Heathrow consultation on its plans delayed as CAA hopes to reassure airlines on lower 3rd runway costs
The Times says Heathrow’s plans for a 3rd runway have been delayed until at least December, or early 2018, as the airport tries to cut £6 billion from the cost. A report by the CAA said that Heathrow’s proposals would be published for consultation “no earlier” than December. This had been expected by August. The CAA report was distributed to airlines, and said that Heathrow was working on revised proposals designed to cut £6 billion from the previous £17.6 billion budget. Heathrow’s attempts to cut the cost is to reassure airlines like British Airways and Virgin Atlantic over “gold-plated” facilities planned for Heathrow expansion – that airlines fear they would have to pay for. Airlines fear higher landing charges, leading to higher fares, knocking their profits and even driving some airlines out of Heathrow. Heathrow has already publicised cuts to its plans, like delaying Terminal 6 and an underground passenger transit system to limit the expense. The problem of how to get the runway over the M25 has not been resolved, but it would be cheaper to do a bridge over the motorway rather than a proper tunnel, as the Airports Commission had expected. The airlines want Heathrow to “make available more mature information/data on costs and benchmarking before [the consultation].”
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Cost-cutting delays Heathrow airport’s third runway
Heathrow’s plans for a third runway have been delayed until at least the end of the year as the airport tries to cut £6 billion from the cost of the project.
A report by the Civil Aviation Authority said that Heathrow’s proposals would be published “no earlier” than December, suggesting that the process could slip into next year.
[Heathrow hopes putting the runway etc over the M25, on a sort of bridge, rather than paying for a proper tunnel for the M25 could save it a lot of money. The bridge would be 8 metres above the runway. ]
[Heathrow hopes with 3 runways it could get 138 million annual passengers, up from around 75 million now. But that means up to 740,000 annual aircraft movements – up from 480,000 now – and much more noise. Already around 700,000 people live in areas affected by Heathrow noise above 55 Lden, and about 270,000 people live in areas affected by Heathrow noise above 57 Leq link ]
Its latest report, obtained by The Times, said that airlines had been “generally positive”, but it said that “carriers had a “number of important remaining concerns”. It added: “The airline community has said affordability remains their primary concern and they still require more confidence that the emerging features of the scheme design are affordable. They also want [Heathrow] to make available more mature information/data on costs and benchmarking before [the consultation].”
In a further disclosure, the report confirmed that airlines operating from Heathrow were being required to sign gagging clauses — non-disclosure agreements — preventing them sharing information about the third runway.
Full Times article at
https://www.thetimes.co.uk/article/cost-cutting-delays-heathrow-airport-s-third-runway-0j9zgphxf
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Holland-Kaye confirms again that Heathrow will need to build its runway etc in phases to spread costs
Heathrow CEO, John Holland-Kaye, has again said the airport may need to build its 3rd runway and associated airport infrastructure in phases, to spread the massive £17 billion cost over many years. It will be interesting to see the latest government air travel demand forecasts when they are finally published later this year. It is likely they will show more demand at Gatwick than the Airports Commission had assumed, when it pressed for a 3rd Heathrow runway. There may be less strong demand for Heathrow than originally suggested, with impacts on Heathrow’s finances. Holland-Kaye says he is not in favour of the cheaper runway plan by hotel tycoon Surinder Arora, which could be some £7 billion cheaper than Heathrow’s own. Not otherwise very bothered about the extra noise caused by his 3rd runway, Holland-Kay says …”I’m most concerned about the idea that the runway might move closer to London – that means more homes lost, more people hit by aircraft noise.” He says: ‘We can expand the airport with fewer new buildings. We can do the construction on a phased basis so we can smooth out the price. Originally we were going to expand Terminal 2 early on which would have given us an extra 20 million passengers a year. …Now we’re going to do that in phases, adding enough for 5 million at a time.”
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How Heathrow’s new runway would be funded, (higher landing costs, more costs to taxpayer) – all unclear
Heathrow’s plans for a 3rd runway, and associated building, are due to cost the airport at least £18 billion (not including unexpected over-runs and engineering problems etc). Heathrow now wants the right to make airlines and passengers contribute to any unexpected higher costs. The CAA controls the amount Heathrow can charge airlines. Heathrow has asked the CAA to factor in a huge array of risks from building the 3,500 metre runway across the M25 into the charges it is allowed to claw back from carriers. Heathrow keeps insisting its landing charges would remain close to current levels, aviation experts said there are few credible alternatives to charging users more. IAG believes the huge construction costs will lead to charges doubling to landing charges per passenger, from about £40 now to £80 for a return ticket. Heathrow is mainly owned by overseas investors. As well as higher than expected costs of construction, there are risks such as lack of interest from airlines in taking up the new landing slots; financial markets turning against the airport, leading to a downgrade of its credit rating; higher debt costs; and politics. There is real fear that if the Heathrow expansion project was allowed, the costs – many £ billion – might fall on the taxpayer – if the enterprise becomes a bit of a white elephant. The Airports Commission and DfT have said little about this massive risk to the public finances.
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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.
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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).
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Lord Adonis: Hard Brexit could halt Heathrow runway plans, as investors won’t risk the money in UK
National Infrastructure Commission chairman, Lord Adonis, says UK must maintain ties with EU to save key projects such as Heathrow 3rd runway and HS2. He said a hard Brexit would spell the end for the 3rd Heathrow runway. Heathrow airport was keen, before the referendum in 2016, for the UK to remain in the EU. While Heathrow, since the referendum, has argued that Brexit makes its 3rd runway ever more important, Andrew Adonis said private investment in infrastructure would be off the table unless Britain could maintain ties with the EU. He said that a host of major projects including HS2, Crossrail 2 and HS3 rail links between northern cities, as well as universal broadband and mobile services, would be under threat but particularly those that rely on private funding. “These decisions on Brexit have a crucial bearing on infrastructure. Business will not invest for the long term if they think Britain is going down the tube. It’s as simple as that.” And “If we were to go for a hard Brexit which severs Britain’s trading ties with the continent I think we could be heading for a calamity as a country.” The cost of the expansion at Heathrow would be about £17.5 billion (with Heathrow only paying about £1 billion towards surface access). They are trying to find cost savings. The money needs to come from its range of foreign investors, the biggest two of which are a Spanish Ferrovial (25%) consortium and Qatar’s sovereign wealth fund (20%).