Rival Heathrow expansion consortium, Arora, upbeat as Government opens door to competition
The Telegraph reports that the government has said it welcomes competition in the construction of the nation’s airports. Hotel owner Surinder Arora had earlier this year proposed a cheaper way to build a Heathrow 3rd runway, cutting about £5 billion off the price. Government documents related to the expansion had previously assumed Heathrow would be in charge of the construction project and choose which contractors it wanted to help it fulfil the scheme. But the DfT says in the revised consultation on its Airports NPS (National Policy Statement) that it would welcome competing bids for the work. The NPS consultation says: “For the avoidance of doubt, the Airports NPS does not identify any statutory undertaker as the appropriate person or appropriate persons to carry out the preferred scheme.” And there could be “more than one application for development consent, dealing with different components individually”. The Telegraph believes a key difference, if a body other than Heathrow did the building, would be that the party behind the construction would receive the associated income it generates from passenger and airline charges, as well as retail rental payments. But there could be more risks, more costs etc.
Rival Heathrow expansion consortium upbeat as Government opens door to competition
By Bradley Gerrard (Telegraph)
19 NOVEMBER 2017
The Government looks to have given a rival bid to develop Heathrow’s third runway a lift after stating for the first time it welcomed competition in the construction of the nation’s airports.
A plan by the largest single land owner on the site marked for expansion, Surinder Arora, alongside partners US engineering firm Bechtel, was put forward earlier this year which claimed to be as much as £5bn cheaper than Heathrow’s £17.5bn initial estimate.
Government documents related to the expansion had previously assumed Heathrow would be in charge of the construction project and choose which contractors it wanted to help it fulfil the scheme.
But now the Department for Transport has said in its revised draft Airports National Policy Statement, a document which forms part of the process of airport expansion, that it would welcome competing bids for the work. (NPS consultation document – both quotes from page 7).
“For the avoidance of doubt, the Airports NPS does not identify any statutory undertaker as the appropriate person or appropriate persons to carry out the preferred scheme,” the NPS document says.
Regardless of who builds the expansion it will have to comply with the exact specifications of the scheme which was recommended by the Airports Commission in 2015 and subsequently backed by the Government.
But a key difference will be that the party behind the construction will receive the associated income it generates from the likes of passenger and airline charges as well as retail rental payments.
It is possible, the Government states in the NPS consultation paper, that there could be “more than one application for development consent, dealing with different components individually”.
Mr Arora, who believes the project can be delivered for £12.4bn, said he wanted to see the project through and was “not trying to make it difficult for everyone”.
“We are happy to work with anyone on the basis the project is as efficient, affordable and as competitive as possible,” he said.
Carlton Brown, chief financial officer at the Arora Group, added that if there was a “more value-enhancing way” to construct the expansion, Heathrow had an obligation as part of its licence from the Civil Aviation Authority to embrace this.
A Heathrow spokesman said it had worked hard with airlines to develop a plan which would keep airport charges close to current levels, “cutting billions of pounds from the early budget estimates whilst also improving passenger experience”.
“The NPS is clear that commitments made, particularly to local communities must be delivered,” the spokesman added.
“Only Heathrow Airport Ltd has committed to a world-class £2.6bn compensation package for local communities and a £10m route development fund for the regions and nations. No other plan, including the Arora plan, can deliver these commitments and give the country the hub airport it needs in a post Brexit world.”
The notion of parties other than the airports themselves constructing terminals or runways is more common in the USA but hasn’t developed in the UK.
But some countries in Europe are starting to adopt this method, with the Irish Government recently stating it would consider a third party provider to develop a third terminal rather than the Dublin Airport Authority.
The potential for competition to construct some or all of the expansion at Heathrow is also backed by the airport’s largest airline group, British Airways owner IAG.
“Heathrow is the most expensive airport in the world so we think the Government is wise to take a serious look at Arora’s proposal,” a spokesperson said. “It would significantly reduce the cost.
“Customer charges must not increase from today’s level if Heathrow is to have a viable future and compete effectively with European airports post Brexit. The Government must ensure it is customers that benefit from the new runway, not the airport’s shareholders.”
Some, however, question whether splitting the construction up would add cost and increase the risk of delay to a project many view as long overdue.
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.
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).