oxera after being asked by the House of Commons transport committee to develop a set of questions to probe the evidence put forward by witnesses as part of an inquiry into the UK’s aviation strategy.
The firm said: “Oxera concludes that, under most scenarios, expected revenues would be less than the expected costs and that a new hub airport would not be commercially viable.
“The report highlights that for construction of a new hub airport to go ahead, substantial taxpayers support is likely to be needed.”
Committee chairman Louise Ellman MP said: “This work was framed specifically to help the Committee assess the commercial viability of a new hub airport by asking whether any future owners could make adequate returns sufficient to obtain finance.
“The results suggest a new airport would require public investment and have considerable impact on Heathrow and other London airports.
“The research findings also shed significant light on the scale of investment required to deliver essential related surface transport links for any new airport.
“We hope this works delivers something new to a crucial debate. It doesn’t provide answers but it does set out in a systematic way which areas of questioning the Davies Commission must address and answer fully.”
Commenting on the findings, Corin Taylor, senior economic adviser at the Institute of Directors, said:
“This analysis confirms our view that a new hub airport would need substantial public subsidy and probably require the closure of Heathrow.
“Expanding our existing hub airport would be cheaper, quicker and offer far better rail and road connections to the rest of the country.”
The IoD has already urged a comprehensive overhaul of aviation policy, including the construction of new runways at Heathrow and Gatwick.
The Oxera research did not analyse whether government support for such an airport would offer good value for money and does not attempt to provide a full social analysis.
The analysis includes scenarios addressing demand, airport and surface access construction costs, and landing charges. These are used as “objective inputs” to model the expected cash flows of a new hub airport.
A range of designs for a new hub airport, covering aspects such as the number of runways and policy options towards existing airports, is also considered.
“It is important therefore that this analysis of a new hub is considered within the context of wider UK aviation policy, in line with the committee’s inquiry, and is not considered on a stand-alone basis,” the consultancy says.
The questions highlighted in this research will now inform the work undertaken by the transport committee when it takes further oral evidence.
The next session is due on Monday with witnesses including those involved with and opposed to the development of hub airport proposals.