Friday, 28 November 2014

Gatwick

A great vist to Gatwick yesterday to see the senior management team.  Some idle thoughts.

1. here's what we said on the CC when we broke up BAA (from the provisional findings), para 6.21

6.21 It is not possible to predict fully what additional outcomes might flow from the unleashing of a dynamic process of competition between independent airports in the South-East (with some competition at the margin from airports in other regions). However, we would expect the increased rivalry that separate ownership will bring to result in a constant pressure on airports for innovations in the way in which infrastructure is developed to meet the particular needs of their customers. This will reveal opportunities to win business through superior design, lower costs, higher quality, greater flexibility or better delivery of capacity and may uncover ways of reducing the lumpiness of capacity expansions.

2. The new runway.  The problem with the new runway is that two things are needed. First, a new runway.  Second, knowledge now of the right place that runway should be.  Now, we don't have that knowldge since the world is so uncertain, we cannot predict future traffic, businesss structures.  So what do we do?  Really, we want then to invest in both a new runway but also a mechanism for discovering that knowldege. That mechanism is competition.  So where should we invest?  Where competition will be encouraged which is LGW.  

This is analyticaly similar to a policy of buying insurance against uncertaintly by not having all your eggs in one basket.  Now, that policy goes wrong if eggs like being in one basket, i.e. network effects.  These would have to be very very strong, and exist across airline allicances, to go for Heathrow.

3 comments:

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  2. Personally, living under a Gatwick flight path at the moment and as someone who flies from there at least once a year I would be directly impacted by a second runway. At the moment, I'm not entirely sure about what my opinion is on the matter as although I realise that this second runway would increase competition and therefore lower costs etc.
    I also think that the other connotations of a second runway would be substantial. More borrowing would be needed and the budget deficit would only increase, I understand that you want to increase scientific innovation as well as Research and Development in general. This will only increase pollution and road and air congestion.A new terminal would be needed unless they decided to increase the size of the North Terminal but even that would still cost a lot.
    However, given that in the UK we need another major runway I do realise that Gatwick is the most viable option to have one, as I do not think a third runway at Heathrow would be viable. I would agree that the question that the Gatwick management face is where to the put the runway. There are several positives and negatives that must be considered but I would say that a new terminal would be the best option as I think that even if the North Terminal was extended it would still struggle to cope.

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