Heathrow’s third runway: Hotel and property tycoon Surinder Arora disputes the expansion plan costs, claiming that his group could do it for less. Ian Taylor reports


Pressure mounts on Heathrow to cut runway costs


MPs’ vote on the government’s National Policy Statement on Heathrow on Monday was a step towards building a third runway, but there is a long way to go as pressure grows on Heathrow to slash costs or cede control of part of the project.


Heathrow says its plan for a new northwest runway will cost £14 billion to increase capacity to 110 million passengers a year, but few in the industry believe its assurances. Hotel and property tycoon Surinder Arora, who has developed hotels around Heathrow, argues the airport’s expansion plans are more likely to cost £31 billion and claims his Arora Group could develop Heathrow to handle 130 million passengers a year for £14.4 billion. Arora said: “It’s about time we had competition for Heathrow. Its terminal works are always above budget. Heathrow’s interest is very simple – the more they spend, the more they make. We’ve been


“Heathrow won’t go into this voluntarily. It is not in its financial interests”


involved in tonnes of construction projects. We’ve never gone back and said we need an extra pound. “We spoke to airlines and came up with [a scheme for] the same northwest runway that is slightly different to Heathrow’s.” Carlton Brown, Arora Group


chief financial officer, explained: “Heathrow Airport Holdings [HAL] plans terminal expansion in three locations and assumes a lot of building in the central area. That will push up costs. Our scheme expands only one location.” The Arora plan would concentrate new airport capacity on the western side of Heathrow near Terminal 5. Arora insisted: “We don’t want


HEATHROW: Industry figures are sceptical about its assurances


to take over the airport. We’ll work with HAL, but not for HAL. We want to operate the terminal.” He believes he can operate a terminal more efficiently than Heathrow, and argues: “Why not allow more than one operator of terminals?” Brown added: “It’s a misconception that Heathrow runs its terminals. Much is run by airlines or outsourced. Heathrow does not run the retail, it does not run the car parks. HAL does not need to run building maintenance. That is what we do. We maintain and operate all sorts of properties.” He said: “We’re meeting with


HAL and the airlines, but HAL wants to control [the process] and progress is slow. Heathrow won’t go into this voluntarily. It is not in its financial interests.”


Arora steers car parking fight to High Court


Heathrow and the Arora Group are locked in a legal battle as Arora seeks to break HAL’s control of car parking at the airport. Arora has filed a High Court


claim over plans it submitted in 2015 to build a nine-storey car park on land the group owns at Heathrow. HAL has opposed the development, arguing a cap on


car park space gives it control. Carlton Brown, Arora chief financial officer, said: “This is a microcosm [of the problem]. HAL tries to control all the car parking at the airport and the car parking costs are among the highest in the world. We can provide car parking at half the cost HAL does and still make money. But they are fighting us.”


Counting the cost: Issues affecting price of a third runway


Heathrow says the plan for a third runway to the airport’s northwest will cost £14 billion. This excludes the costs of any legal challenges or overruns. Here are some of the key issues: lThe plan requires bridging 12 lanes of the M25 motorway.


lAn extra £10 billion will be needed to upgrade rail and road links. Heathrow is in dispute with London transport authority TfL over who will pay for this.


l Heathrow has yet to provide a breakdown of the costs, but under pressure from airlines led by IAG, it cut its estimate by £2.5 billion from the original £16.5 billion.


l Heathrow plans to borrow the money. The financing costs alone could run to £2 billion or £3 billion on top of the £14 billion runway cost.


lThe airport already has substantial debts. HAL reported £13.4 billion in debt in 2017, when its asset base (value) was put at £15 billion.


lThe Airports Commission estimated the expansion would increase Heathrow’s debt to £27 billion.


lThe CAA will decide how much Heathrow can charge airlines. The government has pledged only “to keep airport charges as close as possible to current levels”.


l Heathrow charges are already 40% higher than at rival European airports.


l Heathrow has been owned by a consortium led by Spanish firm Ferrovial since 2006. The sovereign wealth funds of Singapore, Qatar and China are investors.


lThe shareholders received £847 million in dividends last year on profits of £516 million.


28 June 2018 travelweekly.co.uk 63


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