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Heathrow and Gatwick expansion plans more costly than airports claim Heathrow and Gatwick expansion plans more costly than airports claim
(about 9 hours later)
New runways at Gatwick and Heathrow will cost more than the airports claim, meaning higher airport charges and likely higher fares for passengers, according to an analysis published by the airport commission. New runways at Gatwick and Heathrow will cost billions more than the airports claim, meaning higher airport charges and possible higher fares for passengers, according to an analysis published by the airport commission.
The commission, led by Sir Howard Davies, set out its assessment of the three shortlisted options for airport expansion in south-east England as it launched its final public consultation on Tuesday. The commission, led by Sir Howard Davies, set out its assessment on Tuesday of the three shortlisted options for airport expansion in south-east England as it launched its final public consultation.
The commission says Heathrow’s third-runway proposal would cost £18.6bn, £3bn more than the airport itself estimated, while the independent Heathrow Hub plan to extend and split the northern runway would cost £13.5bn, £3.4bn more than estimated. Gatwick’s second runway would cost £9.3bn, rather than the £7.4bn it estimated. The commission says Heathrow’s third-runway proposal would cost £18.6bn, £3bn more than the airport itself estimated, while the independent Heathrow Hub plan to extend and split the northern runway would cost £13.5bn, £3.4bn more than estimated. Gatwick’s second runway would cost £9.3bn, not £7.4bn.
While the cost of Gatwick expansion remains significantly lower than Heathrow, the commission’s analysis could prove more damaging to its prospects.While the cost of Gatwick expansion remains significantly lower than Heathrow, the commission’s analysis could prove more damaging to its prospects.
Davies says the increased construction costs could more than double the current airport charges at Gatwick to an average of £15-18 and a peak of £23. Heathrow’s charges would also rise from £20 to £28-29, peaking at £32. However, Gatwick has staked its case on the provision of competition and low fares, so a substantial rise in charges for price-sensitive passengers – its biggest airline is EasyJet – would be more of an issue than at Heathrow, where fares are already far higher. Davies says the increased construction costs could double the current airport charges at Gatwick to an average of £15-18 per passenger and a peak of £23. Heathrow’s charges would rise from £20 to £28-29, peaking at £32. However, Gatwick has staked its case on the provision of competition and low fares, so a substantial rise in charges for price-sensitive passengers – its biggest airline is easyJet – would be more of an issue than at Heathrow, where fares are already far higher.
On Monday, Stewart Wingate, the Gatwick chief executive, said he would sign a pledge to keep charges below £15 and challenged his Heathrow counterpart, John Holland-Kaye, to make a similar promise. Stewart Wingate, the Gatwick chief executive, said he would sign a pledge to keep charges below £15 and challenged his Heathrow counterpart, John Holland-Kaye, to make a similar promise.
Gatwick’s plan would disturb fewer people with noise and be the easiest option to construct, but Heathrow expansion would create more jobs, the commission’s evaluation says.Gatwick’s plan would disturb fewer people with noise and be the easiest option to construct, but Heathrow expansion would create more jobs, the commission’s evaluation says.
Davies told the BBC Radio 4 Today programme that the evaluation was necessarily detailed on noise implications, air quality and costs. He said: “There’s an awful lot of detail that people should properly know so they can react”. Davies said he believed the next government could not afford to avoid expanding one of the two airports, despite a history of inaction: “We clearly are reaching the end of the runway. What I hope to provide is an evidence base that will make it very difficult for any government to duck this issue for another five years.”
He said he hoped the public would respond by relating the airports to the various criteria the commission had defined, including “novel measures”, such as a sense of place. He warned that businesses could relocate abroad. “You could see some unpleasant effects for the UK economy. That is a significant risk for a future government. If they choose to duck [a decision] and see these things happening, they will pay.”
Davies said the new evaluation gave the public “an awful lot of detail that people should properly know”. He said he hoped the people would respond on the various criteria the commission had defined, including “novel measures” such as a sense of place. He added that the consultation might best show “which option is the least hated”.
Davies confirmed Gatwick would be the cheapest option. “It doesn’t have the complexity of Heathrow. There’s a very interesting choice of model here. We have never said we don’t need a hub. The issue is how big that hub needs to be and whether the growth will be the point-to-point – the Ryanair model – or the British Airways-type global network.Davies confirmed Gatwick would be the cheapest option. “It doesn’t have the complexity of Heathrow. There’s a very interesting choice of model here. We have never said we don’t need a hub. The issue is how big that hub needs to be and whether the growth will be the point-to-point – the Ryanair model – or the British Airways-type global network.
