Airport hotel tycoon, Surinder Arora, wants Heathrow runway built soon – but a bit cheaper
A wealthy hotel tycoon, Surinder Arora, has submitted plans for a 3rd Heathrow. He has been a long time backer of a runway, and says his plan would be £5 billion cheaper than what Heathrow is offering (costing £17.5 billion). He has put his proposal to the government’s public consultation on Heathrow (the NPS consultation actually closed on 25th May.) Heathrow has been trying to find ways to make their runway + terminal scheme cheaper, as the airlines are not keen on paying the higher charges that would be needed. Ticket prices would rise. (ie. lower airline profit). The Arora Group’s proposals include altering the design of terminal buildings and taxiways, and reducing the amount of land to be built on. They know the alterations to roads, including the M25 and the junction of the M25 and the M4, are massive problems and “threaten deliverability” of the runway project. They therefore want to “shift the runway”. Where to? All this shows how very uncertain the runway plan has become, and the immense doubts – especially on money. Heathrow said they would welcome views on various options “in the public consultation later this year.” The plans must first be assessed by the Commons transport committee, be amended by the DfT and then voted on in Parliament …. it is not a quick process.
The Arora hotel group has hotels at lots of airports, including Gatwick and Heathrow. (Notthe same as Aurora hotels). http://www.thearoragroup.com/business/hotels
‘Cheaper’ Heathrow airport third runway plans proposed
A wealthy businessman has submitted plans for a third runway at Heathrow which he says would be £5bn cheaper than the airport’s current scheme.
Hotel tycoon Surinder Arora has put his proposal to the government’s public consultation on Heathrow.
Ministers have expressed a preference for the airport’s plans for a new runway and terminal costing £17.5bn.
Heathrow said it was already considering some of the ideas, and wanted to lower the cost too.
Arora Group’s proposals include changing the design of terminal buildings and taxiways, and reducing the amount of land it is built on.
Mr Arora said: “We want passengers to be at the heart of our plans and the current monopoly at Heathrow, which over-charges airlines and in turn raises fares for passengers, is not the right model for the future.
“Heathrow needs competition and innovation which puts passengers and airlines at the heart of the expansion project.”
He added: “One of the options we have proposed to government includes a possible shift of the runway so that it does not impact on the M25 and M4, as we know the M25 junction being affected threatens the deliverability of the whole project.
“We appreciate this is a politically sensitive issue but it is merely an option with additional savings of £1.5bn, whereas the rest of our proposals save up to £5.2bn without the need to amend the runway location.”
Willie Walsh, chief executive of British Airways’ owner IAG, welcomed the proposals.
He said: “The government should look closely at Arora’s proposal as it would significantly reduce costs. British Airways is Heathrow’s biggest customer.
An airport spokeswoman said: “Heathrow’s expansion proposals are supported by the government and have widespread cross-party political, business and union support.
“We continue to develop our plans to improve passenger experience, reduce the impact on local communities and lower the cost so we deliver expansion at close to current charges.
“Some of the options we are looking at sound similar to those suggested in this submission, and we will welcome views on these in the public consultation later this year.”
Construction will not begin for at least three years, and it could be delayed by legal challenges over the runway’s environmental impact.
The Department for Transport has said a new runway at Heathrow would bring economic benefits to passengers and the wider economy worth up to £61bn, and create as many as 77,000 additional local jobs over the next 14 years.
Arora’s plan for a cheaper 3rd Heathrow runway means putting it further east. ie. more noise for London
Surinder Arora, a hotel magnate, wants to get the 3rd Heathrow runway built quickly, and has made some suggestions of how it could be done more easily – and at least £5-6 billion more cheaply. But his scheme, for a shorter northern runway, means there would be even more noise pollution over London than from Heathrow’s own £17.6bn proposal. Heathrow airport did not, apparently, know of his plans till he went public with them. If the new runway was shorter (3.2km not 3.5km) and moved a bit east, to Sipson, there would be cost savings. But this could mean noisier flights over London as aircraft may have to fly slightly lower over London by something like 300 feet or so (at a guess). One of Heathrow’s reasons for its own location for the runway was to get this 300 ft or so height gain, claiming it would make all the difference to noise levels. The 2009 scheme, by Heathrow, for a much shorter 2.2km runway failed in part because of noise concerns, as did a plan for a 2.8km runway rejected by the Airports Commission. Willie Walsh of IAG, and Craig Keeper of Virgin Atlantic, want the cheapest scheme possible, to keep their costs down, and avoid having to increase the cost of their air fares. Amusingly, the Heathrow airport runway plan involves demolishing one of Mr Arora’s 5 hotels at the airport, two of which are under construction. Mr Arora says he was not informed by Heathrow (Willie Walsh claimed the same, for his head office building).
