Manchester Airports boss deeply critical of likelihood of large public subsidy aiding Heathrow or Gatwick runway
The CEO of Manchester Airports group, Charlie Cornish, has protested about the likelihood of public funds being used to assist a new south east runway. He says: “Given the private interests at stake, adopting a special set of rules that favours the delivery of new capacity over the use of existing capacity, will have profound adverse consequences for competition and consumers in the long-run.” More public funds for London airports does not help regional airports. The Commission, in its consultation documents on Heathrow and Gatwick runway plans, does not give specific figures on anticipated public subsidy. But it comments there “may be a case” for some funding by the public sector. Equally, if the airport benefits from surface transport paid for by the taxpayer “may mean that a contribution from the scheme promoter to these costs is justified.” State aid rules may also require an airport operator to make an appropriate payment, if it benefits from a surface access scheme. “The Government would need to reach its own view on the level of public investment that can be justified.”
Manchester Airport boss slams potential cost to taxpayer of making Heathrow or Gatwick bigger
Nov 11, 2014 (Manchester Evening News)
By Charlotte Cox
We’re concerned at levels of taxpayers’ money that could be spent on expansion, says chief executive Charlie Cornish
The boss of Manchester Airport has blasted the ‘unprecedented’ levels of government funding potentially needed for expanding Heathrow and Gatwick.
Chief executive Charlie Cornish said: “Given the private interests at stake, adopting a special set of rules that favours the delivery of new capacity over the use of existing capacity, will have profound adverse consequences for competition and consumers in the long-run.”
He was commenting after the Airports Commission released an assessment of the three options on the table – ahead of a public three-week consultation.
These are a £7.8bn second runway at Gatwick, a £17bn third runway at Heathrow, or an extension to Heathrow’s northern runway.
But the commission said that a second runway at Gatwick would cost £2bn more than estimated by the applicant. And that expansion of Heathrow could cost up to £4bn more.
It also suggests landing charges to airlines would need to increase to pay for the expansions – which could mean higher fares for passengers.
Mr Cornish, chief executive of MAG, which operates Manchester, London Stansted, East Midlands and Bournemouth airports, said: “We are deeply concerned by the unprecedented levels of State Aid factored into the Airport Commission’s appraisal of the three schemes.”
Referring to a costly judicial review that could follow any decision, he added: “The onerous legal burden that will undoubtedly be associated with such a heavy reliance on state aid also raises significant questions about the viability of delivering any of these schemes.”
Mr Cornish wrote last month to Transport Secretary Patrick McLoughlin arguing for a model in which the country’s transport needs are served by Manchester and Heathrow – which already have two runways – along with Gatwick and MAG-owned Stansted, which wish to build second runways, combined with high-speed rail links.
He said he disagreed with the Heathrow operator’s argument that a third runway is necessary to allow British businesses to open new routes to fast-growing markets in the developing world.
… and it continues a bit ….
On the issue of state aid to help with the building of a new south east runway, the Airports Commission main consultation document says: (Page 27
The approach adopted by the Commission to the treatment of surface access costs should not be taken as a firm view as to the appropriate allocation of costs between the public sector and the private funding of the short-listed scheme. There may be a case, for example, for some costs directly associated with the scheme to be funded by the public sector. Equally, the benefits for an airport from wider investment on the core network, and potentially changes in prioritisation resulting from airport expansion, may mean that a contribution from the scheme promoter to these costs is justified. State aid rules may also in some circumstances require an appropriate contribution from the airport operator where the operator would derive a benefit from a surface access scheme. The Government would need to reach its own view on the level of public investment that can be justified.”
The Airports Commission’s paper on Gatwick airport (P 72) https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/373211/evidence-base-gatwick-airport-second-runway.pdf
It is likely that Government will need to fund some or all of the surface access
requirements, and a commitment to do so may provide investors with a level of
assurance and so reduce the price they place on the risks discussed above. There
may be other options for public sector involvement that the Government of the day
wishes to explore, for example a role in the delivery partnership or in managing
The Airports Commission’s paper on Heathrow Hub (extended northern runway) (Page 30)
Although the Commission is not defining relative contributions it is likely that a large
proportion of the total scheme cost will be privately funded, though some elements
of the proposal, notably the associated improvements to road and rail access to
the airport, could require the investment of public funds.”
and (Page 49)
The Commission makes no judgement as to who should bear these costs and
in its analysis recognises that historically these have been split between the
public and private sectors. However, in its analysis the Commission considers the
situation where the public sector funds the surface transport requirements and the
private sector airport funds the remainder of costs on and off the airport site. The
Commission also considers the case where the private sector airport funds all on
and off airport costs. ”
Although the Commission is not defining relative contributions, it seems likely that the majority of financing will be determined by the commercial decisions of investors, but also that some key elements of the proposal will require some investment of public funds. ”
The Airports Commission paper on the Heathrow northwest runway option
The financial case views the question through the prism of the commercial investor
whilst this economic case looks at the proposal from the broader perspective of
investing public funds and the social costs and benefits. To that end the varied
nature of the sources of funding raise questions about the suitability of established
government appraisal methods which normally deal with schemes where the
majority of funding is coming from the public purse.”
The ratio of costs to benefits when looking specifically at public sector expenditure
would depend on the level of contribution made. On the basis that the public sector
might only contribute the costs of surface access, the benefits clearly outweigh
those costs under any scenario, but that is only one potential outcome. The overall
cost to the public sector could be higher or lower. ”