“In the last 10 years you can see it is low-cost traffic that has grown more rapidly. That’s a big element of the debate where we will want responses from businesses and airlines [as to] how they think the world will look.” “In the last 10 years, you can see it is low-cost traffic that has grown more rapidly. That’s a big element of the debate where we will want responses from businesses and airlines [as to] how they think the world will look.”
The Gatwick chief said the consultation underlined why momentum was gathering behind his airport’s proposal. Asked whether higher charges would deter low-cost airline growth, Davies said: “We’ll be interested in responses from airlines whether they think it is a viable proposition at that level.”
“The UK gets the economic benefit it needs at a fraction of the environmental impact of Heathrow today,” Wingate said. “It would mean competition and lower fares for passengers. We have a financing plan and a construction project that can be delivered without huge risk to the public purse.” Willie Walsh, chief executive of British Airways’ parent company IAG, said Gatwick’s pledge was meaningless and warned that charges of £15 – the low end of Davies’s estimates – would wipe out profits for carriers. He said that despite Davies’s optimism, he did not expect either runway would be built: “I don’t think anything has changed politically. Who is going to commit to the massive investment that will be required without having confidence that they can see it through to completion?”
Davies said higher estimates of construction costs were partly due to experience that infrastructure projects tend to cost more than originally planned – but said the contingency was only 20% of budget. Schemes such as HS2 are budgeted with a 40-50% potential overspend.
Wingate said Gatwick airport would contest the commission’s estimates of its charges: “We still hold to the original costs and are confident we can deliver. Gatwick is by far the most affordable. Heathrow also has £5.7bn of surface access improvements to be paid by the taxpayer. On the environmental aspects, the commission has essentially endorsed what we have said all along.” He said the consultation underlined why momentum was gathering behind his airport’s proposal: “The UK gets the economic benefit it needs at a fraction of the environmental impact of Heathrow today.”
Heathrow seized on the commission’s increased estimates of the economic benefits of its third runway, from £112bn-£211bn, compared with up to £127bn at Gatwick.Heathrow seized on the commission’s increased estimates of the economic benefits of its third runway, from £112bn-£211bn, compared with up to £127bn at Gatwick.
Holland-Kaye said: “The commission has confirmed that only Heathrow can connect all of Britain to global growth, delivering over £200bn to the British economy and 180,000 jobs while reducing noise for local residents compared to today. This shows that Heathrow’s proposal is deliverable and is the only way to keep Britain at the heart of the global economy.”Holland-Kaye said: “The commission has confirmed that only Heathrow can connect all of Britain to global growth, delivering over £200bn to the British economy and 180,000 jobs while reducing noise for local residents compared to today. This shows that Heathrow’s proposal is deliverable and is the only way to keep Britain at the heart of the global economy.”
Anti-expansion campaigner John Stewart said: “It will come down to political deliverability. The report underscores the fact the noise at Gatwick would affect far fewer people. For politicians, that could be the clincher.”Anti-expansion campaigner John Stewart said: “It will come down to political deliverability. The report underscores the fact the noise at Gatwick would affect far fewer people. For politicians, that could be the clincher.”
The consultation will run until February 2015, with public meetings scheduled in the area of both airports in December. The consultation process will run until February 2015, with public meetings scheduled in the area of both airports in December.
Senior politicians have confirmed that the consultation is likely to be the public’s only opportunity to have a direct influence on the choice of airport expansion, with the commission’s recommendation due after the general election in May. Politicians have confirmed that the consultation is likely to be the public’s only opportunity to have a direct influence on the choice of airport expansion before the commission makes its recommendation, due after the general election in May.
Robert Goodwill, the aviation minister, told the Airport Operators Association conference that the Conservative party would not be making specific manifesto pledges but said its decision would be based on the commission’s conclusions. “What the industry doesn’t want is for it to be a general election issue,” he said. Robert Goodwill, the aviation minister, told the Airport Operators Association conference on Monday that the Conservative party would not be making specific manifesto pledges but said its decision would be based on the commission’s conclusions. “What the industry doesn’t want is for it to be a general election issue,” he said.