Heathrow plans to cut building costs of its runway plan, to keep fares low, by not adding new terminal

Heathrow has said it will – allegedly – guarantee to effectively freeze passenger landing fees when [if] a 3rd runway is built, by scrapping plans for a new terminal. The cost for the whole planned expansion is about £17.6 billion, and Heathrow knows it will have trouble raising all this and paying for changes to surface access transport. The government does not want air fares to get any more expensive. So Heathrow now says it will knock “several billion” pounds off the cost of its plan by abandoning facilities such as an additional terminal. The terminal would require a huge subsurface baggage handling system and an underground passenger metro system, which was estimated to cost £1 billion alone. They instead suggest extending Terminals 5 and 2 and phasing the expansion work over as long as 20 years, to control costs. The main airline at Heathrow, IAG, is not prepared to pay higher charges to fund inefficient expansion, that is unnecessarily expensive. The amended expansion plans by Heathrow will be put out for a public consultation later in 2017.  The publication of the final Airports National Policy Statement [the consultation on it ended in May 2017] setting out the Government’s position, and a subsequent House of Commons vote, are expected in the first half of 2018 with the vote not before June. Heathrow hopes to cut costs in every way it can, and get in the necessary funds by attracting many more passengers, even if paying hardly more than they do now – about £22 landing fee – each.


There is no Heathrow press release on this.  Heathrow press releases

Heathrow to freeze prices despite expansion costs

27.7.2017  (ITV)

Travellers using Heathrow Airport shouldn’t expect to pay more for their flights despite costs of expansion.

Heathrow said it’s confident it can keep landing fees close to existing rates and not affect ticket prices. That’s despite the costs implicated in building a new terminal.The Department for Transport has said it expects the industry to “drive down costs” and aim to keep charges “close to current levels”.

£246m Heathrow’s profit after tax in its half-year results

Willie Walsh, the boss of British Airways’ parent company IAG, has repeatedly warned that expansion must be cheaper than the £17.6 billion budget estimated by the Government-commissioned Airports Commission.

He fears that landing fees could be raised and has insisted airlines “are not going to pay for inefficient expansion”.

Although specific plans will not be released until a consultation is launched later this year, the airport is proposing to delay some of the more expensive aspects of the work.

The publication of the final Airports National Policy Statement [the consultation on it ended in May 2017] setting out the Government’s position and a subsequent House of Commons vote is expected to take place in the first half of 2018.



Heathrow scraps new terminal plan to control expansion costs

by Phil Davies  (Travel Weekly)

July 27th 2017

Heathrow scraps new terminal plan to control expansion costs

Heathrow will guarantee to effectively freeze passenger landing fees when a third runway is built by scrapping plans for a new terminal.

The London hub today pledged to knock “several billion” pounds off the cost of its expansion plan by abandoning facilities such as an additional terminal, new baggage handling systems and an underground train.

Heathrow will instead suggest extending Terminals 5 and 2 and phasing the expansion work over as long as 20 years to control costs.

The airport hopes that the plan will cut the £16.8 billion price tag for a third runway while easing concerns that a hike in passenger landing charges will price many carriers out of Heathrow.

The proposals will go out for consultation later this year.

Willie Walsh, the head of British Airways’ parent company International Airlines Group, had predicted that landing charges, which add £21.75 to the price of each ticket, could double under a third runway as the airport’s private backers seek to recoup investments.

However, Heathrow chief executive John Holland-Kaye pledged to keep fees “as close to current charges as possible” when the runway opens, possibly by 2025.

Speaking ahead of the airport publishing its latest financial results today, Holland-Kaye told The Times: “We will be reducing the terminal costs by several billions of pounds. When you think about HS2 and other big national projects the costs tend to go up rather than go down, so if we can bring the costs down it will be remarkable.

“We have been working for some time on bringing the absolute costs down and we are getting to a very good position. Having passengers paying pretty much the same amount as today while getting a world-class airport with better public transport is a remarkable achievement.”

The two-mile runway is set to be built to the northwest of the airport, allowing it to boost annual passenger numbers to 130 million a year.

Heathrow originally suggested building one additional terminal between its northern runway and the new runway. It would require a huge subsurface baggage handling system and an underground passenger metro system, which was estimated to cost £1 billion alone.
Holland-Kaye insisted that this could be replaced by an expansion of Terminal 5.

Over coming years, Heathrow’s other main terminal, Terminal 2, would also be expanded, he said.

