Heathrow Third Runway: Complete Analysis of £49bn Expansion Plan and Airline Slot Impact

There's been talk on and off of the possibility of Heathrow expanding adding a third runway. It's been often very hypothetical, however, that is no longer the case with the airport presenting a real ready plan to complete the expansion in 10 years from now. What are the implications of such a move for the airport itself, the surrounding communities and the UK as a whole.

Technical and Infrastructure Analysis

For as long as I can remember London Heathrow airport has been running extremely close to 100% of its runway capacity. The airport has been suggesting for quite some time that in order to remain competitive against mega hubs it would need a third runway. That's what its latest announcement is all about.

Third Runway Specifications: 3,500m Northwestern Runway Design

London Heathrow airport, Europe's busiest aviation hub, has presented a plan (which will need governmental approval to proceed) to build a third runway within the next decade.

The proposed runway will be 3,500 meters long, similar in size to 09R/27L, capable of accommodating most wide body aircraft. The airport's third runway, if constructed, would be located north west of the current airport.

Now, that easier said than done. The project would be a massive undertaking. It would It would involve destroying nearby towns and rerouting the M25 below the ground to pass under Heathrow's new third runway.

Capacity Transformation: From Current Operations to 756,000 Annual Flights

A new runway located where proposed would provide massive boost in total flight numbers the airport can manage annually. Yearly flights would leap from 480,000 it currently handles to 756,000. In absolute numbers that is an increase of 276,000 flights while in percentage that represents a 57.5% increase.

In terms of passenger capacity London Heathrow airport would easily break through the 100 million passenger capacity, landing at approximately a 150 million passenger capacity yearly. That's 411,000 passengers transiting through the airport every single day.

Terminal Infrastructure Overhaul

To handle all that additional capacity new terminal facilities will be needed. Therefore Heathrow's plan also includes the construction of a new passenger terminal complex. T5X, as it has been called will sit to the west of Terminal 5 and will have an additional satellite T5XN which will provide additional gates.

Timeline and Implementation

This is not the first time Heathrow has presented a plan to expand with the construction of a third runway. The airport hopes to have a more successful outcome with this new proposal.

The plan has just been submitted to the government and will undergo the scrutiny of the authorities. That will take quite a long time. Heathrow's hope is to get to the end of the government approval stage by 2029 to then break ground and have the new runway operative by mid 2030.

Being totally honest with you, that is quite optimistic. There will likely be pushback by those affected by the expansion which could make the whole process longer.

Airline Industry Impact Analysis

This is where things get interesting and more political. London Heathrow wants to grow to remain competitive against other major international hubs around the globe. Airlines would benefit from the possibility of expanding their networks but not everyone will be so cheerful to welcome such a massive change in paradigm at Heathrow.

Slot Economics and Market Disruption

What I mean is that adding capacity for 57% more yearly flights will completely disrupt the current state of affairs at London Heathrow airport. Uncertainty and disruption can be not all that welcomed by the established, while it can be seen as fantastic opportunity for carriers seeking greater presence at London's busiest airport.

Incumbent Airline Analysis

Above all British Airways and Virgin Atlantic are those who'd have more to lose if things don't play out the way they hope. With the current state of affairs they can't increase frequencies or destinations that much but neither can other airlines, making their slots extremely valuable. Flooding the market with new slots will massively decrease the value of these assets, all while risking of seeing their market share diluted significantly.

New Entrant Opportunities

Other airlines will see this as one of the biggest opportunities ever. Think of Emirates, Qatar Airways or Turkish Airlines how they would pounce on any new slot available at Heathrow airport. Also there might be airlines and other opportunities that I can't even think of that with new slots might give London a go.

Route Development and Network Effects

Looking at airline operations the construction of Heathrow's new runway would create new route network expansion opportunities. Not only on the long and ultra long range segments.

30 New Destination Analysis: Market Opportunities

The airport estimates that additional 30 routes would be created by building the new London Heathrow third runway. That is a lot, even for a hub the size of LHR. Ten are estimated to be long range flights which would drive a significant amount of transit traffic.

Domestic Connectivity Improvements

One area where Heathrow is lacking due to its slot constraints is domestic travel. There isn't all that space at the airport for shorter flights. That according to the airport would change, with the third runway new slots would allow more domestic flights to launch allowing travelers UK-wide to benefit from this project.

Cargo Network Expansion: 50% Capacity Increase Impact

Finally, cargo capacity. This is an area where London Heathrow would make a huge leap forward if the third runway becomes reality. The already significant cargo capacity London Heathrow handles would be bumped up by 50%. That would make it even more a competitor to airports such as Amsterdam as the gateway to cargo headed in and out of Europe.

Economic and Financial Analysis

So how much is this going to cost and what will the benefits generated be? Those are important pieces of information, in absence of which you can't have clear picture to evaluate if London Heathrow's third runway will be a net positive or negative.

£49bn Investment Breakdown

The total cost of the project is an eye-watering 49 billion pounds. That includes all stages from purchasing the land to building the runway itself. The entire funding for the proposed London Heathrow third runway will come from private investment.

• £21bn for the runway construction
• £27bn for the terminal expansions

Economic Impact Assessment

No investment comes without the hope of generating more money than is spent. This third runway at London Heathrow is no exception. The impact of this project is such a big one that it isn't measured in usual figures, but in GDP points. Heathrow airport estimates that the entire UK will benefit from the construction of the runway and the increased traffic that will follow with an increase in the country's GDP by 0.43% by 2050.

Competitive Landscape Analysis

This is not only a move to continue growing and increase revenue on London Heathrow's side. It is also fending back existential threats that are growing from other airport in Europe and the middle east. Heathrow is a relatively small airport by surface when compared to some of its main competitors in the European region, such as:

• Amsterdam Schiphol (AMS) – Operating a 6 runway system
• Paris Charles de Gaulle (CDG) – Operating a 4 runway system
• Frankfurt (FRA) – Operating a 5 runway system
• Istanbul (IST) – Operating a 5 runway system

Overall capacity is growing in the UK with growth in secondary airports but to remain competitive even in regards to airports in the middle east (the Doha, Dubai and Abu Dhabi) the airport needs to grow