Willie Walsh (IAG) warns again of excessive, out-of-control, unknown Heathrow 3rd runway costs
Willie Walsh, CEO of IAG, has always been against the very high costs of expanding Heathrow. He has again said he does not trust Heathrow to keep costs reasonable, and he is opposed to expansion – for which costs would escalate. He said Heathrow has “understated” the costs of expanding and the project is “out of control”, and there was “absolutely no way” Heathrow could build everything planned on budget. He thinks that while Heathrow continues to quote a figure of £14 billion for the investment required, the “true costs” would be over £32 billion. He believes building the 3rd runway and associated works alone will require £14 billion. And then a further £14.5 billion would be required to add terminal capacity and other infrastructure on the existing site. Walsh thinks just extending Terminal 5 could cost a further £3.5 billion. Heathrow now claim their costs even before building anything, are £3.3 billion for planning and preparation. Far higher than earlier estimates. It is a risk that the runway would be under-utilised, as costs would have to be too high – to pay for the excessive spending – to tempt airlines to use it. That would also make any net economic benefit to the UK very negative.
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British Airways Owner Rips Into Heathrow Airport Over ‘Outrageous’ Expansion Costs
By Patrick Whyte, (Skift)
Aug 02, 2019
Willie Walsh, the CEO of Iberia and British Airways parent company IAG, has renewed his battle with Heathrow Airport over the “outrageous costs” associated with its plans for a third runway.
Walsh has long been critical of the project and wants it stopped or at least done much cheaper.
Of course, he isn’t an objective observer. IAG is the biggest airline group at Heathrow with 56 percent of slots and is no doubt concerned that the airport will pass any increase in the building costs on to the airline.
“The regulator needs to step in. This is completely unacceptable. The costs are out of control. And we still challenge Heathrow to demonstrate that they can do it. [The] government needs to be very focused on this,” Walsh told analysts on an earnings call on Friday.
According to IAG, the real costs of building the third runway are $39 billion (£32 billion) and not the $17 billion (£14 billion) that Heathrow claims.
IAG’s figure includes additional costs associated with terminal infrastructure, which Walsh said was now not included in the headline cost.
“Heathrow is out there trying to con people that this is good for the UK plc. It’s not — it’s good for them and them only,” he said.
Heathrow would counter that the whole country would benefit from expansion for years to come but some people, including academics, are not so sure.
Walsh believes the scheme is at a pivotal moment and is urging action.
“We really do need people to wake up to what’s going on here because if we don’t stop it now and force them either to deliver to the original plans that they have or stop them, what we’re going to be left with is the most expensive piece of infrastructure that will be under-utilised because you’re not going to get people coming in here if the costs are driven up as they will be based on this ridiculous investment profile that Heathrow is looking at,” Walsh said.
Skift asked Heathrow about IAG’s revised estimate on the true cost of the project, but a spokesperson declined to answer specific questions, offering the following statement.
“The master plan we’ve recently published outlines how we will grow the airport affordably and sustainably to 140 million passengers by 2050. It includes the £14 billion expansion project plus already planned investment that will ensure the existing airport infrastructure continues to deliver for our passengers,” a spokesperson said.
“All money spent to 2050 has been worked into our calculations to expand whilst delivering on the affordability challenge and keeping airport charges close to 2016 levels.”
…. and it continues at
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IAG sounds warning on ‘out of control’ Heathrow expansion costs
2 AUGUST, 2019
By MICHAEL GUBISCH (Flight Global)
IAG chief executive Willie Walsh believes that London Heathrow’s has “understated” the costs of expanding the hub as planned, and that the project is “out of control”.
During a results briefing today, Walsh argued there was “absolutely no way” that Heathrow Airport could complete construction of a third runway and additional terminal facilities within the budget specified in its original plan.
Walsh says that while Heathrow continues to quote a figure of £14 billion ($17 billion) for the investment required, he estimates the “true costs” at more than £32 billion.
Construction of the third runway – north of the airport’s existing facilities – and associated works alone will require £14 billion, Walsh says.
But a further £14.5 billion will be required to add terminal capacity and other infrastructure on the existing site, in IAG’s view, while a westerly extension of Terminal 5 – home to the airline group’s subsidiary British Airways – will require a further £3.5 billion.
Wash says that IAG is “particularly concerned” about an increase in planning and preparation cost to £3.3 billion, before construction can begin.
The planning cost nearly doubled to around £500 million – from £265 million – while early construction cost more than quadrupled to £2.8 billion, IAG suggests.
In the airline group’s view, Heathrow does “not have the expertise to lead a project of this size” and has demonstrated “a lack of credibility” in forecasting the costs of expansion.
Walsh says IAG has “no confidence” in Heathrow and will make an effort to correct the airport’s cost figures publicly.
“We have got to call them out… We need to people to wake up,” he says.
Walsh calls for both the UK government and Civil Aviation Authority to “step in” and hold the airport operator to account. Officials “can’t turn a blind eye to it”, he argues.
Heathrow, for its part, states: “The masterplan we’ve recently published outlines how we will grow the airport affordably and sustainably to 140 million passengers by 2050. It includes the £14 billion expansion project plus already planned investment that will ensure the existing airport infrastructure continues to deliver for our passengers.
“All money spent to 2050 has been worked into our calculations to expand whilst delivering on the affordability challenge and keeping airport charges close to 2016 levels.”
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Heathrow plans to increase 3rd runway costs – to £2.9 bn – before approval, hoping it will be too costly to scrap its plans
Heathrow plans to triple the amount it spends on its third runway proposal, to £2.9bn – well before getting final approval. This either means air passengers using Heathrow would be charged more (something the industry and the government do not want), or else the taxpayer will be charged. Even if the runway never goes ahead. The CAA has a consultation about the costs and how Heathrow has been speeding up the process, spending ever more money. (The legal challenges are now going to appeal in October, but Heathrow is pressing ahead with its DCO consultations). Especially on carbon emissions, air pollution and noise grounds, it is entirely possible the runway will be blocked and the DCO will not be granted. The CAA says it has asked Heathrow “to consider different options for this spending and the implications of this spending for the overall programme timetable and the interests of consumers.” [Not to mention the taxpayer, who may end up paying …] Heathrow is increasing the amount of its “Category B” costs and “early Category C” costs. They want to increase the amount spent already to be so large, that it effectively cannot be cancelled. Detailed costs still have to be outlined, but Heathrow is expected to submit its initial business plan to the CAA for review towards the end of this year.
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