Some possible changes at Heathrow, to persuade ever more passengers to use it
People already badly affected by Heathrow are concerned about what might happen, with new Saudi ownership, after Ferrovial. The Saudi-backed consortium is poised to seize control of the airport, but it is far from a done deal. However, plans are already underway that could have ramifications for those living nearby. According to sources close to the bid, they have a multi-pronged strategy to broadly increase the number of passengers, even without — for the foreseeable future, at least — the construction of a third runway. Updating Heathrow’s technology is key in the strategy, with things like scrapping airline-specific check-in desks. There could be an App to get passengers to the shortest queue to drop off their luggage. Luggage tags could also be scrapped in favour of computer chips or QR codes linked to passenger booking information. And other changes. The thinking is that if the new owners can improve life for passengers, making it less stressful and decreasing waiting times, airlines will be able to persuade more people to fly. And more passengers mean more revenue for Heathrow, which currently gets £26.77 per person from its airline customers.
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How new Saudi owners plan to transform Heathrow
New investors are eyeing whizzy new technology and revamped terminals — but what about the third runway and will the sky get even noisier over west London?
By Oliver Gill (The Sunday Times)
January 20 2024
The village of Englefield Green, Surrey, lays claim to have hosted the last fatal duel in England, when Emmanuel Barthélemy killed fellow French refugee Constant Cournet in a row over Barthélemy’s girlfriend in 1852. Some 172 years later and locals in the leafy enclave are in the middle of an altogether different battle.
Like many other villages that sit under Heathrow’s flight path, Englefield Green residents are up in arms with the airport. Campaigners successfully fought off the building of a third runway on noise pollution grounds, but passenger numbers have nearly doubled since Bob McLellan moved his family there in 1996, with low-flying planes now coming over every few minutes at peak times.
Locals meet monthly to air their grievances in the parish hall, so that they can be shared with Heathrow bosses. Not that it seems to help. “It’s like talking to a brick wall,” said McLellan.
Corporate events at Heathrow are now set to give rise to further concerns for the Englefield Green Action Group and others, as a Saudi-backed consortium is poised to seize control of the airport. It is far from a done deal, but plans are already underway that could have ramifications for those living nearby.
So what could the Heathrow of the future look like if the Saudi Public Investment Fund (PIF) and French airports investor Ardian gain control?
According to sources close to the bid, the team have a multi-pronged strategy to broadly increase the number of passengers, even without — for the foreseeable future, at least — the construction of a third runway.
Updating Heathrow’s technology is a key plank in the strategy, with a key idea being to scrap airline-specific check-in desks. Instead of, say, British Airways customers having to find their way to the BA bag drop area and endure the queues when the airline is particularly busy, they would be able to leave their bags at any drop-off point on the departures concourse.
“This is all about moving large numbers of people through an airport as efficiently as possible,” said one source.
A queue-management app loaded onto every passenger’s phone could direct them to the quickest places to drop their bags off and pass through security, taking into account the likely extra time families or tour groups might take.
Ardian has brought in a shared bag drop at Naples airport and cut check-in waiting times by 30 per cent. while AI-driven queue-management systems at security doubled capacity at the same airport.
Luggage tags could also be scrapped in favour of computer chips or QR codes linked to passenger booking information. Another idea is to use technology similar to the Apple AirTag — the small GPS tracking device that can be placed in a bag and linked to the “Find My” app on the iPhone.
The thinking is that if the new owners can improve life for passengers, making it less stressful and decreasing waiting times, airlines will be able to persuade more people to fly. And more passengers mean more revenue for Heathrow, which currently gets £26.77 per person from its airline customers.
Sources said the technology innovations would serve to make planes fuller, rather than add to the number of flights.
But veteran aviation analyst Chris Tarry is not convinced of this. “Growth at an airport emerges because there are either more flights, or airlines use larger aeroplanes — or a combination of both,” he said.
The Terminals
There is another incentive to get passengers through bag drop and security quicker — they will spend more time and money in the shops and bars. Heathrow does not currently perform well on retail sales, with revenue per passenger at the airport of about €8 (£7), compared with €19 and €16 per passenger at Zurich and Paris, respectively, according to an analysis by Citi.
Doubling Heathrow’s per-passenger revenue to that generated at Paris could bring in an additional £140 million a year, based on welcoming 80 million customers annually, as it did in 2023.
Heathrow has long planned to reconfigure its ageing terminals. Most passengers pass through terminals 2, 3 and 5, which sit in the middle of the airport’s two runways. Terminal 4 is awkwardly located to the south; terminal 1 was mothballed in 2015.
Sources say that terminal 3 could be combined with Terminal 2 to create a central hub. Separate spurs from Terminal 5 could also be built to increase passenger capacity.
But terminal expansion would not address Heathrow’s biggest restraining factor — that the airport is limited to operating 480,000 flights a year.
Switching to what is known as “mixed mode” operation is one option — albeit extremely controversial. Current rules dating back to the 1990s stipulate that Heathrow planes flying over London switch runways at 3pm so that residents under each one’s flight path benefit from half a day’s respite from overhead noise. Mixed mode means both runways would be continually used for take-off and landing. It would increase the annual number of flights by about 80,000, according to noise campaigners.
“London is already the most overflown city in the world,” lamented McLellan.
A third runway one day?
