Grayling desperate to cut cost of runway
Transport Secretary Chris Grayling is desperate to cut the cost of Heathrow's third runway proposals, as airlines don't want to pay increased charges that would have to be passed on to price-sensitive passengers.
On 24 May 2018, Grayling make a speech to Airlines UK, the trade body for UK registered airlines, in which he challenged the aviation industry to develop solutions for expansion that provide value for money and benefit passengers. He is expecting Heathrow to collaborate with airlines to work on the design of a third runway development so that costs can be dramatically reduced.
It was not surprising that in a speech aimed at UK airlines, Grayling tried to convince his audience that the interests of current and future passengers are a priority. Funny how Heathrow investors think their profit is at the heart of the plans.
Grayling says it remains one of his fundamental priorities to deliver the ambition he set in 2016 to keep airport charges as close as possible to current levels. However, he clearly realises that without radical cost cutting or money from taxpayers he can't achieve this ambition.
The scheme will have to be pared to the bone and will still involve a huge financial risk. The favoured North West Runway scheme wipes out whole communities. To suppress opposition, Heathrow has already been forced to talk about "world-class compensation" for as many as 6,500 home owners. Significantly, it refuses to put this widely-promoted offer into a legally-binding document. Residents in areas outside the zones for compensation are now starting to campaign to be included in a buy-out scheme because they would not want to be forced to live next to another runway. The finance required to buy so many properties under the scheme touted by Heathrow would be colossal.
In addition to those costs, a massive waste incinerator would have to be moved, costing at least £500m, and so would two detention centres. A section of the Bath Road (A4) would be moved and the M25 would be affected, although Heathrow won't give details of its plans to deal with this obstacle to its runway without incurring a huge cost. Transport infrastructure, already struggling to cope with current usage, would need expensive upgrades, in addition to the forthcoming plans to deal with current capacity.
All these costs must be met but Grayling wants to give the impression that much of the development can be downgraded saying that, "Heathrow's customers should not pay for a ‘gold plated’ solution." He talks about "value for money" at a time when the supposed long-term economic benefits of a third runway have never looked so feeble.
In October 2016 the government commissioned the aviation regulator, the CAA, to provide a quarterly report to show its discussions with the airlines on the third runway. It was known as the Section 16 Commission. It managed to identify "possible savings of up to £2.5 billion". That Commission finished last month but Grayling used his speech to Airlines UK to announce that he was recommissioning this formal arrangement.
All these plans assume that the government ignores the recommendations of the Transport Select Committee so that the National Policy Statement (NPS) can proceed to a vote in Parliament before the summer recess.
If all that happens, and MPs vote for a third runway, the discussions between the CAA and airlines (even those that don't currently use Heathrow) will continue until Heathrow submits a formal planning application.
Grayling made it clear that the CAA will champion the interests of consumers, presumably even those who have no intention of visiting the UK and are just in transit. The interests of the 17,000 people living in the area who could be displaced by a third runway are ignored.
In his speech, Grayling virtually begs the airline industry to talk up the runway at every opportunity. Heathrow expansion is a lost cause unless he can convince airlines and investors to get behind it; someone has to pay the bill. Heathrow's owners have already pumped millions into getting this far with the scheme.
Airlines are concerned that if consumers can fly more cheaply using another airport, they will take that cheaper option.
“Expansion is paid for not by Heathrow but by airline customers in the form of charges and Heathrow must not increase these to pay for a disproportionately expensive scheme.”