Heathrow senior executives would get large bonuses if they manage to get 3rd runway

The Guardian has revealed that Heathrow’s annual report (December 2015) show that its top executives would benefit personally if the airport gets a 3rd runway. This is despite past denials that there were any financial incentives, not least when senior executives at Gatwick were found in February to have huge financial incentives if they manage to get a 2nd runway. Heathrow Airport Holdings Ltd states: “During the year a new bonus scheme was launched based on EBITDA, passenger service (as measured by independent ASQ – Airport Service Quality – scores) and airport expansion over the Q6 period….” [Q6 is the 5 year regulatory period 2014 – 2019].  A Heathrow spokesman said the runway bonus would only be a small part of a payout for meeting the strategic requirements of the business, hitting the profit targets etc. CEO John Holland-Kaye earned £2.06m last year, more than doubling his basic salary of £885,000. However, he could add even more to that should a 3rd runway be approved. The annual report states that while a bonus scheme linked to expansion was launched in 2015, “as the performance in respect of this scheme is so uncertain at this stage, no value in relation to these awards is included” in his 2015 earnings package. The Guardian says John Holland-Kaye is believed to be the architect of the new bonus scheme. The airport cut its wider wage bill by cutting 300 jobs last year (6,714 compared to 7,047 in 2014) but directors’ pay rose. Directors’ remuneration rose by £366,000 in 2015, to £3,555,000 from £3,189,000 in 2014.
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Heathrow Airport bosses to net bonus if third runway awarded

Owner’s annual report shows executives would benefit personally from any expansion despite past denials

Heathrow bosses will stand to gain from bonus payouts if the airport gets permission to build a £17.6bn third runway, it has emerged.

Although  the west London airport has previously denied the existence of any such financial incentives – not least when senior executives at rival Gatwick were found to have incentives to win a second runway – the annual report of Heathrow Airport Holdings states that during 2015 “a new bonus scheme was launched based on EBITDA, passenger service and airport expansion over the Q6 period”(pdf), which runs from 2014 to 2020.

A Heathrow spokesman said the runway bonus would only be a small part of a payout for meeting the strategic requirements of the business, and rests on first hitting the profit targets and independently monitored customer satisfaction scores.

Chief executive John Holland-Kaye earned £2.06m last year, more than doubling his basic salary of £885,000. However, he could add even more to that should a third runway be approved. The annual report states that while a bonus scheme linked to expansion was launched in 2015, “as the performance in respect of this scheme is so uncertain at this stage, no value in relation to these awards is included” in his 2015 earnings package.

Holland-Kaye, who refused to confirm any such bonus existed in a Guardian interview earlier this year, is believed to be the architect of the new scheme.

The airport cut its wider wage bill by cutting 300 jobs last year.

Owned by a consortium of foreign interests, including Qatar and China’s sovereign wealth funds, Heathrow would hope to become Europe’s predominant hub with an extra runway, raising landing charges significantly to fund its expansion.

Heathrow last week abandoned its opposition to conditions laid down by the Airports Commission when it recommended a third runway. The airport agreed to a ban on night flights for a six-and-a-half-hour period and said it would abide by any government decision to rule out a fourth runway.

A decision on whether to grant permission for the airport’s expansion plan is expected from the government in the summer, although Holland-Kaye last week conceded that the definition of summer was likely to be stretched.

Further work into air quality problems in west London, one ostensible reason given for the delay, is expected to be concluded in the coming months by the Department for Transport.

Sixty-five MPs have signed an early-day motion urging the government to make a decision before the recess, while the transport select committee recently demanded a clear timetable be set out by transport secretary.

https://www.theguardian.com/business/2016/may/15/heathrow-airport-chiefs-bonus-third-runway?CMP=twt_a-environment_b-gdneco

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“Even now, though, the disclosure is minimal. The accounts don’t reveal how much Holland-Kaye and colleagues could receive if a third runway is approved. This is a poor show. Bonuses for building a new runway on time and on budget would be easy to understand. But payments for successful lobbying of government feel very different, especially if their size is not revealed in advance. The principle here ought to be simple: if you are going to talk rousingly about the national interest, tell us how much you stand to gain directly.”

https://www.theguardian.com/business/nils-pratley-on-finance/2016/may/16/heathrow-airport-executives-bonuses-third-runway


The Annual report and financial statements for the year ended  31 December 2015 states:

Page 52:

Employee numbers

The average number of employees of the Group was 6,714 (2014: 7,047 for continuing operations).

