IATA hints at rising cost of Heathrow’s expansion

March 23, 2018: The International Air Transport Association (IATA), recently hailed the UK Transport Select Committee’s endorsement on Heathrow, which stated that it was a right location to expand the airport capacity. However, the Committee expressed its concern on the cost escalation, which could possibly spiral out of control.

IATA also upheld the Committee’s recommendations that the government should consider giving the UK’s Civil Aviation Authority greater powers to regulate Heathrow’s passenger and airline charges, and that these charges should be held flat, in real terms.

“The airline community supports Heathrow as the right location to expand airport capacity, but has two overriding concerns. It includes affordability, and operational flexibility. Both have been jeopardised by the current plans from the Heathrow’s owners. The Select Committee’s recommendations on cost control should be an essential pointer for the government, for Heathrow Airport Holdings Ltd (HAL), and anyone with a stake in the future of the air transport in the UK. Currently, we are looking at extra capacity in the right place, but at the wrong price. We need guarantee to manage costs, especially if key risks are unknown at this stage,” said Rafael Schvartzman, regional vice president for Europe, IATA.

The report clearly states that charges of Heathrow airport are the highest in the world, and any expansion of the airport should be accompanied by a commitment to curtail the rise in charges, from the current level. Such a commitment should be in line with comments from the Secretary of State that charges should stay at the current level.

“We welcome the Committee’s recommendation that charges should be held flat. We also share the Committee’s concerns on effects of an increase in charges. An unaffordable Heathrow will have a detrimental impact on the competitiveness of the UK’s only hub airport, in comparison to rivals in France, Germany and Netherlands,” said Schvartzman.

“HAL had suggested a cost in the region of 14-17 billion pounds to build the third runway, which is double the price of the London Olympics. The Select Committee had stated that these estimates are optimistic. But HAL is not yet clear on the funding of crucial works, such as the proposed bridging of the M25, and the relevant surface access schemes. The concerns can be addressed by ensuring much greater transparency on the costs of construction. Heathrow is a facility that will benefit the entire nation. Hence, it’s pertinent to avoid any oversight,” said Schvartzman.

The operational flexibility that enables airlines to provide connections to some of the world’s largest and fastest-growing economies is under threat. Particularly, the proposal to instate a ban on early morning flights can damage the connectivity of the UK economy. It will also weaken the economic case for the new runway.

Airlines are aware of noise impacts on local communities. The third runway will open up the possibility of predictable and increased noise respite through runway rotation, leaving open the option to continue with night-flight connections, which is vital to the UK economy.

“The unique benefits of night-flight connections must not be lost. Carriers from the US, China and Asia, arriving in Europe in early in the morning currently have a choice to stop at the Heathrow or land in continental Europe. Eliminating night-flights will remove the choice, and will make it uneconomic or impossible for the UK to sustain air links to all these destinations. With the UK looking to open up new trade lanes post-Brexit, it cannot afford to weaken these connections,” said Schvartzman.