MPs want overhaul of Heathrow regulation before third runway
Nearly nine in 10 members of parliament do not think Heathrow’s ambitious third runway expansion should go ahead unless there is a major overhaul of its regulatory framework to help bring down costs.
A fresh poll of British lawmakers found that 84 per cent are reluctant to vote through the historic expansion without the west London hub being subject to a parallel shake-up to the way it operates, amid fears the current model fails to incentivise it to keep development costs down.
Half of MPs also believe Heathrow does not currently provide passengers with good value for money, according to the Savanta poll of over 100 members of parliament, shared exclusively with CityAM.
The research comes four months after the Civil Aviation Authority (CAA), the regulator responsible for overseeing airports and airlines in the UK, confirmed it would explore a new regulatory model for Britain’s only hub airport. Several of the site’s key customers, including British Airways owner IAG and Virgin Atlantic, have joined a campaign calling for the watchdog to reexamine the current model, which has meant the airport charges the highest fees in the world.
The industry push – called Heathrow Reimagined – was launched a year ago and is being spearheaded by hotel tycoon Surinder Arora, IAG and Virgin Atlantic. It has since been backed by some of the airport’s largest stakeholders, including airline industry body IATA and Swissport, Heathrow’s main ground services provider.
“This research demonstrates that MPs from across the political spectrum share our outlook on the need for radical change in the way in which Heathrow operates, including the need for regulatory change to improve capital efficiency and crucially, deliver a better customer experience at the airport,” a spokesman for Heathrow Reimagined, which commissioned the survey, told CityAM.
Heathrow model comes under scrutiny
The CAA consultation was outlined alongside the Department for Transport’s announcement confirming its intention to proceed with Heathrow Airport Limited’s (HAL) plan for a third runway, after reviewing multiple options. In an announcement made alongside the DfT’s decision, the CAA said it would explore whether “an alternative model for capacity expansion could better serve the interests of consumers”.
The airport’s operator, which has presided over a decades-long monopoly at the hub, submitted an ambitious £49bn proposal that included plans to reroute the M25 in order to build a full-length runway.
The budget for its bid came in at more than double that proposed by the operator Heathrow West in ministers’ final two, fuelling critics’ concerns that the incumbent’s regulatory model did not incentivise it to keep a lid on costs. Under the current framework, HAL is able to pass on the costs of any expansions or improvements onto customers and airlines meaning there is little pressure on its top brass to forge price-sensitive plans.
Supporters of Heathrow Reimagined say that the current system encourages the airport to spend more on any upgrades, because they “earn higher guaranteed returns”.
The Heathrow Reimagined spokesman said that the campaign was launched a year ago “as a direct response to Heathrow being the world’s most expensive airport and becoming less competitive on the global stage”.
“The only way Heathrow can, and must, do better, is through significant regulatory reform to protect consumer interests,” he added.
Notionally, the airport’s long-awaited expansion has garnered cross-party support, with Labour, the Conservatives and Reform UK all backing the construction of a third runway. In his first official remarks as Reform’s Treasury spokesman, Robert Jenrick gave the megaproject his full-throated endorsement, pledging to “pass legislation to deliver the crucial investment projects that have been bogged down for far too long”.
“If this government fails and continues to fail, we will pass emergency legislation to build a third runway at Heathrow if the project isn’t ready to go the day we take office,” he added.
But on Thursday, Luis Gallego, the boss of British Airways-owner IAG, called on ministers to cap the cost of the expansion at £30bn – a shade over the budget of Heathrow West’s proposal. Were the megaproject’s costs to surpass that, the associated costs would drive traffic away, he warned in an interview with The Times.
““If it goes above £30 billion, then we will need some public funding because private money will not do it,” he said. “What we don’t want is to build something that is going to be empty.”
A HAL spokeswoman said: “MP polling over several years has shown a significant majority of Parliamentarians support Heathrow expansion. We now need to move forward at pace to deliver these benefits and we will continue to work with airlines, the CAA and the government to bring to fruition this long-overdue private investment in the UK’s hub airport.
“Heathrow’s current performance is at an all-time high – we’re the most punctual hub in Europe, the most connected airport in the world and have award-winning shops and restaurants which is why more passengers than ever are flying from our terminals.
“Our expansion plans will unlock competition and choice driving down airfares for passengers, enable airlines to grow their networks offering more destinations and supercharge Britain’s economic growth with more tourism and trade with the world.”