At Heathrow

Year ended 31 December 2015 – 6,104

Year ended 31 December 2014  – 6,441

Other operations

Year ended 31 December 2015  – 610

Year ended 31 December 2014  – 606

Totals

Year ended 31 December 2015  –  6,714

Year ended 31 December 2014   – 7,047


But during that time, the amount of  Management and Directors’ remuneration increased:

Year ended 31 December 2015  – £10,130,000

Year ended 31 December 2014 –  £ 9,252,000


During that time, the amount spent on Directors’ remuneration increased:

Year ended 31 December 2015  – £ 5,330,000 (£3,555,000 as “aggregate emoluments 1 & 2*”)

Year ended 31 December 2014 –  £ 4,269,000 (£3,189,000 as “aggregate emoluments”)

* 1. For the year ended 31 December 2014 aggregate emoluments includes salaries, allowances, director fees, accrued bonuses and amounts payable under long term incentive plans (‘LTIP’).
2. £1,252,000 of bonus was paid in cash in 2015 (2014: £1,354,000).

 

That means the increase on Director’s remuneration between 2014 and 2015 was £366,000. That is well over 10% more.


Annual report and financial statements for the year ended 31 December 2015

states (P 53):

“During the year a new bonus scheme was launched based on EBITDA, passenger service (as measured by independent ASQ scores) and airport expansion over the Q6 period, as the performance in respect of this scheme is so uncertain at this stage, no value in relation to these awards is included above.  [ASQ means Airport Service Quality.  EBITDA means Earnings before interest, taxes, depreciation and amortization].

“The highest paid director participates in various Long Term Incentive Performance Cash Plans. In respect of the Plans, a cash amount is granted which could vest in future periods contingent on achieving or surpassing EBITDA, Return on Equity and other operational targets over a three year period. The highest paid director‟s remuneration includes £476,000 payable in 2016 (2014: nil paid in 2015) in respect of the 2013 LTIP Plan after certain targets were met over the three year period from 2013 to 2015. As the financial performance in respect of the 2014 and 2015 Plans is so uncertain at this stage, no value in relation to these awards is included above.”

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See earlier:

Top Gatwick bosses stand to make personal fortunes if airport price raised by 2nd runway

The Sunday Times has found that several of Gatwick’s senior bosses are signed up to a bonus scheme that should pay out handsomely if the airport is sold.  In small print in Gatwick’s 2011 accounts the bonuses of “certain members” of its board are directly linked to the amount GIP gets from sale of the airport.  It has long been suspected that Stewart Wingate, Nick Dunn (and others?) would stand to gain significantly, themselves, if they could raise the value of the airport by getting a 2nd runway.  Now the disclosure has proved it.  The cap on how much they could make is not revealed. Gatwick lent the executives £2.8m to buy into the share scheme, with the interest-free loans repayable once they sell their shares.  GIP owns 42% of the airport, with much of the rest held by investors from Abu Dhabi, California, Korea and Australia. Gatwick have been doing all they can to block a Heathrow runway, to get their own.  They are also doing all they can to increase the maximum number of flights per hour through flight path changes – again to raise the airport’s price. GIP bought Gatwick for £1.5 billion in 2009, and has just sold London City airport for almost x3 what they paid for it – and almost x32 its annual underlying profits.

http://www.airportwatch.org.uk/2016/02/top-gatwick-bosses-stand-to-make-person-fortunes-if-airport-price-raised-by-2nd-runway/

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Anger at revelation that Gatwick bosses to personally profit (millions of £s) if 2nd runway allowed

The Gatwick Area Conservation Campaign (GACC) has expressed anger at the revelation in the Sunday Times that Gatwick bosses are set to benefit personally by several million pounds if permission is given for a 2nd runway. GACC says a 2nd runway would bring misery to tens of thousands of people. There would be three times as many people affected by serious amounts of aircraft noise, and new flight paths over peaceful areas. About 50,000 people would suffer from worse air quality. A new runway would mean traffic jams on motorways and local roads, overcrowding on the trains and an influx of new workers with a need to build 40,000 new houses on green fields. But with all these negative impacts on ordinary people, Gatwick bosses would walk away with huge bonuses. GACC chairman, Brendon Sewill, commented: “Until now Gatwick Airport Ltd have tried to persuade the public that a 2nd runway would be in the national interest. Now the cat is out of the bag!  There is no real need for a new runway at Gatwick.” GACC will be investigating how far these new bonus payments will be subject to the normal full 45% rate of income tax.  Despite making large profits, Gatwick Airport has paid no corporation tax since being bought by GIP due to tax fiddles similar to those operated by Starbucks or Google.

http://www.airportwatch.org.uk/2016/02/anger-at-revelation-that-gatwick-bosses-to-personally-profit-millions-of-s-if-2nd-runway-allowed/