Heathrow Airport’s proposed third runway faces renewed scrutiny as the cost debate intensifies, with the airport itself claiming a per-passenger cost of just £15 over a decade, a figure sharply contested by airlines who estimate a far higher price tag. The debate comes as the Civil Aviation Authority (CAA) prepares to issue a crucial ruling that will significantly influence the project’s viability.
Heathrow Chief Executive Thomas Woldbye outlined the airport’s position, stating that the additional revenue needed to deliver the third runway equates to £15 per passenger over a prolonged period. “That’s what it costs you to take the Elizabeth Line from central London to Heathrow,” Woldbye told the Financial Times. “For that amount of money, we can deliver an almost new airport.” This calculation is part of Heathrow’s broader £49 billion investment plan spanning 20 years.
The proposed expansion has garnered support from Chancellor Rachel Reeves, framed as a key component of the government’s economic growth strategy. However, this backing is countered by concerns from airlines regarding potential cost increases and criticism from environmental groups. The Heathrow Reimagined campaign, representing major carriers like British Airways and Virgin Atlantic, argues the true cost could reach £60 per passenger, adding £240 to a family of four’s holiday expenses.
The discrepancy in cost estimates underscores the high stakes surrounding the CAA’s upcoming decision. The regulator is currently evaluating potential changes to Heathrow’s regulated business model, specifically how costs are passed on to airlines. A report by The Economist highlighted Heathrow’s congestion, noting it handles over twice as many flights per runway compared to competitors like Amsterdam Schiphol, which operates six runways. Inaction on the third runway, the report suggests, threatens Heathrow’s competitive position.
The CAA is expected to release details of the proposed new model in the coming weeks, with a final decision anticipated later this year. This model is critical for securing final investment commitments from Heathrow’s ownership group, which includes Ardian, and sovereign wealth funds from Qatar, Saudi Arabia, and Singapore. Investors have cautioned that overly restrictive changes to the regulatory framework could deter investment.
The financial implications extend beyond the runway itself. Heathrow reported a one-third decrease in annual pre-tax profits to £575 million, attributed to non-cash valuation adjustments related to its property holdings. However, stripping out these adjustments, profits remained flat. Revenues increased by 2 percent to £3.6 billion, driven by record passenger numbers of 84.5 million in .
Looking ahead, Heathrow anticipates a slight decline in profits due to rising business rates and increased national insurance contributions. Despite these challenges, the company has reinstated dividend payments for the first time in five years, distributing £550 million to its investors. Woldbye emphasized the importance of rewarding shareholders after a five-year period without returns, citing strong cash flow and operational performance as justification for the decision.
“Shareholders in this company have not had any return for five years, since before Covid,” Woldbye stated. “Healthy companies pay dividends… we just felt now that with a solid cash flow performance, solid operational performance, airlines being really happy with the operational outcomes that they’ve seen in , this was the right time to do that.”
The debate over the third runway is not merely a financial one; it’s a strategic assessment of the UK’s aviation capacity and its ability to compete on a global scale. The CAA’s decision will be pivotal in determining whether Heathrow can move forward with its expansion plans, and whether the promised benefits – increased capacity and economic growth – will materialize. The conflicting cost projections, however, suggest a complex negotiation lies ahead, with airlines and the airport locked in a battle over who will bear the financial burden of this ambitious project. A statement from ministers indicated the runway is “needed to increase capacity in the south-east and around London.”
as noted by Heathrow CEO Thomas Woldbye, the delay in building the third runway is increasingly problematic. “The third runway at Heathrow should have been built 10 years ago because we need it now. Now, we may get it in 10 years’ time,” he said, highlighting the growing urgency of addressing the airport’s capacity constraints.
