British Airways, in evidence to Transport Cttee, says that Heathrow runway is “unfinanceable” and a “white elephant”

British Airways has made its strongest attack yet on plans for a new Heathrow runway, saying its proposals are “unfinanceable” and a “white elephant”. The comments are in written evidence to the Commons Transport Select Cttee, dated 12th October, in its submission to its inquiry into surface access on October 27th.  BA repeats its view that the cost of transport infrastructure for the runway scheme should not be funded by airlines and their customers. BA is the biggest airline (51%) at Heathrow. It says – dangerously – that because of the alleged “up to £147 billion” of benefits of a runway to the UK, new road and rail link for the airport should, like standalone transport schemes like M4 widening, be paid for by taxpayers. [That “ up to £147 billion” benefit figure is highly dubious, and the Airports Commission’s own expert economic advisors, Mackie and Pearce, warned that it includes double counting and should be treated with caution.]  While avoiding any specific opposition in principle to expanding Heathrow, BA is not willing to pay – but it says the runway plan is is unaffordable and unfinanceable, and called into question the economic benefits. There has been speculation if Willie Walsh is just “browbeating aimed at cowing the CAA into lower charges” rather than stopping a Heathrow runway.
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Runway through Colnbrook is “unfinanceable” and a “white elephant” says British Airways

7.11.2015 (Colnbrook Views)

British Airways has made its strongest attack yet on plans for a new runway through the parish, labelling Heathrow’s proposals “unfinanceable” and a “white elephant”.

British Airways: "The Commission’s proposals, costed at £17.6bn, would turn Heathrow into a white elephant".

That British Airways has made several statements in recent months around its unwillingness to contribute toward the cost of a Third Runway is old news.

But in a statement to a Parliamentary committee just over a week ago the airline has labelled the current proposals a “white elephant” and called for a rethink.

The comments were made in a submission to the Transport Select Committee’s inquiry into surface access to on October 27. http://data.parliament.uk/writtenevidence/committeeevidence.svc/evidencedocument/transport-committee/surface-transport-to-airports/written/22975.html  (dated 12.10.2015)

BA repeats its oft-made view that the cost of transport infrastructure for the North-West Runway scheme should not be funded by airlines and their customers.  It says new road and rail link for the airport should, like standalone transport schemes like M4 widening, be paid for by taxpayers.

While avoiding any specific opposition in principle to expanding Heathrow in the statement, BA has baulked at the exorbitant cost of transport infrastructure which it fears it will be expected to contribute to, telling MPs:

The Heathrow option recommended by the Airports Commission is unaffordable and unfinanceable. This calls into question the economic benefits of the scheme. The Commission’s proposals, costed at £17.6bn, would turn Heathrow into a white elephant

It adds:

“The surface access costs estimated in the Commission’s report to be some £5bn are especially excessive. BA therefore cannot support a further increase in airport charges for our customers, on top of the significant increases estimated by the Commission, to fund the necessary surface access.”

BA says that with up to £147n of claimed economic benefit to the UK, and the airline already having forked out “substantial sums” for rail links to T5, the Government not airlines should pay “unless there is a clear business case for the airline”.

Would the airline support Heathrow’s plans if it didn’t have to pay is not so clear.  The airline’s recent position of opposition has only ever been about who pays for the current transport links proposed.  It says the price tag is too high but has not said links proposed are wrong and has presented no alternatives.  With a 51% market share at Heathrow BA could well be expected to shoulder a large proportion of the burden if expansion is allowed.

The Economist noted in August that Willie Walsh, BA’s chief executive, has engaged in a “big bluff” over a Third Runway after his apparent u-turn earlier this year after promoting it in speeches since 2009.  In 2011, it notes, Mr Walsh declared a third runway “dead” and talked up growth at the airline’s other hub, Madrid.  Similarly there is talk now about expansion in Dublin.  The Economist suggests his threat a few months ago to challenge a third runway “by any and every avenue” is “legal browbeating aimed at cowing the CAA into lower charges” rather than stopping Heathrow expansion in its tracks.

BA used the opportunity of its submission to reiterate its previous statement to the Airports Commission: that limited surface access options at Gatwick is one reason why there is no business case for a new runway there.

