Heathrow runway completion date now 2029, NOT 2026. That means maximum economic benefit cut from +£3.3 bn to a loss of -£13 bn to the UK
Heathrow’s timetable for its 3rd runway faces further delay after CAA said it would only approve £1.6 billion of spending before the DCO is approved. Not the £3 billion Heathrow wants. In a new CAA consultation document released on Thursday, they say this would mean a delay of about a year to the 2026 scheduled opening of Heathrow’s runway, based on Heathrow’s estimates. However, Heathrow said the CAA’s proposal would delay the completion of the runway by up to 3 years. ie. it would not open till 2029 (Heathrow says “between early 2028 and late 2029….). The delayed opening date means the alleged economic benefit to the UK is far lower than currently estimated. The Transport Select Cttee report in March 2018 on the Airports NPS said the maximum benefit of the runway to the whole of the UK over 60 years would be +£3.3 billion. They said that a delay of two years, from opening in 2026 to 2028 would mean a loss of £16.3 in economic benefit to the uK. That means the runway would now cause a considerable economic loss to the country. On this basis alone there should be a review of the Airports NPS, and rethink by government on Heathrow.
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The Transport Select Committee’s report, in March 2018, on the Airports NPS and the Heathrow runway, said:
https://publications.parliament.uk/pa/cm201719/cmselect/cmtrans/548/548.pdf
27. The economic case of the NWR scheme is grounded on it being delivered by 2026 and at capacity by 2028. These are essential considerations. If the NWR cannot be delivered to the capacity and timeline assumed, because of, say, airfield design pinch points or planning issues, there will be considerable knock on effects to the economic business case of the scheme. 63 A two-year delay to the scheme’s delivery would result in £16.3 billion of benefits being removed from the economic case. 64 Similarly, there are significant economic costs from not proceeding at this point with the NWR scheme. In making its decision, Parliament needs to consider these opportunity costs, such as additional demand moving to competitor airports in other countries.
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Economic case
23. The DfT’s appraisal shows little separates the economic cases of the three schemes. The economic benefits over the appraisal period are now marginally in Gatwick’s favour, which is forecast to deliver £74.1 billion in gross benefits; compared with a Heathrow NWR at £72.8 billion and £61.7 billion with a ENR. 50 Once costs are considered, the net economic benefits for the NWR scheme are relatively small at a maximum of £3.3 billion over 60 years and in fact, may be negative if future demand falls. 51 The net economic benefits for the other schemes are also relatively small. The draft NPS does not reflect the DfT’s appraisal stating simply that “ … overall the Heathrow NWR scheme is considered to deliver the greatest net benefits to the UK.”52
Heathrow’s third runway plans face further delay
UK aviation regulator concerned about level of spending ahead of final approval
By Tanya Powley and Peggy Hollinger in London (Financial Times)
19.12.2019
Heathrow’s timetable for its third runway faces further delay after the UK aviation regulator said it was minded to approve only just over half the amount London’s busiest airport wants to spend on its project ahead of final approval.
The UK’s Civil Aviation Authority on Thursday rejected Heathrow airport’s proposal to more than quadruple certain early construction-related spending to £2.8bn because of the risk the costs would be passed on to passengers if the project is eventually cancelled.
In a consultation document released on Thursday, the regulator instead said its preference was for spending to increase to £1.6bn. It added that the move would mean a delay of about a year to the 2026 scheduled opening of Heathrow’s third runway, based on Heathrow’s estimates.
However, Heathrow said the CAA’s proposal would delay the completion of the runway by up to three years.
The CAA’s move comes after management at the airport proposed in the summer to speed up certain spending on the £14bn project to meet its 2026 completion target date for the runway.
Paul Smith, group director of consumers and markets at the CAA, said: “We believe that more runway capacity at Heathrow will benefit air passengers and cargo owners . . . However, we have also been clear that timeliness is not the only factor that is important to consumers.
“Passengers cannot be expected to bear the risk of Heathrow Airport Limited spending too much in the early phases of development, should planning permission not be granted.”
Heathrow had proposed increasing early so-called Category C spending, relating to acquiring and relocating buildings and compensating local communities, from £650m to £2.4bn, based on 2014 prices. The CAA said that in 2018 prices proposed early Category C expenditure was subsequently increased to £2.8bn.
