LONDON A lack of spare runway capacity at Heathrow costs Britain $22 billion (14 billion pounds) a year in lost trade and means the country is losing out to European rivals in the race for lucrative emerging markets routes, a study found.
The report, commissioned by Spanish group Ferrovial's Heathrow Ltd, said the problem could only be solved by having a single hub airport - meaning either Heathrow should be expanded or a new international hub should be built.
Heathrow, which has two runways, is operating at 99 percent of capacity. The government blocked plans for a third runway when it came to power in 2010 - further expansion of the west London site would mean a huge increase in the number of flights over the capital.
The report, written by the consultancy Frontier Economics, said the government needed to act to better compete with the likes of Amsterdam, Frankfurt, Paris in the battle for routes to emerging markets.
"There is no room to fit in new trade routes to the emerging economies," it said. "There are 1,532 more flights to the three largest cities in mainland China from Paris and Frankfurt than there are from Heathrow, while the gap with China has also widened in terms of destinations".
It noted there were no direct flights from London to seven destinations in mainland China - Chengdu, Hangzhou, Nanjing, Qingdao, Shenyang, Wuhan and Xiamen - now served by other European hubs.
The report said daily, direct flights brought in 20 times as much trade as routes which were not direct or as frequent, and that only a hub airport can provide these links.
Hub airports allow passengers to change planes easily for travel on to another destination.
London's second largest airport, Gatwick, is considering building a second runway in a bid to become a hub.
South-east of the capital, Gatwick is a point-to-point airport, mainly focused on the leisure market, and has far fewer transfer passengers than Heathrow.
"As the UK's only hub airport, Heathrow serves 75 destinations that are not supported by any other UK airport," said the report. "Only a hub can provide the range and frequency of long-haul direct services that UK air passengers want."
The debate heated up this month with the launch of the government-appointed Davies Commission to review airport options.
Frontier Economics dismissed talks of connecting Heathrow and other London airports via a rail link to create a 'dual hub', saying transfers would be too slow.
London's mayor, Boris Johnson - a Conservative tipped as a possible future prime minister, is against Heathrow's expansion and has been pushing for a four-runway hub in the Thames estuary - since dubbed "Boris Island". Others are keen on expanding Stansted airport, northeast of London.
(Editing by Dan Lalor)