Heathrow third runway faces delay of up to three years

The opening of a third runway at Heathrow faces a delay of up to three years.

The London hub’s planned opening of the £14 billion third runway in 2026 is now not expected until 2029, subject to planning permission, amid worries that airlines could face rising charges.

The aviation regulator is concerned that high initial costs could be passed onto passengers through steeper airline landing charges and potentially higher fares even before planning permission is obtained.

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The Civil Aviation Authority has issued a new consultation into the early costs of expansion with responses required by February 28.

Heathrow had said it would need to bring forward the timing of certain spending and total early costs would need to be about £2.9 billion at 2014 prices in order to retain a target of 2026 for the opening of the new runway.

But the regulator wants to limit the spending on developing the scheme to about £1.6 billion.

CAA consumers and markets group director Paul Smith said: “We believe that more runway capacity at Heathrow will benefit air passengers and cargo owners.

“Its timely delivery is required to prevent future consumers experiencing higher airfares, reduced choice and lower service quality. The sooner a new runway comes into operation, the sooner these benefits can be realised.

“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.

“Our consultation reflects this balance. It will allow Heathrow’s operator to work towards delivering the new runway within an achievable timetable, and will reduce the risk of future airport passengers having to meet any undue financial burden if the project does not get planning approval.”

The planned expansion would raise capacity at the airport from 80 million passengers a year and almost 476,000 flights to 115 million passengers by 2030 including new terminals.

But Heathrow’s main user, British Airways owner International Airlines Group, yesterday called for an independent study to ensure Heathrow expansion is cost effective.

IAG chief executive Willie Walsh 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 while minimising the environmental significance of expansion.”

Heathrow said in a statement:  “The CAA’s announcement is an important milestone in expanding Heathrow and connecting all of Britain to global growth. It increases certainty for our local communities and for the job creation, increased trade and lower airfares that expansion delivers.

“We will now review the detail to ensure it will unlock the initial £1.5 billion – £2 billion of private investment over the next two years at no cost to the taxpayer.

“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.”

In an investor report published today, the airport said: “Overall, the general election result is positive for Heathrow.

“The business will now get certainty on Brexit and the Conservative’s manifesto confirmed the new government’s support for expansion, subject to meeting environmental concerns.

“It is unlikely the government will want to re-open difficult issues and their focus will likely be elsewhere in 2020.

“We will continue to move forward with the delivery of the project phase. The next milestone is the publication of our initial business plan over the next few weeks.”

Heathrow projected adjusted earnings [ebitda] for 2019 to be £1.901 billion, up 3.5% on last year.

“We remain confident that Brexit will not have a material impact on Heathrow airport even if the UK were to exit the EU without a deal,” the report said.

A spokesperson for Virgin Atlantic, which competes with BA from the airport, said: “Heathrow must be expanded in an affordable way that respects both local communities and the environment.

“But half of the airport’s current capacity is controlled by one carrier, limiting choice and airline competition.

“So it’s vital that expansion proceeds without unnecessary delay, to enable a second flag carrier to emerge to transform competition and lower fares for consumers on domestic, short and long-haul routes.”

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