Heathrow: airlines demand guarantee on expansion costs

Simon Calder
Master plan: Heathrow's depiction of an expanded airport: Heathrow Airport Ltd

The UK’s leading airlines have demanded a guarantee that passenger fees will not increase at an expanded Heathrow.

British Airways’ parent company IAG, easyJet, Virgin Atlantic and Flybe were giving evidence to the Transport Select Committee,

Willie Walsh, chief executive of IAG, said Heathrow is the most expensive airport that his firm operates from, and that any increase in costs could mean “the third runway will become a white elephant”.

He was scornful of the airport’s record on major projects. “My confidence in ‘on time and on budget’ is zero,” he said, adding that it was “rare if ever” that a project had been on time.

Mr Walsh warned that UK domestic services could be hit by higher costs: “You will not get any additional connectivity and you could lose existing connectivity if the charges go up.”

All the airlines have urged cost savings on expansion. Sophie Dekkers, UK director for easyJet, said: “It’s important that it isn’t gold plated. The reason we haven’t gone into Heathrow is because we could not make it cost-effective.”

Heathrow Airport Ltd has identified savings of £2.5bn in its original estimate, reducing the cost to £14bn. But Dale Keller, chief executive of the Board of Airline Representatives in the UK said: “We don’t really believe the £14bn.”

Speaking for overseas carriers, he said: “There’s huge risk and uncertainty.”

Craig Kreeger, chief executive of Virgin Atlantic called for “a passenger cost guarantee”. Otherwise, he said, “The consequence of an overspend would be borne by the airline and its customers.”

He also said that existing users should not pay for future expansion: “Adding a pre-funding charge is completely unacceptable.”

Mr Walsh has called for competition between terminals, which he said is opposed by Heathrow: “They don’t want competition, because competition will put pressure on them.

“It would be very positive for consumers.”

A spokesperson for Heathrow rejected Mr Walsh’s criticisms, saying: “Since the opening of Terminal 5, both sides have learned considerable lessons and today Terminal 5 has been voted ‘world’s best terminal’ 5 years in a row.

“Heathrow has gone on to deliver Terminal 2 and numerous other projects on time and on budget.

“Willie Walsh’s comment suggesting we have no experience in doing so, is categorically untrue. Our expansion cost projections are equally robust and we will continue to work to reduce the cost further.

“Last year we confirmed potential cost savings of up to £2.5bn which illustrates our ongoing focus and progress in this area. It is a shame this hasn’t been recognised by Mr Walsh in this instance.”

The chief executive of the Civil Aviation Authority, Andrew Haines, called the third-runway scheme “the largest privately funded infrastructure project ever, anywhere in the world”.

He said that planning costs alone could amount to £500m, but said: “It would be possible to do this project as currently scoped at flat prices.”