Willie Walsh tells AOA conference Heathrow’s runway is too expensive, and at that price, would fail

The Airport Operators Association is holding a two day conference on the runway issue, and Willie Walsh (CEO of IAG) was its key speaker.  He said Heathrow should not get a 3rd runway, if the Airport Commission’s calculation of the cost of building it is correct. He said: “The Commission got its figures wrong – they are over-inflated. If that is the cost [of a new runway], it won’t be a successful project.”  He described the assumption that airlines would pay for the new runway through increases in fares as “outrageous”.  British Airways is by far the biggest airline at Heathrow, with 55% of the slots. He said of the Commission’s report:  ” .. I have concerns about the level of cost associated with the main recommendation and the expectation that the industry can afford to pay for Heathrow’s expansion.”  He does not believe the cost is justified, and “If the cost of using an expanded airport significantly exceeds the costs of competitor airports, people won’t use it.”  It was not realistic for airlines: “You have to see it in terms of return on capital. ….Either the figures are inflated or you are building inefficient infrastructure. I do not endorse the findings. I definitely don’t support the costs of building a runway. If those costs are real, we should not build it.” On the cost of £8 billion to build a 6th terminal he commented: “How many chandeliers can you have in an airport terminal?
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‘No new runway for Heathrow if costs too high’ says Walsh

By Ian Taylor (Travel Weekly)

Nov 23, 2015

Heathrow should not get a third runway if the Airport Commission’s calculation of the cost of building it is correct, says Willie Walsh.

Walsh, chief executive of British Airways’ parent IAG, told the Airport Operators’ Association in London: “The commission got its figures wrong – they are over-inflated. If that is the cost [of a new runway], it won’t be a successful project.”

He described the assumption that airlines would pay for the new runway through increases in fares as “outrageous”.

The government is poised to announce its decision on whether to accept the conclusion of the Airport Commission, published this summer, which was that Heathrow should get a third runway.

BA is by far the biggest carrier at Heathrow, with 55% of the airport’s take-off and landing slots.

Walsh told the AOA: “The Commission produced an excellent report. Its recommendations were the obvious ones. But I have concerns about the level of cost associated with the main recommendation and the expectation that the industry can afford to pay for Heathrow’s expansion.

“We believe it’s outrageous and can’t believe it is justified. If the cost of using an expanded airport significantly exceeds the costs of competitor airports, people won’t use it.”

He insisted: “I don’t believe the figures in the Commission’s report are realistic. If the industry is to spend this money, it will want to see a return. You have to see it in terms of return on capital.”

Walsh pointed out Heathrow ‘s Terminal 5 cost about £5.2 billion to build and the Commission put the bill for a new Terminal 6 “at over £8 billion”. “The cost has gone up by almost £3 billion,” he said. “How many chandeliers can you have in an airport terminal?

“Either the figures are inflated or you are building inefficient infrastructure. I do not endorse the findings. I definitely don’t support the costs of building a runway. If those costs are real, we should not build it.”

He dismissed the idea of building new runways at Heathrow and Gatwick, saying: “There is a case for one new runway.

“The economic argument for Heathrow is much stronger than for Gatwick, but only if the the runway is built in an efficient manner. If you build runways at Heathrow and at Gatwick you will have wasted capacity.”

Walsh added: “There is a long way to go [on this].

“The economic argument is very much in favour of Heathrow. The political argument favours Gatwick, and I don’t believe we have brave politicians.

“Boris Johnson [who opposes Heathrow expansion] is a very influential figure in the Conservative Party. There is a lot to play out.”

Walsh said IAG would be expanding it’s transatlantic flights from Dublin following its takeover of Aer Lingus in July, arguing: “The Irish government has a progressive attitude to aviation tax and to developing infrastructure.”

He described UK Air Passenger Duty as “a disgrace”.

http://travelweekly.co.uk/Articles/Details/58439

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An AirportWatch member commented: 

If Walsh does not believe that he will be able to control and use all the extra capacity then he must think that he would be effectively subsidising his competitors to use his home airport – and that would not make a lot of sense for him.

Another commented:

Since the Airport Commission figures were way adrift (what about the surface access costs?) can we assume that R3 is now a dead duck according to the gospel of St. Willie? I don’t think it’ll be as simple as that: a bit of Walsh posturing?.

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Other things Willie Walsh has said recently:

 

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.

http://www.airportwatch.org.uk/2015/11/british-airways-in-evidence-to-transport-cttee-that-heathrow-runway-is-unfinanceable-and-a-white-elephant/
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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.”

http://www.airportwatch.org.uk/2015/08/willie-walsh-says-heathrow-3rd-runway-is-a-vanity-project-with-outrageous-costs/

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BA’s CEO, Willie Walsh, says post-election indecision will block building of any new south east runway

Willie Walsh, CEO of IAG, the parent company of British Airways, has again said that there will not be a new south east runway. He has often said this before, but this time he sees the likelihood of political indecision after the election as an additional issue. Willie Walsh thinks  that to build a runway, there would need to be “political consensus across all the parties – not just coalition partners.”  He also warned that the cost of each of the 3 runway proposals would all be prohibitive.  The expense would lead to higher landing costs, and airlines would not find that acceptable.  Willie Walsh reiterated his view that there was “no business case” for a 2nd Gatwick runway,  with not enough demand from airlines for it.   He has said in the past that Gatwick does not have the same international attraction as Heathrow.  He commented that Heathrow was already “the most expensive airport around.”  The runway decision would be a political one, and with a coalition government looking to be inevitable, there would be huge political difficulties in pushing through an unpopular runway, with dubious benefits even to the airlines.

http://www.airportwatch.org.uk/2015/05/bas-ceo-willie-walsh-says-post-election-indecision-will-block-building-of-any-new-south-east-runway/

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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%. 

http://www.airportwatch.org.uk/2014/11/willie-walsh-says-there-is-no-business-case-for-a-2nd-gatwick-runway-ba-has-gatwicks-2nd-largest-number-of-passengers/

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http://www.airportwatch.org.uk/2015/05/bas-ceo-willie-walsh-says-post-election-indecision-will-block-building-of-any-new-south-east-runway/

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