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See earlier:

Willie Walsh says Heathrow 3rd runway is a “vanity project” with outrageous costs

British Airways boss Willie Walsh has said that the costs of Heathrow’s plans for a 3rd runway would be “outrageous”.  He said: “At the moment this is a vanity project by the management of Heathrow who are driven to build a monument to themselves.”  Walsh said that even if Heathrow gained another runway it would be lagging behind Dubai as a global hub by the time it is built.  “It is based on inefficient infrastructure which is not fit for purpose. Airlines and consumers are looking for lower costs when it comes to flying but airports only seem to be looking at higher costs.” Heathrow was already one of the most expensive airports in the world and was now “talking about raising costs by 50% to build the extra runway”. His criticism may be the start of negotiations to ensure BA is not landed with a huge bill to fund Heathrow expansion.  John Stewart, chairman of HACAN, said: “Willie Walsh is saying that a 3rd runway won’t deliver benefits for the aviation industry that are worth paying for. This could turn out to be curtains for the third runway unless this is no more than clever negotiating tactics by one of the sharpest operators in the business.”


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British Airways-owner CEO, Willie Walsh, opposes new Heathrow runway as too expensive to airlines

British Airways-owner IAG does not support the building of a 3rd Heathrow runway, its chief executive said, because the costs of the project does not make sense for the airline. Willie Walsh said: “We think the costs associated with the third runway are outrageous and certainly from an IAG point of view we will not be supporting it and we will not be paying for it.  …We’re not going to support something that increases our costs.” British Airways is the biggest airline at Heathrow [it has around 50% of the slots]. An expanded Heathrow with a new runway would be partly paid for by higher charges to airlines. In May this year he had said “the cost of all three [runway] options are excessive and would translate into an unacceptable increase in charges at the airports.”  Not to mention the problems of politics and unacceptability to the public.   The Airports Commission’s final report says, with a new runway at Heathrow, “The resulting impact on passenger aeronautical charges across the Commission’s four demand scenarios for Heathrow is an increase from c. £20 per passenger to a weighted average charge of c. £28-30 per passenger and a potential peak of up to c. £31.”

http://www.airportwatch.org.uk/2015/07/british-airways-owner-ceo-willie-walsh-opposes-new-heathrow-runway-as-too-expensive-to-airlines/


Analysis by AEF shows economic impact of Heathrow runway likely to be minimal, or negative. Not £147 billion (over 60 years)

The Airports Commission has claimed,in its final report (1st July) and the media has uncritically repeated, that a new north-west runway at Heathrow would deliver up to £147 billion benefit for the UK (over 60 years). Now the AEF (Aviation Environment Federation) has done some critical analysis of the Commission’s various documents and figures, to elucidate what the actual economic impact on the UK economy might be. This is complex stuff, and making sense of the various facts (often in different documents at different dates) is not for the faint hearted. However, AEF shows that claims of £147 billion do not take into account the environmental or surface access costs associated with a new runway. The Commission’s own economic advisers have criticised the analysis (not done with the usual “WebTAG” model used by government) for double counting and questionable assumptions in relation to the indirect benefits associated with increased seat capacity. Using WebTAG, it appears – using the Commission’s own data – that there could be a net cost to the UK economy of – £9 billion over 60 years. Not a benefit at all, once all environmental and surface access costs are factored in. With some ‘wider economic benefits’ included, the benefit over 60 years would still be only £1.4 billion  (not £147 billion), as quoted in the Commission’s own final report.

http://www.airportwatch.org.uk/2015/08/analysis-by-aef-shows-60-year-impact-of-heathrow-runway-likely-to-be-minimal-or-negative-not-147-billion-over-60-years/

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Letter from two expert economic advisors to the Airports Commission:

A Note from Expert Advisors, Prof. Peter Mackie and Mr Brian Pearce, on key issues considering the Airports Commission Economic Case

May 2015

Two extracts from that letter:

“Our assessment of the PWC approach is that there is a high degree of overlap between the direct and wider impacts. So for example a benefit accruing proximately to a business traveller going abroad to negotiate an export contract might also show up as a trade effect. We think there is likely to be some double counting between the direct and wider impact channels in the PWC calculations”

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“Furthermore the interpretation of the result – what exactly do they mean and is their basis transparent – is an issue. Overall, therefore, we counsel caution in attaching significant weight either to the absolute or relative results of the GDP/GVA SCGE approach (PwC report) within the Economic Case. We would accept that there is some useful indicative material for the Strategic Case but care is required in assessing its robustness and reliability.”

5.5.2015    Letter at
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/438981/economy-expert-panelist-wider-economic-impacts-review.pdf

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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.”