The CAA has approved Heathrow’s plan to raise early Category B expenditure, associated with seeking planning permission, such as the public consultation and master plan development, from £265m to more than £500m.
Heathrow said Thursday’s announcement was an “important milestone” in expanding the airport.
“We will now review the detail to ensure it will unlock the initial £1.5bn to £2bn of private investment over the next two years at no cost to the taxpayer,” a spokesperson said. “Whilst this is a step forward, the CAA has delayed the project timetable by at least 12 months.
“We now expect to complete the third runway between early 2028 and late 2029.”
However, there is still uncertainty over whether the expansion will go ahead, following opposition from politicians, local residents and environmentalists. A judgment on five judicial reviews by campaigners against the expansion is expected early next year.
Heathrow is likely to submit its application for a development consent order (DCO), the permit required by all nationally significant infrastructure projects, next year. The airport hopes the transport secretary will approve it in 2021.
While the CAA has rejected the highest early spending plan, approval to spend more money ahead of getting a DCO is still likely to attract criticism, such as from IAG, British Airways’ parent company and Heathrow’s biggest customer.
Willie Walsh, IAG chief executive, has long criticised plans to spend significantly on early construction costs before planning permission is granted or the scheme’s final costs are known. On Wednesday, he called on the government to commission an independent assessment of Heathrow’s expansion costs.
In its master plan, revealed in June, Heathrow said it would stagger expansion to manage costs and appease residents’ concerns about noise and pollution. Dividing the project into four phases is part of the airport’s efforts to keep the passenger service charge close to 2016 levels. Heathrow’s fee of £22 per person is already one of the most expensive in the world.
Construction of the new runway is in the first phase of the project, which was scheduled for completion in 2026. The fourth phase, which includes car parks, road systems and hangars, is set to be finished in 2050.
However, an independent report commissioned by the CAA suggested that Heathrow’s target date of 2026 for the runway opening was “optimistic” even under the airport’s preferred approach to early spending. It noted that a more likely opening date would be between early 2027 and late 2028 under Heathrow’s previous proposal.
The CAA’s consultation will be open for responses until February 28, with a final decision expected in the spring. Its title is: “Economic regulation of Heathrow Airport Limited: policy update and consultation on the early costs of capacity expansion”
https://consultations.caa.co.uk/cmg/early-costs-of-capacity-expansion/
FT article at
https://www.ft.com/content/13c97730-226d-11ea-92da-f0c92e957a96
Willie Walsh calls on Boris Johnson to review cost of Heathrow expansion
By Oliver Gill (Telegraph)
18 DECEMBER 2019
A row has intensified between IAG airline boss Willie Walsh and Heathrow Airport as the pair traded fresh blows over controversial plans for a third runway.
Mr Walsh, whose firm owns British Airways, called on Boris Johnson to launch an independent probe into the cost of Heathrow’s expansion scheme.
Costs for the project have previously been estimated at £14bn, but it is feared that bills could snowball.
He said: “We need a fresh look at the environmental viability and total cost of expanding Heathrow. The airport has a history of spending recklessly to gold-plate projects and paying guaranteed dividends to shareholders.”
But Heathrow hit back, claiming Mr Walsh was seeking delays so he could protect his firm’s dominant position at the airport. An expansion will give rival airlines more space.
The future growth of Britain’s busiest airport remains in the balance. While parliament gave the third runway the green light last year, Mr Johnson has historically been a staunch opponent and once even threatened to lie down in front of the bulldozers to stop construction.
He is yet to give a firm opinion on the matter since becoming prime minster.
Mr Walsh said: “Boris Johnson wants to make Britain more competitive. Allowing an expanded airport that is considerably more expensive than our European neighbours would be an own goal.”
A Heathrow spokesman said: “Our costs have not changed, and the Government already has an independent regulator who, alongside all of our airlines, closely scrutinises and approves all investment at Heathrow. Pushing this project back now only serves IAG.”
Heathrow is owned by a consortium led by Spanish infrastructure titan Ferrovial and Qatar’s sovereign wealth fund.
IAG’s biggest shareholder is state-owned carrier Qatar Airways, which owns more than a fifth of the FTSE 100 airlines group.
Heathrow is also fending off criticism from billionaire hotel tycoon Surinder Arora, a major landowner in the area. He hailed a “breakthrough” earlier this month after regulators hired consultants to consider whether he could build the third runway at the site, instead of Heathrow Airport Limited.