Heathrow � should we build a third runway? | 51
The CAA also acknowledges the economic benefits that this
generates, referring to:
"... the potential for a wider range of air services to improve
the underlying performance of the economy, such as supporting
higher value economic activity, stimulating trade and improving
the efficiency with which people work."
Raise the cost of using Heathrow
A market-based solution to scarce airport capacity suggests the
use of price as the mechanism to bring supply and demand into
balance. Thus higher landing charges or the use of auctions to
distribute take-off and landing slots at Heathrow would restrain
demand for scarce runway capacity.
In principle, using price in this way is an efficient means of
allocating scarce capacity, as airlines that value their access to
Heathrow the least will switch flights to other airports.
But higher charges should accompany capacity expansion
where the market demands it, and not be a substitute. Shifts in
relative prices signal that an increase in supply is necessary. It
would be perverse to raise charges, but to ignore the message that
extra capacity is needed. To increase charges on UK air services
without new capacity would inflict a `double whammy' to the
competitiveness of the UK economy, as few airports in
continental Europe are as capacity-constrained as Heathrow.
Mexico City
Lusaka
Beirut
Halifax
Dar-es-Salaam
Seattle
Phoenix
Chennai
Bangalore
Tripoli
Riyadh
Accra
Ottawa
Dhaka
Mexico
Zambia
Lebanon
Canada
Tanzania
USA
USA
India
India
Libya
Saudi Arabia
Ghana
Canada
Bangladesh
64
63
62
59
57
56
56
55
54
53
53
53
52
52
117
55
107
117
46
249
179
121
159
65
65
115
128
75
TABLE 1
Airport Country Connecting
passengers (%)
Total passengers
(000)
Source: CAA
Routes at Heathrow with the highest proportions of connecting passengers 2007

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