IAG Concerned About Heathrow Expansion Cost

Yesterday during a results briefing, IAG Chief Willie Walsh criticized London Heathrow’s expansion plan saying that there was “absolutely no way” the airport could complete its undertakings within the budget set in the original plan.

Heathrow chaos
Heathrow is the primary home of IAG airline British Airways. Photo: Tony Higsett via Flickr

Battle of the numbers

Walsh estimates that the “true cost” will be more than twice Heathrow’s quote. The figure provided by Heathrow is £14 billion ($17 billion). However, Walsh argues that reality has it closer to £32 billion.

Here’s a breakdown of that estimate, according to Walsh:

  • Construction of the third runway and associated works will require £14 billion.
  • Another £14.5 billion will be required to add terminal capacity and other infrastructure on the existing Heathrow site.
  • A westerly extension of Terminal 5 (the home of IAG’s British Airways) will require £3.5 billion.
As part of an April Fools Day joke – Heathrow announced that it would rename terminals after the newest generation of royals. Photo: LHR Airports Limited

Concerns over planning and preparation

According to FlightGlobal, Wash is saying that IAG is “particularly concerned” with regards to increases in planning and preparation costs, which are now set to be £3.3 billion, before construction can commence.

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Speaking about airport management, Skift reports Walsh saying the following:

“We really do need people to wake up to what’s going on here because if we don’t stop it now and force them either to deliver to the original plans that they have or stop them, what we’re going to be left with is the most expensive piece of infrastructure that will be underutilized because you’re not going to get people coming in here if the costs are driven up as they will be based on this ridiculous investment profile that Heathrow is looking at,”

Walsh also says the airport has demonstrated “a lack of credibility” in its ability to forecast the costs of expansion. Furthermore, he says IAG has “no confidence” in Heathrow and calls for both the UK government and Civil Aviation Authority to intervene and hold the airport operator to account.

Response from Heathrow

“The master plan we’ve recently published outlines how we will grow the airport affordably and sustainably to 140 million passengers by 2050. It includes the £14 billion expansion project plus already planned investment that will ensure the existing airport infrastructure continues to deliver for our passengers…All money spent to 2050 has been worked into our calculations to expand whilst delivering on the affordability challenge and keeping airport charges close to 2016 levels.”  – Heathrow spokesperson.

Heathrow is in the midst of a 12-week-long public consultation with regards to its third runway. The Airport Expansion Consultation runs from 18th June until 13th September 2019. It is a statutory obligation for any company that wishes to begin construction.

The three-month process allows for public input and scrutiny. Public input will then inform the airport’s application for a Development Consent Order (DCO). Here is the description from the Heathrow expansion website:

“The DCO process places real importance on engagement with residents and stakeholders and there will continue to be opportunities to influence the proposals through the planning process over the coming months and years.”

A visualization of the runway expansion plan. Photo: LHR Airports Limited

Conclusion

How do you think this vocal criticism will affect the relationship between IAG airlines and Heathrow? It’s common for major projects to finish late and over budget; do you think Walsh is accurate with his assessment? Let us know by leaving a comment!

1 comment
  1. Walsh is a reprehensible human being, and IAG couldn’t care less about customers, employees, or the public at large. He is simply making noises to try to discourage more competition at LHR in order to maintain a stranglehold on slot pairs. What’s needed are 10 year leases for all existing slots and some similar situation for gates.
    As to high costs driving off customers, BA should proudly lead the way in eliminating surcharges on all tickets to show that they believe that customers do not deserve to be gouged. Of course the odds of BA acting in an ethical fashion are so low as to be virtually nonexistent.

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