{"id":309,"date":"2015-07-14T10:25:19","date_gmt":"2015-07-14T08:25:19","guid":{"rendered":"http:\/\/www.aviationadvocacy.aero\/blog\/?p=309"},"modified":"2019-07-23T11:48:28","modified_gmt":"2019-07-23T09:48:28","slug":"the-heathrow-decision-explained-in-triangles","status":"publish","type":"post","link":"https:\/\/www.aviationadvocacy.aero\/blog\/?p=309","title":{"rendered":"The Heathrow decision explained in triangles"},"content":{"rendered":"The UK Airports Commission recently released its report<\/a> recommending the development of a new northwest runway at Heathrow to address airport capacity constraints in the South East.\r\n\r\nThe Commission reached its view after undertaking a cost-benefit analysis of the different options. The benefits were estimated to exceed the costs for all options, but the net benefit was estimated to be highest for the Heathrow northwest runway option.\r\n\r\nThe report\u2019s analysis is pretty comprehensive \u2013 the main report is 342 pages long with various technical reports making up an astonishing 4,470 pages of analysis. However, the report\u2019s findings and recommendation can essentially be explained by a triangle.\r\n\r\n

The benefits\u00a0to passengers was\u00a0a key factor\u00a0in the Commission’s decision<\/strong><\/h3>\r\nThe decision to recommend a new northwest runway at Heathrow was largely due to the significant benefits this option is expected to create for passengers. This includes access to additional routes and increased flight frequencies.\r\n\r\nThe Commission was able to put a value on these benefits by calculating what economists call the \u2018consumer surplus\u2019. This is the benefit passengers would receive from flights from the new runway (for example, being able to fly from a more convenient airport or shorter delays) compared to the cost of these flights (ie, their airfares).\r\n

To explain the consumer surplus in another context, suppose that on a hot day you are willing to pay $3 for a refreshing ice-cream. When you get to the shop you find that ice-creams cost only $2. The difference ($1) is your consumer surplus.<\/em><\/p>\r\n\r\n

These benefits can be\u00a0captured by calculating the area\u00a0of a triangle<\/h3>\r\nAs illustrated in the figures below, the consumer surplus can be measured by calculating the area of a triangle.\r\n\r\nFigure 1 shows the consumer surplus prior to the expansion of airport capacity.\u00a0The demand curve indicates that as fares fall, more people would be willing to fly. The supply curve reflects that there is a capacity constraint at the airport currently: airlines will provide more flights from the airport as fares increase until the runway is at full capacity (Q1<\/sup>), beyond which airlines are unable to increase supply even if they wanted to. The point where demand and supply intersect denotes the price (ie, the airfare), P1<\/sup>.\r\n\r\nFigure 1: The consumer surplus prior to expansion<\/strong>\r\n

\"\"<\/p>\r\n

The triangle A is the consumer surplus. It shows that some passengers (up to Q1<\/sup>) would be willing to pay more than P1<\/sup> to fly from the airport.<\/p>\r\n

Figure 2 then illustrates the impact of increasing capacity at the airport. Airlines will supply more flights at the airport as prices increase until they hit the new capacity constraint at the higher level of Q2<\/sup>. This increased supply leads to a lower market price (P2<\/sup>).<\/p>\r\nFigure 2: The consumer surplus when the new runway is built<\/strong>\r\n\r\n\"\"\r\n\r\nThe consumer surplus is now measured by the triangle A+B+C, which is somewhat bigger than under the previous capacity constraints. Additional passengers who weren\u2019t willing to fly at the previous higher price are now choosing to fly (represented by the triangle C), while the net benefit of flying from the airport has increased for those passengers who were willing to fly at the previous higher price of P1<\/sup> (represented by area B).\r\n\r\nThe Airports Commission undertook this exercise for all three options considered using a suite of sophisticated models to calculate the size of the triangle. Its finding? That the size of the triangle A+B+C was estimated to be larger for the Heathrow northwest runway option than for all others. Not so much economics as geometry\u2026","protected":false},"excerpt":{"rendered":"

The UK Airports Commission recently released its report recommending the development of a new northwest runway at Heathrow to address airport capacity constraints in the South East. The Commission reached its view after undertaking a cost-benefit analysis of the different options. The benefits were estimated to exceed the costs for all options, but the net […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[],"class_list":["post-309","post","type-post","status-publish","format-standard","hentry","category-airports"],"_links":{"self":[{"href":"https:\/\/www.aviationadvocacy.aero\/blog\/index.php?rest_route=\/wp\/v2\/posts\/309","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.aviationadvocacy.aero\/blog\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.aviationadvocacy.aero\/blog\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.aviationadvocacy.aero\/blog\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.aviationadvocacy.aero\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=309"}],"version-history":[{"count":28,"href":"https:\/\/www.aviationadvocacy.aero\/blog\/index.php?rest_route=\/wp\/v2\/posts\/309\/revisions"}],"predecessor-version":[{"id":482,"href":"https:\/\/www.aviationadvocacy.aero\/blog\/index.php?rest_route=\/wp\/v2\/posts\/309\/revisions\/482"}],"wp:attachment":[{"href":"https:\/\/www.aviationadvocacy.aero\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=309"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.aviationadvocacy.aero\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=309"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.aviationadvocacy.aero\/blog\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=309"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}