Heathrow boss rules out footing the £5 billion bill for road and rail works – wants taxpayer to pay

The Airports Commission left the matter of who would pay for the approximately £5 billion needed to tunnel a section of the M25, and other surface access improvements, vague. The assumption has been made that the taxpayer would have to fund this, though the Airports Commission suggested that Heathrow would be able to find the funding from its investors for this. Now the CEO of Heathrow has dismissed the suggestion that the airport foots the £5 billion bill for road and rail work if a 3rd runway is built.  Huge motorway engineering would be needed, to have the runway going over the motorway.  John Holland-Kaye has ruled out paying for the surface access work. Though the government funds road and rail improvements under normal circumstances, tunnelling the M25 and dealing with hugely increased road traffic using an airport 50% larger than at present are not normal circumstances. Especially in times of huge economic savings being necessary in public finances. The Commission’s final report said it considered the runway was commercially viable “without a requirement for direct government support. This remains the case even in a situation where the airport is required to fund 100% of the surface access costs.” This would be by Heathrow “raising both debt and equity finance. This finance is then serviced through subsequent revenues and refinancing by the airport operator.”

.
Tweet

 

 

Heathrow boss rules out footing the bill for road and rail works

John Holland-Kaye has dismissed the Airports Commission’s suggestion that it pays the £5bn in road and rail upgrades if a third runway is built

By Ben Martin

24 Jul 2015  (Telegraph)

The boss of Heathrow has dismissed the suggestion from Sir Howard Davies, the chairman of the Airports Commission, that the airport foots the £5 billion bill for road and rail work if a third runway is built.  [See page 224.  Point 11.7 of Airports Commission final report].

A new runway in west London would require significant transport upgrades, including encompassing part of the M25 in a tunnel.

These so-called surface access costs are normally funded by the taxpayer, but Sir Howard had suggested there was scope for negotiation between the airport and the Government, and indicated that Heathrow and its investors could bear all of the costs.

Speaking at the airport’s half-year results on Friday, chief executive John Holland-Kaye ruled out the idea.

“Those are things that the Government should be paying for anyway,” he said. “That’s the way these things work, that government funds road and rail, aviation is funded privately, so that’s what we expect to happen here.”

Surface access aside, the commission estimated that a third Heathrow runway would cost £17.6bn. The airport on Friday posted 5.9pc increase in first-half revenues to £1.3bn. Pre-tax profits for the six months to the end of June climbed to £120m from £23m a year earlier.

http://ift.tt/1MrV40K

.

.

---

.

The Airports Commission’s final report

http://ift.tt/1LCJTke

.

This report includes the comment (pages 227 and 228):

“Financeability – the scheme capital costs are paid for by the airport as incurred through raising both debt and equity finance. This finance is then serviced through subsequent revenues and refinancing by the airport operator. In this context, the peak levels of debt and equity required are key outputs of the analysis, which have been subject to further scrutiny by investors, lenders and other market participants as part of the assessment.

.

11.16 The commercial viability of the three schemes is based on the ability of the airport users to bear the additional costs (weighted average aero charge figures above in Table 11.4) and the ability of the airport operator to raise and service the additional finance (peak equity and peak debt figure).

11.17 In considering the ability of the airport users to bear the costs, analysis undertaken by the Commission suggests that all of the three shortlisted schemes are commercially viable propositions, without a requirement for direct government support. This remains the case even in a situation where the airport is required to fund 100% of the surface access costs, which would not increase the weighted average aero charge by more than two pounds for any scheme (the Commercial Case and the report Cost and Commercial Viability: Sources of finance discuss this in more detail).”

.

.

---

.

Heathrow is already wriggling on other conditions for its runway:

Heathrow wants “discussions with government” to negotiate runway conditions set by Airports Commission

July 14, 2015

The Airports Commission recommended a 3rd runway at Heathrow, subject to a number of conditions (noise, compensation, local consultation, air quality etc). But Heathrow is not keen on these conditions, and now says it is “seeking discussions with government ” on them. John Holland-Kaye, Heathrow chief executive, said Heathrow “would have to consider” the demand from the Commission that there should not be night flights, and that there should be a legal prohibition on a 4th runway. The point of conditions is that they are, well as they say, conditions. But Heathrow says: “We will work with the government to make sure we have a solution that can be delivered. I am not saying today that we will accept all the conditions that have been put down.” Airlines would not like night flights, as they make long haul routes less profitable and problematic. Heathrow’s hope of getting conditions, all recommended for good reasons, removed or reduced will only increase the level of hostility towards the airport by its opponents. Whitehall sources say the government will state its preference for the location of a new runway before Christmas (could be November?) — but will then launch a fresh consultation.

Click here to view full story…

via Airportwatch http://ift.tt/1MrV68J