New Moody’s report shows Gatwick vulnerable to either its own, or a Heathrow, runway
The credit ratings agency Moody’s, have produced a new report entitled “New runway will have mixed credit implications for London’s airports”. This indicates that Gatwick would take the biggest hit if a new runway was built in London, while Heathrow stands to gain the most from a new runway. Moody’s has concluded that a new runway either at Gatwick or at Heathrow would be bad for Gatwick. With its own new runway, Gatwick would be forced to levy higher airport charges, in order to pay for it.. Adding a runway at Heathrow would also result in increasing competition for Gatwick, because it would be at risk of losing scheduled airline traffic to Heathrow, where carriers can typically earn more per passenger mile. The Moody’s analyst commented: “A runway at Heathrow would allow the airport to benefit from growth in future traffic volumes, and a new runway at Gatwick would not take significant traffic from Heathrow.” And they say Gatwick double aeronautical charges would put it at a huge competitive disadvantage to Stansted, which is its main competitor in the low-cost airlines segment.
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Gatwick airport would be hit hardest by new London runway plans
by Kate McCann (City AM)
10.12.2014
Gatwick airport would take the biggest hit if a new runway was built in London, while Heathrow stands to gain the most from expansion plans, a new report out today claims.
Credit ratings agency Moody’s has concluded that a new runway on site or at Heathrow would be bad for Gatwick, as expansion would mean more expensive airport charges. Adding capacity at Heathrow would also result in increasing competition.
Xavier Lopez del Rincon, a Moody’s senior analyst and author of the report published today, said: “A runway at Heathrow would allow the airport to benefit from growth in future traffic volumes, and a new runway at Gatwick would not take significant traffic from Heathrow.
“Gatwick, on the other hand, would be vulnerable to airlines switching to an expanded Heathrow, whilst a new runway at Gatwick would increase its airport charges and could alienate its price-sensitive airlines.”
The Airports Commission, headed up by Sir Howard Davies, announced its shortlisted options in November. These include two designs at Heathrow, one at Gatwick and one at Stansted.
http://www.cityam.com/1418176895/gatwick-would-be-hit-hardest-airport-plans
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Moody’s: A new runway will have mixed credit implications for London’s airports
London, 10 December 2014 — Adding a new runway at either Heathrow or Gatwick would have conflicting credit implications for London’s three largest airports, says Moody’s Investors Service in a Special Comment report published today.
Moody’s report, entitled “New runway will have mixed credit implications for London’s airports”, is available on www.moodys.com athttps://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1001651.
“A new runway will have mixed credit implications for London airports. A runway at Heathrow would allow the airport to benefit from growth in future traffic volumes, and a new runway at Gatwick would not take significant traffic from Heathrow,” says Xavier Lopez del Rincon, a Moody’s Vice President — Senior Analyst and author of the report. “Gatwick, on the other hand, would be vulnerable to airlines switching to an expanded Heathrow, whilst a new runway at Gatwick would increase its airport charges and could alienate its price-sensitive airlines.”
A runway at Heathrow would allow the airport to accommodate expected growth in London passenger traffic. By 2050, Heathrow would be able to accommodate between 133 and 149 million passengers, [with a new runway] which is almost double current traffic levels. While Heathrow’s hub airport status could come under pressure from a new runway at Gatwick, it would remain London’s largest airport as it would still be expected to handle around 20 million more passengers per annum than Gatwick by 2050. [This ignores the fact that only one runway could, possibly – doubtfully – be built, keeping within UK carbon targets. Two new runways cannot be built, unless the UK breaches its carbon target for 2050].
Moody’s expects that Gatwick will be more vulnerable to competition if Heathrow were to build a new runway as it would be at risk of losing scheduled airline traffic to Heathrow, where carriers can typically earn more per passenger mile.
Conversely, the construction of a Gatwick runway would almost double aeronautical charges at the airport, putting it at a huge competitive disadvantage to Stansted, which is its main competitor in the low-cost airlines segment.
Moody’s notes that a Heathrow runway would not affect Stansted, as it is unlikely to experience significant competition from Heathrow, given its specialisation in servicing low-cost carriers, which are entirely absent from Heathrow.
The rating agency expects that the Airports Commission will make its final recommendations in its final report due in summer 2015.
This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.