After decades of wrangling, parliament voted in favour of Heathrow building a third runway in 2018. Legal challenges by environmental and noise campaigners held it up, then support from the government cooled under Boris Johnson’s premiership. Johnson opposed the third runway being built because of the impact on his west London constituency.
Heathrow expansion is not on the Saudi consortium’s agenda in the near to medium term, according to sources close to its thinking. Likewise, new Heathrow chief executive Thomas Woldbye recently launched an internal review into how capacity could be increased without expanding beyond the airport’s current footprint.
The prospective new owners have not, however, ruled it out forever.
Mopping up
Before any changes to Heathrow can become a reality, the Saudi Public Investment Fund and Ardian, in which the PIF is an investor, need to complete their takeover.
Although the consortium originally only bid to acquire the 25 per cent stake held by Spanish infrastructure giant Ferrovial in the airport, Heathrow’s shareholder agreement gives other investors — predominantly overseas sovereign wealth, pension and infrastructure funds — the option to sell their stakes to the buyer at the same price. The Ardian-PIF group have said they are willing to buy a further 10 per cent, but last week it emerged that investors with a further 35 per cent of Heathrow want to sell.
So, Ardian and PIF will need to find other buyers looking to team up with them.
Are there other investors out there? As Europe’s busiest airport, Heathrow benefits from “trophy asset” status like a Premier League football club or major newspaper, according to a senior figure at one big global investor. But new backers would have to buy in at the Saudi consortium’s price, which looks expensive, they added. Less than two years ago, that 25 per cent stake was valued at £520 million by JP Morgan; the Saudi team is paying £2.4 billion.
Meanwhile, two of those that might naturally be interested — Gatwick investor Global Infrastructure Partners and IFM, the Australian firm behind Manchester and Stansted airports — are likely to be ruled out on competition grounds.
But there are others that might be keen. Singapore sovereign wealth fund Temasek is said to be scouting for a European airport target. And Canada Pension Plan Investment Board, which manages more than £330 billion of assets, is also “open for business”, according to one investment banker.
The jury is out on what this means for the residents of Englefield Green. What seems certain: their duel with Heathrow will continue, whoever is in control.
https://www.thetimes.co.uk/article/f37a5b25-85c2-4048-b948-14044b26b1bc
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See earlier:
More Heathrow shareholders plan to sell stakes alongside Ferrovial
Ferrovial agreed to sell its 25% stake in Heathrow in November for £2.4bn to French private equity company Ardian (15%) and the Saudi Public Investment Fund (10%). Now 3 other Heathrow shareholders that together own 35% of the airport, have said they want to sell out too, as part of £2.4bn Ferrovial deal agreed. It has been suggested, by someone in the know, that Canadian pension fund Caisse de dépôt et placement du Québec (CDPQ), Singapore sovereign wealth fund GIC and the UK’s Universities Superannuation Scheme all intend to exit. So with 25% and 35%, that is 60% of Heathrow’s ownership. As part of the Ferrovial deal, the airport’s other shareholders were given the option to sell their own stakes at the same valuation, with the Saudis and Ardian offered first refusal. This could be a problem for the Ferrovial sale, and the £2.4bn deal could collapse if all the shareholders cannot find buyers. Ferrovial said it was a “condition” of the transaction that the “tagged shares” were also sold. Neither Ardian nor the Saudis are compelled to buy the new shares on offer. The Saudis don’t want more than 10%. They might be able to find a 3rd investor to come in and buy the 35%.
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Heathrow considering smaller ways to increase flights, rather than a 3rd runway
Heathrow is exploring options for expansion that would prioritise smaller improvements before considering if it could go for a 3rd runway. New Chief Executive, Thomas Woldbye, who joined in October, has apparently launched an internal review into the options to increase its capacity. No decisions have yet been made. One option under consideration is a new plan to initially focus on easier and cheaper improvements within the airport boundary, as there are serious concerns about the feasibility of a 3rd runway. The world has moved on since Heathrow got consent for a new runway, with travel demand altered since Covid, and a different political and regulatory environment, as well as far higher construction and financing costs than before. The cost estimate was £24 billion in 2019. Heathrow is also in the middle of a change in ownership, as Ferrovial agreed to sell their 25% stake to a consortium lead by Saudi Arabia’s sovereign wealth fund (PIF). One major problem for a 3rd runway is having to put a section of the M25 into a tunnel (very costly) and demolishing local homes. The Climate Change Committee says there should be no airport expansion, unless the sector has a way to genuinely cut CO2 emissions.
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Ferrovial to sell its 25% stake in Heathrow for $3 billion to Ardian (15%) and Saudi Arabia’s PIF (10%)
Infrastructure giant Ferrovial has reached an agreement with two different buyers to sell its entire 25% stake in Britain’s busiest airport, Heathrow, for £2.37 billion ($3.01 billion) the company said in a statement on Tuesday. Ferrovial said the buyers for the stake in FGP Topco – the parent company of Heathrow Airport Holdings Ltd – were private equity fund Ardian and Saudi Arabia’s Public Investment Fund (PIF). Ardian would acquire a 15% stake and PIF a 10% stake. The transaction is subject to regulatory conditions and must comply with the right of first offer and full tag-along rights, which may be exercised by the other FGP Topco shareholders, Ferrovial added. Ferrovial expects to complete the sale by mid-2024. Ferrovial also has a 50% stake in three other British hubs: Aberdeen, Glasgow and Southampton. It also has a 49% stake in the new Terminal One at New York City’s JFK airport.
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