Holland-Kaye confirms again that Heathrow will need to build its runway etc in phases to spread costs
Heathrow CEO, John Holland-Kaye, has again said the airport may need to build its 3rd runway and associated airport infrastructure in phases, to spread the massive £17 billion cost over many years. It will be interesting to see the latest government air travel demand forecasts when they are finally published later this year. It is likely they will show more demand at Gatwick than the Airports Commission had assumed, when it pressed for a 3rd Heathrow runway. There may be less strong demand for Heathrow than originally suggested, with impacts on Heathrow’s finances. Holland-Kaye says he is not in favour of the cheaper runway plan by hotel tycoon Surinder Arora, which could be some £7 billion cheaper than Heathrow’s own. Not otherwise very bothered about the extra noise caused by his 3rd runway, Holland-Kay says …”I’m most concerned about the idea that the runway might move closer to London – that means more homes lost, more people hit by aircraft noise.” He says: ‘We can expand the airport with fewer new buildings. We can do the construction on a phased basis so we can smooth out the price. Originally we were going to expand Terminal 2 early on which would have given us an extra 20 million passengers a year. …Now we’re going to do that in phases, adding enough for 5 million at a time.”
Extracts from the Mail on Sunday article:
Airport boss John Holland-Kaye speaks out ahead of new probe
By Jon Rees, Financial Mail on Sunday
But Heathrow boss John Holland-Kaye urgently needs to convince politicians of his green credentials, at the same time as fending off a cheaper rival.
The Labour Party’s leadership is understood to be preparing to vote against his plans for a third runway when it comes to a Commons vote amid concerns over air quality.
Now the Government has said there will be a ‘short period of further consultation’ in the autumn to allow the public to consider new evidence on Heathrow – including, crucially, ‘revised aviation demand forecasts and the Government’s final air quality plan’.
The Airports Commission opted for Heathrow over rivals like Gatwick because it said extending Heathrow would bring greater economic benefits.
But if revised figures show Gatwick expanding faster than previously thought, then it might have the edge on future economic benefits, too.
…. hotel tycoon Surinder Arora has come up with his own plan to build a new runway at Heathrow, backed by US building giant Bechtel and ex-British Airways boss Sir Rod Eddington. It claims to be nearly £7 billion cheaper than Holland-Kaye’s £16.5 billion scheme.
Heathrow’s biggest customer, British Airways, and Virgin Atlantic have both welcomed the Arora proposal.
But can business leaders really be trusted? After all, it was Sir John Egan, chief executive of Heathrow’s then owner BAA, who assured local residents that ‘Terminal 5 will not lead to a third runway’. And car maker Volkswagen cheated over its diesel emissions on a grand scale.
Holland-Kaye: “We will add up to 40,000 new jobs and 10,000 apprenticeships – we’ll need pilots, engineers, construction workers, customer service people, IT staff.”
As for the Arora plan, which includes an option of shifting the new runway so that work on the M25 motorway is not required, Holland-Kaye is coolly damning ….. “I’m most concerned about the idea that the runway might move closer to London – that means more homes lost, more people hit by aircraft noise,” he says.
He points out, too, that one of Heathrow’s earlier proposals included building the new runway in a position that avoided the necessity of working on the M25 – and that was rejected by the Airports Commission.
Holland-Kaye admits the task of delivering the world’s biggest private investor-backed construction project without increasing passenger charges – currently £22 a time – as he has promised, is a tough one but ‘deliverable’.
Willie Walsh, boss of British Airways owner IAG, insists Heathrow cannot deliver expansion and stay competitive without hiking prices.
But Holland-Kaye, 52, says: ‘We can expand the airport with fewer new buildings. We can do the construction on a phased basis so we can smooth out the price. Originally we were going to expand Terminal 2 early on which would have given us an extra 20 million passengers a year. ” “Now we’re going to do that in phases, adding enough for 5 million at a time. We’ve seen a big appetite from the airlines to increase their business here, much faster than we had planned. New airlines, too, who couldn’t get into Heathrow are very interested. It looks like growth in the early years might be faster than we had assumed.”
It is why he supports the smoothest possible transition post-Brexit for whatever replaces the EU’s customs union, noting that the red tape involved in coping with new customs barriers would be a huge extra cost for very little gain.
He is also after a long-term contract with the Civil Aviation Authority over charges. It is understood he wants a 15-year contract though nothing has yet been decided.
He is in line for an as yet unquantified bonus on delivery of the runway – on top of his basic pay thought to be £896,000, plus bonuses taking that to £1.9 million last year.
Full article at
University pension scheme, 10% owners of Heathrow, have £17.5 deficit in pension fund
Universities face a new blow to their finances after the main pension fund deficit has risen to £17.5bn. The Universities Superannuation Scheme (USS) now has the largest pensions deficit of any UK pension fund after it increased by £9 billion last year. One expert said student fees may have to rise or be diverted from teaching. But a USS spokesperson said the pensions were “secure, backed by a solid investment portfolio and the strength of sponsoring employers.” The USS funds pensions for academics who are mostly based in the pre-1992 universities, and has more than 390,000 members. The pensions deficit has grown rapidly since 2014, when benefits were reduced for new entrants to plug a £5,3bn deficit. The USS bought an 8% stake in Heathrow in 2014 and has since increased that to 10%. They also bought, in 2013, a nearly 50% stake in the Airlines Group, which owns almost half of air traffic controller, NATS. USS said: “USS pensions are secure, backed by a solid investment portfolio and the strength of sponsoring employers.” The owners of Heathrow are expected to put up money for the very expensive Heathrow expansion scheme, and will be needing large returns on their investment if the runway is ever built. Heathrow is having to cut the costs of its scheme, now saying it will delay a terminal + underground rail link, which it cannot afford.
Heathrow plans to cut building costs of its runway plan, to keep fares low, by not adding new terminal
Heathrow has said it will – allegedly – guarantee to effectively freeze passenger landing fees when [if] a 3rd runway is built, by scrapping plans for a new terminal. The cost for the whole planned expansion is about £17.6 billion, and Heathrow knows it will have trouble raising all this and paying for changes to surface access transport. The government does not want air fares to get any more expensive. So Heathrow now says it will knock “several billion” pounds off the cost of its plan by abandoning facilities such as an additional terminal. The terminal would require a huge subsurface baggage handling system and an underground passenger metro system, which was estimated to cost £1 billion alone. They instead suggest extending Terminals 5 and 2 and phasing the expansion work over as long as 20 years, to control costs. The main airline at Heathrow, IAG, is not prepared to pay higher charges to fund inefficient expansion, that is unnecessarily expensive. The amended expansion plans by Heathrow will be put out for a public consultation later in 2017. The publication of the final Airports National Policy Statement [the consultation on it ended in May 2017] setting out the Government’s position, and a subsequent House of Commons vote, are expected in the first half of 2018 with the vote not before June. Heathrow hopes to cut costs in every way it can, and get in the necessary funds by attracting many more passengers, even if paying hardly more than they do now – about £22 landing fee – each.