BA owner IAG tells Heathrow it should sell the Heathrow Express link and focus on running airport
The owner of British Airways, IAG, has demanded that Heathrow be forced to sell the Heathrow Express rail line, which is Britain’s most expensive train service. They say Heathrow should focus on running the airport instead. IAG does not want to have to pay for Heathrow’s expansion with a 3rd runway, or have to put up its prices for its air passengers. This week, Heathrow is to launch consultations on its building plans, hoping to get ways to cut about £5 billion off the previously estimated cost of about £17.5 billion. The Heathrow Express, which operates the 15-mile route between the airport and Paddington station, charges passengers as much as £27 for a single journey. But there will be a threat from new Crossrail trains, which are due to start running competing services in May. Heathrow also owns part of the track, but last May lost a high court battle over attempts to raise charges for rival operators to run on its rails. IAG said Crossrail’s introduction would mean infrastructure costs were disproportionately heaped on to Heathrow Express at a time when its revenues were diluted — and would end up in higher landing charges for airlines.
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BA owner IAG tells Heathrow: Sell Express rail link and focus on running airport
By John Collingridge (The Sunday Times)
January 14 2018
Passengers are charged as much as £27 to travel on the Heathrow Express
The owner of British Airways has demanded that Heathrow be forced to sell Britain’s most expensive train service and focus on running the airport instead.
IAG’s latest salvo escalates the long-running battle between the airport and its biggest customer over the cost of Heathrow’s plans for a third runway. IAG made the call for the Heathrow Express to be sold in a response to a consultation by the aviation watchdog. On Wednesday, the airport is due to reveal its blueprint for expansion as it attempts to slash about £5bn from the £18.6bn price tag for the third runway.
Its 10-week planning consultation is likely to examine options such as erecting a runway on stilts over the M25 and building new terminals.
The Heathrow Express, which operates the 15-mile route between the airport and Paddington station in west London, is renowned for charging passengers as much as £27 for a single journey.
However, the operator faces a threat from new Crossrail trains, which are due to start running competing services in May. Heathrow also owns part of the track, but last May lost a high court battle over attempts to raise charges for rival operators to run on its rails.
IAG said Crossrail’s introduction would mean infrastructure costs were disproportionately heaped on to Heathrow Express at a time when its revenues were diluted — and would end up in higher landing charges.
“Consequently, it would be in passengers’ interests for Heathrow to divest Heathrow Express . . . to a rail operator and to instead focus on its core business of running and expanding an airport,” it said.
Heathrow said: “We are looking forward to the arrival of Crossrail in coming years as part of our plans to treble Heathrow’s rail capacity by 2040 and put the airport at the heart of an integrated transport network.
“Heathrow Express has carried more than 100m passengers and will continue to play an important role in sustainable transport at Heathrow alongside Crossrail.”
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BA chief calls for tighter regulation on Heathrow
Walsh says aviation watchdog must hold airport to account over excessive investment spending
By Peggy Hollinger, industry editor (Financial Times)
14.1.2018
Britain’s aviation regulator is failing to hold Heathrow to account over excessive investment spending and the airport should be more closely scrutinised if the UK gives the go-ahead to a £14bn expansion plan, according to one of the world’s biggest airline groups.
Willie Walsh, chief executive of British Airways parent, International Consolidated Airlines, has accused the Civil Aviation Authority of failing passengers by not demanding greater transparency and efficiency from one of the world’s busiest airports on investments.
Writing in the Financial Times, Mr Walsh said: “For Heathrow’s expansion to succeed, there needs to be a relentless focus on controlling costs. But I have no confidence that the CAA is up to the task.”
Heathrow was already one of the most expensive airports in the world with charges 65 per cent higher than any other major European hub, he said.
The IAG boss said airlines were being “forced to raise fares when they pay too much for the landing fees that mask Heathrow’s inefficiencies”, adding: “There is no benchmarking, no transparency and very little recourse.”
However, he said the CAA’s mandate needed to be changed if Heathrow was to remain globally competitive.
Mr Walsh’s stinging attack on the CAA comes as Heathrow embarks on a 10-week public consultation on Wednesday with its detailed plans for a new runway and terminal. MPs are due to vote on expansion by the summer.
He said he was “alarmed” at signs that the government “looks set to give its blessing to the £14bn proposal”.
Heathrow’s expansion is a politically charged subject given its environmental impact and strong opposition in conservative constituencies near the airport. However, pressure for new airport capacity is mounting with all of the UK’s five major airports expected to be at full capacity by the mid 2030s and British business arguing that congestion is holding back international trade.
Many airlines have also criticised the failure to expand capacity at Heathrow in particular, the UK’s biggest airport, and where IAG’s BA dominates with 51 per cent of weekly take-off and landing slots.
However, many have also raised the alarm over the potential impact on airport charges, which are determined every five years after taking into account airport investment.
