Airlines tell Transport Committee of their alarm over ‘blank cheque’ for Heathrow 3rd runway
Date added: February 21, 2018
At the final oral evidence session by the Commons Transport Committee, looking at the Airports NPS (ie. plans for a 3rd Heathrow runway) airline representatives and the CAA were questioned. Key people from British Airways, Virgin and easyJet urged MPs to secure details from Heathrow on costs before voting to approve a runway. Willie Walsh, CEO of IAG, told MPs that the true cost of Heathrow expansion is likely to be “grossly” higher than the £14.3bn the airport has cited, and there is no clarity or transparency on the plans. Airlines do not want higher landing charges, and it is unclear how Heathrow could pay for its expansion without higher charges. The airlines want guarantees on costs. MPs commented that it was hard for MPs to vote for (or against) the runway, when vital details on costs and financing are not available – and even the main airlines don’t know if they back the scheme. Willie Walsh said parliament should not trust Heathrow; he had “zero confidence” that a third runway would be delivered on time and within budget – there were not even any clear plans for what is to be built yet, nor for the M25. Walsh added: “When we’ve asked for disclosure … what they are saying is ‘trust us. Give us your approval and support’. I don’t trust them and you shouldn’t, either.” And higher charges risked making an expanded Heathrow too expensive and a “white elephant”.
The true cost of Heathrow expansion is likely to be “grossly” higher than the £14.3bn the airport has cited, airlines have told MPs, adding that transparency and guarantees should be supplied ahead of a crucial vote.
Willie Walsh, chief executive of IAG, British Airways’ parent company and the main operator at Heathrow, said parliament should not trust Heathrow and said he had “zero confidence” that a third runway would be delivered on time and budget.
However, Heathrow said it would not bow to pressure from “vested interests” to reduce costs at the expense of commitments on noise, environment, jobs and improved national air links.
In a final session of the transport select committee’s inquiry into the national policy statement backing Heathrow expansion, airline executives sounded the alarm over the “blank cheque” and urged MPs to secure pledges before parliament votes to endorse a third runway.
Walsh told the committee: “It is very easy to deliver on budget if you have a massive contingency in your budget that you can waste. We don’t know what the budget is yet. We don’t even know what the plan is.”
Walsh added: “When we’ve asked for disclosure … what they are saying is ‘trust us. Give us your approval and support’. I don’t trust them and you shouldn’t, either. This is too big an issue to base a decision on the trust of Heathrow’s statements.”
He said that higher charges risked making an expanded Heathrow too expensive and a “white elephant”. He said: “You have to have clarity. You have to have guarantees … Otherwise we shouldn’t waste any more time and look for an alternative.”
Heathrow said it would not bow to pressure from ‘vested interests’ to reduce costs at the expense of commitments on noise, environment, jobs and improved national air links. Photograph: Yui Mok/PA
Craig Kreeger, chief executive of Virgin Atlantic, called for Heathrow to make a “passenger cost guarantee” before proceeding with its third runway plans. He said: “We find ourselves in a position where our endorsement is sought for a plan where the consequence of an overspend will be borne by the airline and its customers.
EasyJet’s UK director, Sophie Dekkers, said the airline welcomed that the transport secretary and Heathrow had said the charges would be as close as possible to current levels but “we would want a commitment”.
In a pre-emptive strike ahead of the hearing, the Heathrow chairman, Lord Deighton, wrote an open letter on the importance of expansion. He said: “We will deliver this project while keeping airline charges as close to current levels as possible, having already stripped out £2.5bn of costs from our initial proposals.
“But let me be clear. We will not renege on these commitments no matter what the pressure to reduce costs or amend our plans in favour of one vested interest or another.”
BA boss warns MPs not to trust Heathrow over expansion plans
Airline boss Willie Walsh has told ministers they would be “foolish” to sign a blank cheque for Heathrow’s expansion as the regulator suggested the scheme could be delivered with flat passenger charges.
The chief executive of British Airways owner IAG gave both barrels to Heathrow when he appeared before Parliament’s Transport Select Committee with other airline bosses.
Mr Walsh said his confidence in Heathrow delivering expansion on time and on budget was “zero”, suggesting the airport had claimed in the past to have hit targets but had not actually done so.
“Heathrow is saying trust me, we can deliver something for about £14bn,” Mr Walsh told MPs.
“But we don’t know what it is, when it will be built or the constituent parts. They are saying trust us, give us approval and we will deliver on time and on budget but I don’t trust them and you shouldn’t either.”
Mr Walsh was giving testimony as part of the committee’s evidence gathering session into the National Policy Statement (NPS), a document which will provide the broad parameters of the expansion scheme. MPs are due to vote on this document in June, at which point Heathrow will be able to start putting together a Development Consent Order, effectively a definitive planning application for the scheme.
A key friction about the expansion is what exactly the costs will be given these will essentially be borne by passengers through higher ticket prices.
Mr Walsh added if Heathrow believes it could do the expansion without raising charges it should “give a guarantee that passenger charges will not increase”.
His counterpart at Virgin Atlantic, Craig Kreeger has previously called for a passenger cost guarantee and echoed this at the committee.
“We find ourselves in a position where endorsement is being sought for a plan where the consequence of overspend could be borne by airlines and customers,” he said.
“[Heathrow] should bare the risk of its estimate being grossly off target whereas today we, or our customers, would be holding the bag for any overspending on a very unpredictable outcome.”
EasyJet’s Sophie Dekkers added that effectively pre-funding the scheme “should not happen”.
“It is against the principle at any airport,” she said. “We want cost effective infrastructure – we don’t want it to be gold-plated.”
Andrew Haines, chief executive of the Civil Aviation Authority said modelling his agency had done suggested it was “plausible to build the infrastructure and keep costs flat”.
But he warned against calls from the airlines urging ministers to write into the NPS a guarantee that charges would stay flat.
“If prices had to go up by 1p to deliver this then a flat charges cap would be absurd,” he said.
Mr Haines added the CAA could not require Heathrow to open up to competition at the airport, such as forcing it to allow a third party to run a terminal, but he “strongly expects them to look at working with alternative parties and to look at who can deliver the scheme”.
“It would be disingenuous for them to say only they can build a car park and only they can operate one, so to speak,” he said.
A scheme fronted by hotelier Surinder Arora and another by former Concorde pilot Jock Lowe have been submitted as potential ways to expand the airport, with the proponents of both claiming to be able to do so for far less than Heathrow can.
Heathrow’s chairman Lord Deighton wrote in The Daily Telegraph this week that the airport would deliver the expansion “while keeping airline charges as close to current levels as possible”, having already stripped out £2.5bn of costs from its initial proposals.
Airline and CAA representatives questioned on Airports National Policy Statement
20 February 2018
This is the final session of the Transport Committee’s inquiry into the Airports National Policy Statement (NPS) where it hears from representatives of several airlines as well as the Civil Aviation Authority (CAA).