The parent of British Airways, IAG, has again suggested that expansion plans at Heathrow Airport represent a poor deal for consumers. Willie Walsh, IAG’s chief executive, voiced his belief that UK’s busiest airport was guilty of “treating customers with contempt”.
IAG has been a frequent critic of the scheme, and Walsh himself was hugely critical of the well-publicized plans to extend Heathrow. The plans will see passengers contribute £3.3 billion (US$4 billion) in order to create a third runway. The scheme has also attracted considerable criticism from local residents and environmental groups.
Commenting on the issue in a UK Civil Aviation Authority consultation, IAG declared that there is no reason whatsoever to believe that Heathrow is capable of delivering a cost-effective expansion. Indeed, IAG notes that initial construction and planning costs have already escalated rapidly, more than doubling from the initial £915 million (US$1.1 billion) estimated just two years ago.
On this basis, IAG believes that costs associated with the new runway and attendant projects will reach £32 billion ($38.7 billion); again more than double the £14 billion (US$17 billion) that was originally anticipated.
In fact, Walsh believes that the completion of the expansion is far from inevitable, asserting that there is “no guarantee” that the project will come to fruition, due to “judicial, environmental and political hurdles”. Walsh characterizes the attitude of Heathrow to the project as being a “gravy train,” and suggests that the airport will do everything possible to protect this.
Opposition to the third runway at Heathrow has been particularly vocal, with many asserting that the ecological consequences of the project could be disastrous. While Greenpeace suggested in an extensive study on the plans that they could result in 1.6 million people suffering from “constant noise”.
Despite the resistance to the scheme and its apparent fiscal difficulties, Heathrow continues to defend the plan. In a response to IAG and Walsh, the airport asserted that any claims that expansion costs have increased are “misleading”, and that expenses are actually identical to those submitted to the Airports Commission.
Heathrow also states that the expansion would be good for the airline industry, resulting in increased competition, and thus more options for passengers. Representatives of the airport have also accused IAG of having a vested interest, namely seeking to “protect their dominant position and record profits”.
Regardless of the merit of this argument, IAG has indeed enjoyed excellent recent financial results. The company recently raised its own financial prognosis for the year, after it exceeded profit forecasts for the first half of the critical summer period.
And investment bank JPMorgan has cited IAG as its ‘top pick’ in the European airline industry, suggesting that the company has huge upside potential.
While plans to expand Heathrow continue to cause controversy, the airport has also faced dissent from its own workforce. Staff at Heathrow are upset with pay and conditions, with the Unite union that represents staff having promised a “summer of chaos”, based around significant industrial action.
However, a recent strike scheduled for 23rd and 24th August was postponed in order to hold a ballot on future strategy.