Mr Walsh said the fault lay in part with the CAA, which “rewards the inefficient use of capital: the more it spends on capital projects, the cost of which can be passed on to airlines, the more it makes for its shareholders . . . By not regulating Heathrow firmly enough, the CAA is failing to protect the consumer.”
Heathrow rejected Mr Walsh’s criticisms, saying estimated costs of expansion had already been cut by £2.5bn after discussions with airlines and other stakeholders, and the government’s challenge to Heathrow was to keep charges “close to today’s levels”.
Andrew Haines, CAA chief executive, admitted that Heathrow’s expansion posed challenges for the regulator, but said plans were being put in place to ensure the investment did not lead to excessive charges.
The CAA had put forward proposals in December for a new approach to setting airport charges in light of Heathrow’s expansion. “The CAA has been crystal clear for a number of years that the economic regulation of this expansion cannot be treated as business as usual and, moreover, that Heathrow’s airline customers have a critical role to play in judging the efficiency of the scheme design, procurement and delivery,” he said.
https://www.ft.com/content/4af7e08a-f94c-11e7-a492-2c9be7f3120a
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See earlier:
Willie Walsh, CEO of IAG (with over half Heathrow’s slots) again says its expensive 3rd runway plans are “a ridiculous glory project”
Willie Walsh, the boss of British Airways’ parent company, IAG, has again lambasted Heathrow’s expansion plans as a “ridiculous glory project”. He said the £17.6bn plan to build the 3rd runway (just £200 million for the runway itself – not counting the M25 problem) could lead to a “completely unjustified” increase in airport charges, which airlines would have to charge to passengers, denting demand etc. IAG (which owns Iberia and Aer Lingus) have over 50% of Heathrow landing slots. IAG wants a 3rd runway, though it would increase its competition, but they want a cheap no-frills scheme – and have backed the £7 billion cheaper scheme promoted by Surinder Arora. The Heathrow scheme requires the demolition of the BA HQ at Waterside in Harmondsworth and IAG could end up effectively paying its own compensation through increased charges levied by Heathrow. Willie Walsh also said IAG’s new long-haul, low-cost brand Level might one day fly from Heathrow. At present, the subsidiary operates just two aircraft from its base in Barcelona. He hopes it will have 30 planes by 2022, and fly to destinations currently off the BA route map, like secondary cities in China.
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Willie Walsh and IAG: Work out cost of crossing M25 before Heathrow runway plan
Willie Walsh, CEO of IAG, says pushing through Heathrow’s 3rd runway should be suspended until there are proper plans of how the airport is going to bridge the M25. The section of the M25 that the runway would have to go over is about the busiest stretch of motorway in the UK, and it is unclear if there would be some sort of bridge (a cheaper option, about 8 metres above the road surface), or a proper tunnel (more expensive for Heathrow). IAG, and British Airways, are concerned the extra cost would mean higher charges by Heathrow, so higher ticket prices. Heathrow says landing charges would remain as close to flat “as possible” but Walsh fears they could double and they raised their concerns in their submission to the inquiry by the Commons Transport Committee, into the draft NPS. There are a few airports globally that have some sort of bridge, with planes taxiing above the road, clearly visible to traffic. None over such a wide, busy section of motorway. In October, when the bridge idea was first suggested (the Airports Commission always presumed a tunnel) papers from Highways England showed it described the scheme as “high risk”, warning of a “a substantial risk of excessive customer frustration about what might be prolonged period of disruption”. IAG is also deeply opposed to Heathrow ending night flights between 11pm and 5.30am, as that risks flights going instead to airports like Frankfurt, losing IAG money.
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Willie Walsh reiterates that he will fight Heathrow runway, due to cost; content with 3 hub system for IAG instead
Willie Walsh has reiterated his determination not to pay the exorbitant costs of a new Heathrow runway (and that’s without the costs that the taxpayer would have to pick up for surface access improvements – which could be £20 billion). He said the current proposal to build a 3rd Heathrow runway is “indefensible” from a cost point of view and he will fight it. BA holds over 50% of Heathrow’s slots. Walsh said he was worried about the current Heathrow proposal because there was now “desperation by the airport to get a third runway and they are willing to do anything to get it.” He commented: “So the airport is incentivised to spend money while I am incentivised to save money.” Because the coalition government blocked a 3rd runway in 2010, in January 2011 BA and Iberia were merged to form IAG. Then IAG bought UK airline BMI, to get hold of its Heathrow slots, gaining an extra 42 pairs. That ensured IAG had enough Heathrow slots to secure its ability to compete from its hub base. Since then Walsh has made his plans to use a 3 hub strategy – with Madrid and Dublin as its two others, not depending so much on Heathrow. IAG also owns Iberia, Vueling and Aer Lingus. Dublin will be adding a new runway – probably by 2020.
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