Let me build Heathrow’s third runway and I will save £6bn
Hotels tycoon Surinder Arora has his own plans for a cheaper way to expand the airport’s capacity
By Oliver Shah (Sunday Times)
July 9 2017,
The first Surinder Arora heard of Heathrow’s intention to demolish his Sofitel at Terminal 5 to clear space for the long-awaited third runway was a rumour from “two different sources”. The hotels tycoon then confronted the airport’s bosses, who confirmed it.
“Bear in mind we employ more than 400 staff there,” he said to them. “Obviously you don’t see us as neighbours or partners. No one’s even told me.”
Arora’s voice is soft, but there is no mistaking his frustration as he recalls “the arrogance of it”.
Heathrow has played a big part in Arora’s life ever since he arrived there from India in 1972, aged 13. Having started out as an office clerk, he has built a £258m fortune around airport hotels, including five at Heathrow, two of which are under construction.
The airport could come to rue its high-handed treatment of the boy next door. Determined to carve out an opportunity from Heathrow’s “monopolising”, he has launched a bid to build and run the third runway and Terminal 6 in competition with the airport. He has submitted a range of plans to the government, one of which would avoid the need for a controversial bridge over the M25. He claims his designs would be as much as £6.7bn cheaper than the airport’s estimated £17.6bn bill — a saving that would ultimately be passed on to passengers.
Arora’s intervention is guaranteed to tip petrol on to the third runway debate given the fierce criticism already levelled at Heathrow’s scheme by airlines, which say they will end up paying for it via higher airport charges.
Willie Walsh, chief executive of British Airways’ parent, International Airlines Group, says: “The government should look closely at Arora’s proposal as it would significantly reduce costs.”
Craig Kreeger, the boss of Virgin Atlantic, says: “This once-in-a-generation project is an opportunity to challenge the status quo . . . Nobody has a monopoly on good ideas.”
The airlines are speaking from self- interest: BA is Heathrow’s biggest customer and owns 51% of its take-off and landing slots. To a degree, so is Arora: he is the biggest landowner in the area, although he denies trying to “leverage up” the value of his holdings.
The backing of BA and Virgin will bolster his credentials, however.
A self-made entrepreneur who spent his teenage years living in a terraced house in Southall, five miles from Heathrow, he is up against a corporation whose owners include Ferrovial, the Spanish infrastructure giant, the Qatar Investment Authority and CDPQ, a Canadian pension fund. Heathrow’s boss is John Holland-Kaye, a former divisional director of Taylor Wimpey.
Arora agrees to an interview at his office overlooking Heathrow’s north runway after The Sunday Times obtains a copy of his government submission. As planes rumble and whine in the background, he runs through his remarkable backstory: born in Punjab, adopted by his childless aunt and uncle, then sent to live with his biological parents in London after becoming “a bit of a gangster — I was carrying a knife, smoking, gambling, doing all the wrong things”.
He left school at 18 with no A-levels and worked as a junior clerk for BA, moonlighting as a wine waiter in a hotel at Heathrow for extra money. He became a financial adviser at Abbey Life and ploughed his spare earnings into property. He still owns one of the first buildings he bought, the Heathrow Lodge Hotel in Longford, which gets trade from the Home Office housing asylum seekers — to the chagrin of some locals.
Arora Group has 16 hotels, most of them around Heathrow, Gatwick and Stansted, plus a big property portfolio. The jewel in its crown is the InterContinental at the O2 centre in London’s Docklands. The business made pre-tax profits of £11.7m on sales of £175.3m last year.
Arora, 58, is well-connected enough to count Tony Blair as a close friend, but he manages to keep a low profile. He knows he will face questions over his “experience and expertise” when it comes to his third runway proposals.
He has put together a heavyweight team for his pitch, including the family-run construction behemoth Bechtel and the renowned property barrister Chris “KitKat” Katkowski.
He has also assembled an advisory board comprising Mike Clasper, the former chairman of HM Revenue & Customs; Sir Rod Eddington, former boss of BA and Cathay Pacific; and Robert Webb, BA’s former general counsel. Eddington says: “This represents a game changer. Whether Surinder wins or not, the fact he’s put his hand up with a viable alternative to Heathrow will — among other things — force a discussion around costs and affordability.”
Arora, who comes across as emollient and sometimes almost shy, insists the airport should not “see us as a threat”, because “if you have competition, we can drive our people better and they can drive their people better”. Heathrow’s owners are unlikely to see it that way.
