Heathrow could be forced to allow other firms to build third runway to cut costs | Heathrow airport
Heathrow may be forced to allow other companies to design and build its third runway and new terminal after the UK aviation regulator argued rival bids could keep construction costs low.
The long-awaited review by the Civil Aviation Authority (CAA) is recommending changes to the regulatory model that determines how Heathrow operates and recovers its costs.
These include the operator seeking bids from other businesses to design, build and operate parts of the long-delayed expansion project at Europe’s busiest airport; this project will “allow direct competition between Heathrow and an alternative developer… [that] can promote competition and efficiency”.
The CAA’s most radical proposal, which would require special approval from the government, would allow another developer to tender to build and operate its own terminals at Heathrow, similar to the plan at New York’s JFK airport.
Last November, ministers backed Heathrow’s plan to have the runway up and running by 2035 over a rival bid from Arora Group, but the airport operator is still seeking formal planning approval for construction to start by 2029.
Earlier this month, it was revealed that Heathrow’s new chairman, Philip Jansen, was in open talks with airlines and Arora Group chairman Surinder Arora to progress plans to expand the airport, amid a row over how much the plan would cost carriers, retailers and ultimately passengers.
British Airways dominates at Heathrow, accounting for more than 50% of slots, and Luis Gallego, chief executive of BA owner International Airlines Group, said the cost of the third runway and associated works should be capped at £30bn.
Heathrow is considered Europe’s most expensive airport, and in March the UK aviation regulator rejected plans to significantly increase landing fees to fund a multibillion-pound upgrade.
Arora supports his own £25bn expansion plan and is part of Heathrow Reimagined, which also includes BA and Virgin campaigning to drastically reduce operating costs at the airport.
Arora, founder of Arora Group, said: “Competition was not on the agenda at Heathrow two years ago and now it is very much alive and exciting because the case for change is so strong.” “We welcome this consultation from the CAA.”
The CAA said there could be difficulties in implementing a model that allows competing bidders. “This model can promote competition and efficiency,” the regulator said. “However, there will be some difficulties in implementing such a model.
“It will be important to ensure that an approach that includes the construction, operation and ownership of assets and direct competition with Heathrow works to advance the interests of consumers across the entire airport.”
But Heathrow warned the proposals could “undermine efforts” to expand the airport and deliver growth.
A Heathrow spokesman said: “Economic growth is key to tackling the cost of living of the crisis. We have a clear plan to invest billions of pounds of private capital to improve and expand the UK’s hub airport, creating jobs and growth across the country. “We support reforms that improve efficiency, reduce red tape and keep investment flowing, but we do not support proposals that would undermine our efforts to improve the airport for consumers or delay the economic growth the country needs. “We look forward to working with government and regulators to translate these recommendations into positive outcomes.”
Heathrow is owned by a consortium of investors led by French company Ardian and includes sovereign wealth funds from Qatar, Singapore and Saudi Arabia.
