SCOTLAND could end up with even fewer connections to an expanded Heathrow than it has now unless the Government reforms how it uses public subsidies to support domestic routes, the Airports Commission has warned.
In its long-awaited report, the Commission said adding a third runway to the UK hub offered the "strongest case" for boosting regional and international connectivity, but cautioned that growing demand for landing slots meant that "even an expanded Heathrow may accommodate fewer domestic routes in future".
The number of services between Scotland and Heathrow has tumbled from 50 to 35 in the last decade. Inverness has had no daily connections with the hub since 1997 while flights to Heathrow from Glasgow and Edinburgh have been cut by a third in the last 20 years.
Scottish business leaders have been vocal in their support for a third runway at Heathrow over the alternatives of a second runway at Gatwick or extending Heathrow's Northern runway.
Heathrow bosses have vowed to protect and increase regional services by creating a £10 million start-up fund to support establishment of new routes, and want to cut landing charges by £10 per passenger on UK routes from January 2016.
In its report, the Airports Commission said that by 2040, domestic services could utilise "136-175 additional daily slot pairs" at an expanded Heathrow compared to 55 currently.
But it noted that "a number of competing pressures may limit the increase in domestic services to an enlarged Heathrow".
It stated: "One such pressure could be continuing competition from overseas hubs, which may still be able to offer cheaper services, higher frequencies, or more convenient connections on some routes.
"An expanded Heathrow is also likely to see rapid growth in demand, which may relatively quickly begin to exert pressure on slots during the most popular periods.
"The Commission's forecasts reflect these pressures and suggest that without specific measures to support domestic connectivity even an expanded Heathrow may accommodate fewer domestic routes in future than the seven served currently."
The report stressed that there was "no viable legal basis" under EU competition rules to guarantee a fixed number of slots to domestic services, but urged the Government "reinterpret" Public Service Obligations so that they could be deployed "more widely than at present".
PSOs allow the state to subsidise carriers on routes which are not commercially viable.
However, the Commission suggested that since access to an expanded Heathrow - in particular up to 12 new long-haul destinations - was vital to the "economic and social development" of the UK as a whole and should therefore "be seen as an important factor when considering the establishment of PSOs".
Emma Gilthorpe, Heathrow's Strategy, Planning & Regulation Director, said the third runway would pave the way to new connections and increased frequency to emerging markets in South America, the Far East and China, and it was "absolutely critical" to link Scotland to these consumers.
"We need to maintain and grow the routes that we have with Scotland today, it's a really important market for the whole of the UK. Critically we need to get some of the great products and services that are developed in Scotland out to these far-flung markets.
"We've been frustrated by the lack of capacity for a long time and we've seen these routes dwindle, so we need to get them back up and running and make them viable again."
"The slots previously operated by Virgin Little Red [between Edinburgh and Heathrow] are back in the pool and we're hopeful that they will be recycled and put back into routes in Scotland.
"Our proposal for a landing charge discount will make that more viable and it was part of the rationale for why we put that forward because we were keen to regain those critical routes."
Liz Cameron, Director and Chief Executive of Scottish Chambers of Commerce, said: ""The expansion of capacity at Heathrow has many potential benefits for Scotland, but only if our air links to Heathrow improve. We want to see more slots at Heathrow reserved for domestic air services, allowing services from Inverness to be re-established and ensuring a competitive market for Scotland's other principal airports."
Ross Martin, chief executive of the Scottish Council for Development and Industry (SCDI) added: "The major London Airports are national infrastructure assets and they must serve the needs for the nations and regions of the UK.
"We particularly welcome the Commissions' view that additional capacity can halt the decline in our air connections with them, and its recommendation that the Government should change its policy and introduce airport-to-airport public service obligations."
Inglis Lyon, Managing Director of Scottish Government-owned Highland and Islands Airports Ltd said the decision was a "significant victory".
"For the first time in years, it offers a realistic prospect that Inverness will once again be reconnected to the UK's hub," he said.
The Commission's recommendation will pose a headache for Government, however, with a number of senior Conservatives including London Mayor Boris Johnson and Zac Goldsmith, opposed.
Mr Johnson said the third runway "will never happen" following the publication of the report on Wednesday morning, while there is opposition from environmentalists and hundreds of homeowners whose properties - some 800 - will have to be demolished to make way for the third runway.
Willie Walsh, chief executive of British Airways owner IAG, has previously said that a third runway was a "lost cause" that no Government would have the bottle to carry out.
The Commission conceded that the alternative plans were also "feasible", leaving the door open to Ministers to reach their own conclusion.
A second runway at Gatwick would also boost capacity but "would be more focused on short-haul intra-European routes and the economic benefits considerably smaller", said Commission.
Extending Heathrow's existing Northern runway would deliver "similar economic benefits, is less costly and requires the loss of fewer homes" but "provides a smaller increase in capacity and is less attractive from a noise and air quality perspective".
A new runway, expected to cost £17.6 billion to deliver, will boost GDP by up to £147 billion over 60 years and create more than 70,000 new jobs by 2050, the report concluded.
Sir Howard Davies, the chair of the Commission, said: "Heathrow is best-placed to provide the type of capacity which is most urgently required: long haul destinations to new markets. It provides the greatest benefits for business passengers, freight operators and the broader economy."
Patrick McLoughlin, Secretary of State for Transport, said he would report back to Parliament in the autumn to reveal the Government's plans.
He said: "This is a vital moment for the future of our aviation industry. All those with an interest in this important question are expecting us to act decisively."
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