Willie Walsh says there is no business case for a 2nd Gatwick runway – BA has Gatwick’s 2nd largest number of passengers
Willie Walsh, the head of IAG, will not support a 2nd Gatwick runway, even if it is chosen by the Airports Commission or backed by the next government. He does not believe there is a business case to support its expansion, and there is insufficient demand from airlines for extra capacity at Gatwick. Mr Walsh campaigned heavily for a 3rd Heathrow runway before 2010, but has made frequent comments indicating he does not believe UK politicians will have the “courage” to build that. Willie Walsh says British Airways would resist higher landing charges, which would be necessary to fund a runway – either at Heathrow or Gatwick. (EasyJet has also said in the past they don’t want a new runway, if it means substantially higher charges – their model is low cost). BA would want lower costs, not higher costs, from a new runway. IAG’s shares have now risen as it has now made a profit at last, and will be paying its first dividend (and maybe some UK tax). Gatwick’s main airline is EasyJet with around 37% of passengers, and British Airways 2nd largest at around 14%.
Willie Walsh: ‘No business case’ to support a second runway at Gatwick
Boss of British Airways’ parent company suggests there isn’t enough demand from airlines for a second runway at Gatwick Airport
By Nathalie Thomas, Transport and Leisure Editor (Telegraph)
31 Oct 2014
Willie Walsh, the head of British Airways’ parent company, has ruled out supporting a second runway at Gatwick, even if it is given the go-ahead by policymakers, arguing that he doesn’t believe there is a business case to support expansion at the West Sussex airport.
Mr Walsh, who is chief executive of International Airlines Group (IAG), suggested there is insufficient demand from airlines for extra capacity at Gatwick.
His intervention comes at another critical moment in the long-running inquiry over where to build Britain’s next runway, as the body set up to investigate the issue prepares to test public opinion through a national consultation. Gatwick is battling against its larger rival Heathrow for the right to expand.
Mr Walsh campaigned heavily for a third runway at Heathrow during a previous inquiry, only to see a decision to expand Britain’s biggest airport over-turned by the Coalition when it came to power. He has taken a step back during the current process, which is being carried out by Sir Howard Davies’ Airports Commission, but said on Friday that he would be unable to support expansion at Gatwick, even if it was recommended by policymakers.
“I would not support a runway at Gatwick because I don’t think there is a business case to support it,” the airlines boss said.
Mr Walsh said his objections are “principally based on the demand environment” but he warned that BA would also strongly resist any increase in charges to fund expansion, either at Gatwick or at Heathrow.
“I don’t think it [demand] is as strong as Gatwick would argue,” he said. He warned both airports that they would have to demonstrate “how charges [for airlines] will reduce rather than increase”, as IAG unveiled its third quarter results on Friday.
But a spokesman from Gatwick hit back: “Demand is strong and we are close to full capacity today. Airlines and passengers are voting with their feet and Gatwick is the fastest growing airport in London, as our monthly traffic figures underline.
“Building a second runway at Gatwick will be cheaper than expanding Heathrow and those savings will be passed on to passengers who increasingly want affordable flying. A new runway at Gatwick would also give London two world class airports, delivering more competition, choice and even lowers fares for passengers and UK plc.”
Shares in IAG soared on Friday on guidance that full-year operating profit could rise to as much as €1.37 billion (£1.07bn) following a 30pc jump in profits during the key summer months.
The airlines giant, which is next week expected to lay out a road map towards paying its first dividend, said third quarter operating profit before exceptional costs reached €900m, a better-than-expected €210m improvement on the same period last year, as a major restructuring at its Spanish flag carrier, Iberia, continued to pay off.
IAG, which was formed through the 2011 merger of BA and Iberia, said it now expects full-year operating profit, before exceptional costs, to be between €550m and €600m higher than in 2013, when it reached €770m, representing a slight upgrade on previous guidance. The upgrade pushed shares in early trading to a six-month high.
“The recent Ebola outbreak hit all the airlines, but IAG, with its robust management, has pulled out some bumper, analyst-beating figures. Already increased price targets have been issued this morning by analysts. A return to year-highs of 460p [a share] look inevitable,” said Amrit Panesar, senior trader at Accendo Markets.
BA also performed strongly in the third quarter, making an operating profit of €607m during the three months to September 30, compared to €477m during the same period in 2013.
Operating profit at Iberia jumped to €162m from €74m previously but growth at IAG’s budget airline, Vueling, was far more muted, edging up just €1m to €140m, as competition in the European low-cost market heats up.
The third quarter performance pushed up group operating profit after exceptional items for the first nine months to €1.048bn, a significant turnaround from €348m at the same point last year.
IAG’s performance contrasts dramatically with that of its German rival, Lufthansa, which on Thursday issued its second profit warning this year as it struggles to restructure its cost base.
IAG has been consulting investors on a dividend policy, which it is expected to lay out at a capital markets day next Friday.
Gatwick launched a new report claiming that even with a second runway it would be able to meet EU and UK air quality targets
Gatwick’s website says:
- EasyJet is Gatwick’s largest customer; they fly 37% of the total number of passengers at the airport.
- British Airways is the second largest carrier at Gatwick, accounting for 14% of passenger traffic.
Willie Walsh of BA: Heathrow expansion is a ‘lost cause’
Willie Walsh, chief executive of BA owner, IAG, has said again that there will not be a 3rd Heathrow runway, as it is too controversial. He says UK politicians “lack the character” to get it built. “Historically, politicians have not been brave enough and I don’t think they will be brave enough going forward. You need a big shift in the politics of the country,” he said. However, Walsh warned a Conservative or Labour-led government against choosing Gatwick for an extra runway, adding that the case for growing the capital’s second-largest airport is “significantly weaker.” Gatwick did not have the same international attraction. He said: “You won’t find many airlines that say ‘God I’d love to be able to fly to Gatwick’. That’s why this isn’t a business issue, an economic argument. It’s a political argument and the politics of expanding Heathrow are significantly more difficult than the politics of expanding Gatwick.”
Willie Walsh tells Transport Committee there is no business case for a Gatwick 2nd runway
At the Transport Committee evidence session, Stewart Wingate, Gatwick chief executive, said he would oppose a 3rd runway at Heathrow and wanted to see Gatwick develop as a competing hub airport. But BA’s Willie Walsh said airlines will only pay for expansion at one UK airport and that is Heathrow, implying he would oppose a 2nd Gatwick runway. Willie Walsh also told the committee there was no business case to expand Gatwick, and he was not aware of any discussion with airlines about the extra amount they would have to pay for a new Gatwick runway. Willie Walsh said “the only business case you could stand over is one to invest in a 3rd runway at Heathrow, but I’m not going to waste my time because it’s not going to happen.” Divide and rule ?