The London hub is like a cash machine for its shareholders. After an initial moratorium on dividends imposed by the banks that funded the debt-fuelled £16bn purchase of its parent BAA in 2006, Heathrow has paid out £2.5bn since 2012. It is regulated by the Civil Aviation Authority (CAA), which sets the rate it is allowed to charge airlines based on the value of its assets every five years. Critics complain this system in effect incentivises Heathrow to spend without regard to efficiency, although the CAA can strip out items that it decides are unjustified.
Heathrow has promised to hold airline charges steady “on average” until 2048, while the new runway is under construction. Walsh has predicted an increase from the current level of £20 per passenger to £40 and warned that “£80 per return trip in airport charges will turn Heathrow into a white elephant”.
Arora has plenty of stories about Heathrow’s refusal to compromise. He says the airport tried to block him from putting up a billboard at Terminal 5 that would charge advertisers £350,000 a year — £150,000 less than Heathrow. When he won the planning battle, Heathrow refused to give him power. Holland-Kaye intervened after Arora said he would use a generator, but he is now “going through the same thing again” with another billboard.
Heathrow is by far Britain’s biggest airport. It serves 76m passengers a year and constantly runs at close to full capacity. The pressure can be seen in the prices at which carriers trade landing slots — up to $75m (£58m) for a pair. Arora agrees “100%” with the need for expansion, but quibbles with the way Heathrow has designed and priced its scheme.
The first of two plans he has put forward would involve keeping the runway’s length at 3.5km and bridging the M25, as proposed by Heathrow, but leaving car parking spaces where they are, scrapping a Terminal 2 extension and putting the new Terminal 6 satellite in a different place. He believes this would save £5.2bn and use 23% less space. The second would also involve shortening the runway to 3.2km (apparently, that would still work for 99% of flights) and bridging a spur of the M4 instead of the M25. Arora thinks this would save £6.7bn.
How does a mere millionaire intend to fund an infrastructure project costing £10.9bn to £12.4bn? Arora says he would put in some of his own money, but he has already had an offer from a big investor for the £1bn equity he would need. He thinks the rest could be raised through borrowing from banks or insurers.
His trump card is land. He has spent 15 years quietly buying plots on the proposed site of the third runway. He now has more than 200 acres, including 30 houses in the village of Longford and a row of offices including Heathrow’s own headquarters building.
“Even Carlton [Brown], my chief financial officer, said to me the first time I mentioned it, ‘Are you trying to leverage up your land values?’,” Arora says. “I said no. That question does not even exist in my head. Obviously I’d be mad if I was saying that I couldn’t make this work financially for our business, but it’s something that would benefit the nation.”
Arora has experienced corporate rough-and-tumble before: in 2014, he had to pass two hotels to Davidson Kempner, an aggressive US hedge fund that bought his loans from Allied Irish Bank. The bank’s sale of his debt “broke my heart” because “I’ve always looked at myself as a farmer, never as a hunter”.
You could compare the Americans’ raid with his third runway gambit. Arora says he wants to do “what’s right for customers” rather than “sit there and throw punches and work as enemies”.
But you sense that beneath his gentle manner, this farmer might just have acquired a taste for meat.
Full article in the Sunday Times at
Teddington Action Group (TAG) comment on Arora Group’s “cheaper” plan for a runway – and Heathrow’s highly uncertain finances
On Sunday, 9th July, it was widely reported that hotel tycoon, Surinder Arora, has proposed a cheaper plan to expand Heathrow airport which includes changing the airport’s terminal and taxiway layout, occupying less land, and not impacting on the M25 and M4 motorways which hem it in. Speaking for Teddington Action Group (TAG), Paul McGuinness said: “With Heathrow’s current expansion plans being an un-financeable non-starter, and even Heathrow looking to cut the cost of its plans, it’s hardly surprising that an alternative should pop up to salvage any prospect of the airport’s expansion. But no alternative plan can change the fundamentals. Heathrow is already known as the “world’s most disruptive airport” – being positioned, as it is, bang slap in the middle of the UK’s most densely populated residential region, and with flight paths over the capital city. And from the perspectives of noise, environment and safety, it is expanding Heathrow’s activities by over a half again that will always remain the real non-starter”. TAG have produced a damning assessment of the financial difficulties of Heathrow, in attempting to raise the finance needed for its expansion from its various shareholders. It lists the serious problems Heathrow would have, its degree of indebtedness, and the risk to the UK taxpayer of having to bail out the airport, once construction began, and the airport ran out of money.