The Economics of Airport Expansion
The UK Government has installed a commission to evaluate the need for additional airport capacity in London. Over the years, proponents of expansion have often claimed there to be economic benefits. However, their claims were generally not based on sound economic methods or reliable data. This report proposes social cost benefit analysis as the best methodology to evaluate the economic impacts of airport expansion. It also notes the limitations, which include the fact that impacts on biodiversity and landscape cannot be monetised.
In the current debate about expansion of capacity, the concept of connectivity has a prominent position. Some reports claim that the UK would boost its economy by increasing the number of destinations from its airports. Our report shows that this claim is neither based on evidence in the academic literature nor on proper comparative analysis of trade date. The only proof of economic impacts of aviation is that an increase in aviation activity in a region is followed by an increase in economic activity. Whether this is true causation, an agglomeration effect or whether both are caused by a third factor has not been proven.