Over the past 12 years, Heathrow Airport’s debt liabilities have inflated to such a level that they would actually pay for the airport’s controversial third runway.
London’s Heathrow Airport (LHR) has been revealed to be in debt to the tune of £13.4bn. Having accrued this debt over the past 12 years, the interest alone is costing the airport £500 million a year. Heathrow Airport Holdings, the body which operates LHR, released these figures following pressure from a Daily Mail investigation.
The Heathrow third runway, recently backed by MPs in the House of Commons, has been projected to require investment which is roughly the same as the airport’s current debt of £13bn. The cost of improvements, including the terminals to serve 52m more passengers a year, are estimated at £33bn in total.
The ‘national disgrace’ turned money pit
Since Heathrow Airport debt started to pile up, Europe’s busiest transit hub has blown more than £6bn in interest repayments. That’s in addition to the £10bn plus which has been spent on refurbishments to the airport since it was taken over by the Ferrovial led consortium, Heathrow Airport Holdings.
Other companies in the consortium include Qatar Holding, Caisse de depot et placement du Quebec, the Alinda Capital Partners in the US, China Investment Corporation, and Britain’s Universities Superannuation Pension Scheme. CEO of Heathrow Airport Holdings, John Holland-Kaye, said that prior to refurbishment taking place, Heathrow was a ‘national disgrace’. He commented that,
“We have fantastic investors – exactly the kind of people you would want in a big infrastructure project like this. It’s entirely privately funded and it’s right that they should earn dividends on the investment they have made. They have rebuilt the airport. It’s now something we can all be proud of.”
Although privately funded, it doesn’t mean the public won’t end up paying in some way towards the works. Although the CAA maintain some control over landing fees and other costs at Heathrow, it is estimated that by the end of the expansion, carriers will be paying around £22 per passenger more to land at Heathrow, to help pay back some of the debt.
Is Heathrow’s third runway ever actually going to happen?
Back in June, MPs backed the plans to create a third runway at the major London airport. The vote went through at 415 to 119, finally ending decades of debate around the project. The foreign secretary, Boris Johnson, was notably absent from the vote. It appears he chose not to choose between his cabinet responsibilities and long running opposition of the project.
He said he would continue to oppose a Heathrow third runway from within the cabinet, whilst also expressing doubts it would ever actually happen. So, was he right?
So far, the debate around the expansion of Heathrow has been decidedly political. Very little discussion has addressed the issue of exactly how the expansion is going to happen. The practicalities of the runway construction involve the demolition of hundreds of homes in Harmondsworth, Sipson and Longford, which is sure to prove unpopular.
In previous reports, the Department for Transport has stated that without expansion, London’s airports would be full by 2034. However, speculation was that it’s likely to be at least three years before the ground is broken on the project. Now, after the revelation around Heathrow Airport finances, these delays could, in reality, be much longer.
Featured Image: Heathrow Airport