Heathrow Airport's major expansion plans with an increase to passenger fees
Heathrow Airport has announced plans for a huge expansion - at the cost of their passengers. Heathrow's latest business plan suggests that the airport is to take on a further £8bn of debt, leaving their passengers to pay for terminal upgrades in a bid to accommodate an additional 10 million passengers annually by 2031, contingent on an increase in airline fees.
The proposed 10 million passenger increase represents a 12 per cent rise on current numbers, and to do this the airport is exploring the option to raise the average charge per passenger from the current £28.46 to £33.26.
Heathrow is Europe's busiest airport, and has been under plans from the government for a long-term vision of a new runway - which isn't anticipated to be operational until 2035 at the earliest. So this new proposal offers a quicker route and was submitted to the Civil Aviation Authority (CAA) on Friday, detailing upgrades to existing terminals as a means to boost capacity.
Now the CAA is set to review the plans, but it comes after the airport is currently under fire for already being too expensive. Heathrow has reportedly been facing claims from airlines for being one of the world's most expensive, and have urged the regulator to reduce the charges already
IAG, the parent group of Virgin Atlantic and British Airways, the Heathrow Airline Operators' Committee (AOC) and the Arora hotel group have joined together in a coordinated attack on the airport's regulatory regime.
They hope to "conduct an urgent and fundamental review into the way in which Heathrow, the UK's only hub airport and the largest in Europe, is regulated, for the benefit of consumers, businesses and the UK economy," as reported by the Independent.
'Heathrow has become the world's most expensive airport, with passengers and airlines today paying £1.1bn more each year than if charges were in line with equivalent major European airports,' the partners said in a statement. However, Heathrow argue that this investment will make expansion more affordable and less disruptive.
Heathrow chief executive Thomas Woldbye said in a letter to the Transport Select Committee: "One factor is that the airport's small physical footprint means a lot of our infrastructure has to be underground or built in a unique way, increasing the cost.
'We are also the busiest two-runway airport in the world, meaning the intensity of our operating environment is comparatively more complex and makes it much harder to make targeted improvements and investment while remaining operational."
Paul McGuinness (Chair, No 3rd Runway Coalition) said: "The astonishing detail in Heathrow's Five Year Plan is that only £2bn is of its £10bn cost will be funded by shareholder equity; so adding a further £8bn of debt to Heathrow's current £20bn of arrears."
He continued: "Heathrow's business plans shows their determination to grow irrespective of whether or not expansion takes place. The fact that 80% of this investment will be financed through debt reveals a continuation of a strategy to sweat their assets to their limit which brings with it associated risks and higher costs which will no doubt be passed onto passengers."
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