Announcing a 36% hike in half year pre-tax profits to £102 million for the period to June 30, Holland-Kaye said: “Heathrow’s strong start to 2017 is a boon for Britain – our passengers are getting better value and service, more British trade is flying high on new trading links and our expansion plans are on track.

“The government set us the challenge to expand Britain’s hub while keeping airport charges close to current levels.

“Working with airlines, we are making good progress to meet this challenge whilst delivering all our local commitments and the global connections our country needs.”

Passenger charges fell by 2.3% in the six months as passenger numbers rose by almost 4% to 37.1 million in the half year. Revenue was up by 4.2% to 1.37 billion.

Transport secretary Chris Grayling has insisted that keeping landing charges flat would be a condition of building a third runway. The plan still has to pass a parliamentary vote next year and be approved by planners in the early 2020s.

The airport said: “Continuing to work with airlines, neighbours and wider communities, we are making good progress to meet the secretary of state’s challenge to expand Britain’s hub while keeping charges close to current levels and meeting our local commitments.

“We have identified potential further savings through this work by looking at the location and configuration of the terminals along with different phasing options.

“We will continue refining our plans and release various options at our first planning consultation later this year.”

Tim Alderslade, chief executive of Airlines UK, which represents carriers, said: “Heathrow is the most expensive airport in the world and, post-Brexit, the UK will need to compete even more with other hubs. Airlines are clear that the cost of expansion that they and their customers pay for is a key factor.”

Alderslade added: “We need the right solution at the right price, at the right time, in order to meet the needs of customers, and over time the aim should be for charges to come down as the number of movements increase.”

He said that airlines agree with Grayling that expansion at Heathrow must be delivered while keeping charges flat.

“The secretary of state’s statement was an important acknowledgement that extra capacity must not just be waived through under any circumstances, at any cost.”



Heathrow’s tweaked expansion plans could mean airlines avoid huge rise in charges

27.7.2017 (Telegraph)

By  Bradley Gerrard

Airlines look set to avoid huge hikes in charges at an expanded Heathrow on the back of revised plans aimed at cutting the cost of the project.

Heathrow said it had been working with airlines to help it meet the Government’s challenge to complete the expansion scheme while maintaining airport charges close to current levels.
Chief executive John Holland-Kaye said initial plans had proposed the construction of an entirely new terminal – which would have been the sixth at the site – but now it was likely the existing Terminal 5 would be expanded instead.

Some airlines bosses, notably Willie Walsh from British Airways owner IAG, have criticised the proposed costs of the new runway project because the the potential to push air fares up.
“This reduces the cost of the project and improves passenger service and so we can deliver an expanded hub with a better passenger experience at a more affordable price,” Mr Holland-Kaye said.

“Airlines have always been clear they support expansion but not at any cost and we are working with them to bring costs down.”

IAG chief Willie WalshIAG boss Willie Walsh has urged Heathrow not to crank up charges at an expanded siteMr Holland-Kaye said the airport had renegotiated contracts with some of its service supplies, including air traffic service NATS, and cut the cost of its debt by issuing longer-dated bonds with a lower interest rate.

These initiatives helped it cut the charges passengers pay as part of their ticket price. Mr Holland-Kaye said such charges fell 2pc to an average of £21.92.

This month the airport also reached a deal with Transport for London and the Department for Transport to make sure Crossrail serves all Heathrow terminals from 2019, an upgrade on the previous plan to only link the new rail service to Terminal 4 up to four times an hour.
The airport chief also said the deal would see the proposed frequency of trains increased to six an hour and potentially eight, which alongside the existing Heathrow Express would mean a train to the airport every five or six minutes.

The developments come as the airport reported a 4pc rise in revenue to £1.37bn for the six months to June 30 and reversed the comparable period’s £232m loss to make a £311m profit. A key factor in the swing was a £135m gain on currency-related financial derivatives it holds, which lost £295m in the comparable 2016 period.

Passenger numbers also rose 3.9pc to 3.71m, an all-time record high for a half-year period.



Heathrow Airport say no to new underground station

27.7.2017 (Radio Jackie)

Heathrow Airport has announced they would not support a new underground station on the Piccadilly Line.

The station would be built to cope with extra demand on a new runway if it secures the backing of Parliament next year.

It would have been paid for by Transport for London not the airport- who have refused to pay for more than 1.1 billion pounds of the total surface access costs associated with a new runway.