Airline bosses hit out at the cost of Heathrow runway investment

The bosses of Emirates Airline and International Consolidated Airlines Group (IAG), the parent of British Airways, Iberia, Aer Lingus and Vueling, have hit out at what they describe as the over-inflated cost to deliver a possible new Runway at London’s Heathrow Airport.

The bosses of Emirates Airline and International Consolidated Airlines Group (IAG), the parent of British Airways, Iberia, Aer Lingus and Vueling, have hit out at what they describe as the over-inflated cost to deliver a possible new Runway at London’s Heathrow Airport. Sir Tim Clark and Willie Walsh both agreed during a recent interview at the World Travel Market in London that the £17.6 billion cost for the investment was “fundamentally flawed”.

The selection by the UK Government's Economic and Industrial Strategy (Airports) sub-committee of Heathrow Airport as its preferred growth option for the London airport system, marks the first stage of another process of consultation that will likely lead to a formal Government vote on the planned expansion in late 2017 or early 2018. However, with anticipated appeals, environmental issues and a long planning process, it does not answer the question of when a new runway will be built. 

IAG chief executive officer Willie Walsh confirmed that the group was internally backing both the Gatwick and Heathrow projects, with the latter the preference, despite many observers suggesting that the group would be happy with the current capacity constraints at Heathrow, where it holds the majority of slots.

"I have no objection to Heathrow expansion. I think that would be good. I have no objection to Gatwick expansion,” he said. “But, I didn’t want to come out and say publicly this is what we are backing and then having to pay for it. I do object to having to pay for it unless what they are building is what we need and unless what they are building is built in an efficient manner.”

Walsh said he had a “huge objection” to the idea that you can build anything at any price in the name of the national economy and expect others to pick up the bill for it. "We didn’t ask for it so why should we pay for inefficient expansion,” he noted. “Terminal 5 [at Heathrow Airport] is fantastic, but boy was it expensive".

Both Walsh and its counterpart at Emirates Airline, president, Sir Tim Clark said the days of airports just building expensive, inefficient infrastructure and passing the cost on to airlines and its customers are over. "We're not going to tolerate it any more, we have been absolutely clear in relation to that,” said Walsh, while Clark added: “If you can’t extract value from a project then you shouldn’t be in the business. The idea to charge airlines and its customers for growing infrastructure is fundamentally flawed.”

Clark, who has spearheaded Emirates Airline’s rise in the international market suggested that the £17.6 billion cost to deliver the planned new Heathrow runway is almost double what he would have expected. “It should be half of its current estimated level. That is certainly where it should be when you compare to the cost of Dubai’s brand new World Central airport project,” he said.

According to Walsh, the breakdown of the costing structure shows that just one percent of the investment cost covers the new runway and highlighted an expected £800 million charge to build a new car park. “My research shows me that a car park normally costs between 10,000 and 17,000 per space. At £800 million that means that even at the most expensive rate that is a big car park. There is no way they can be building a 47,000 space car park. Unless of course you're inefficient and don’t care what and where you are spending,” he said.

From an airline’s perspective Walsh described the decision of the UK’s Civil Aviation Authority (CAA) to write to Heathrow as "absolutely critical". The CAA had reinforced the importance of it working with airlines to "drive value for money" in the correspondence with Walsh stating firmly that IAG will not contribute towards the cost of Heathrow expansion unless the budget is tightly controlled.

Walsh suggested the ongoing Heathrow debate will be another clear example of how a political agenda is impacting the natural development of the industry. “Decisions continue to be made based upon popularity stakes and not ideas that work in the commercial world,” he said. “When I was at Aer Lingus I never listened to the opinions of politicians despite them clearly wanting to be heard.”

The comments from Willie Walsh and Sir Tim Clark were made during an interview session by John Strickland, director of JLS Consulting at the ExCeL centre in east London, when both industry stalwarts also hit out at political decision-making bias and shared strong opinions on the evolution of the low-cost, long-haul model, the future of global alliances, the Airbus A380 and how 2016 has been one of the toughest years.


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