Heathrow Airport: 'Change funding or third runway won't happen'

Several airlines and hotel groups have stated that the financing model for Heathrow Airport's proposed third runway should be reformed before any investment is made. These businesses are calling for a comprehensive review of the regulatory rules set by the UK Civil Aviation Authority (CAA), which determine Heathrow's charging standards. They argue that the current model makes Heathrow one of the most expensive airports in the world.

Business figures believe that without reform, the third runway project will be unachievable due to excessive costs. Heathrow Airport has stated that airport management has informed airlines and the government that it will propose a different, longer-term regulatory model for the third runway. However, just as consumers buy other goods, users of a service or product must pay the cost of providing or producing that service or product, which is consistent with the current situation.

Surinder Arora, chairman of the Arora Group, which owns 16 hotels and numerous properties around the airport, supports the airport's expansion but is skeptical about whether the project can be realized. He told BBC London that Heathrow Airport overcharges for many projects. He cited the example of the Renaissance Hotel, located outside Heathrow's boundary, where the price of water is 2.62 pence per unit, while the Hilton Hotel, located next to Terminal 2, charges 23.27 pence per unit due to being within the airport boundary, with this high cost ultimately passed on to customers.

Mr. Arora also cited other examples, including the £76,000 fee charged to airlines for cutting down three oak trees, and a smoking room that would normally cost £20,000-£30,000 to build, but cost Heathrow £1.1 million. Heathrow Airport sources disputed these figures. Mr. Arora believes that the regulatory model allows Heathrow to charge arbitrary fees for many of its services, such as water, parking, or construction, because it has a monopoly position.

"Heathrow's current monopoly position has not only significantly increased aviation fees but also parking fees and various other service fees, continuing to make it the most expensive airport in the world," Mr. Arora said. "We are happy to work with airlines to ask the CAA to more closely examine the regulatory issues that lead to such high prices and seize the opportunity for competition to improve the services Heathrow provides to passengers." He emphasized that without change, the third runway project will not be possible. "If everything stays the same, the project won't succeed," he said. "Looking back over the past twenty years, they have never completed a project on time or on budget. They plan to spend over £62 billion, while the airport is currently worth £20 billion. This means they want everyone to pay three times the current value with a 50% increase in passenger volume. No business can afford that."

Nigel Wicking, CEO of the Board of Airline Representatives in Heathrow, said that all costs are ultimately passed on to travelers. "Heathrow is rapidly falling behind other major global airports in terms of facilities and services, while also carrying the reputation of having the most expensive airport charges. This situation cannot continue," he said. "Airlines want to provide an excellent Heathrow Airport experience for passengers traveling to and from the UK, and we also want to achieve growth while avoiding the disproportionate costs that Heathrow Airport Limited frequently incurs."

The UK government has stated that it will support the third runway project if expansion can be carried out within noise, pollution, and carbon emission limits. Heathrow Airport said this week that it will apply for planning permission before the summer. Heathrow Airport sources said that it is unrealistic to think that passengers can get new runways and terminals for free, as this requires additional investment beyond current routine investment levels. Heathrow is keen to run a transparent process and work with airlines, regulators, and ministers to establish a model that can bring the benefits of expansion to the UK as soon as possible, including the lower ticket prices that consumers can expect from increased capacity.

Heathrow Airport also pointed out that as part of the agreement, airlines must agree to approve all expenditures, and regulators ensure value for money. Selina Chadha, Director of Consumers and Markets at the UK Civil Aviation Authority, said: "We have received an application requesting us to review Heathrow's economic regulatory model, which we will seriously consider as part of our commitment to effective regulation. We will always focus on safeguarding consumer interests while supporting growth, investment, and efficiency."