IAG warns UK government to keep Heathrow costs in check

IAG warns UK government to keep Heathrow costs in check

International Airlines Group is urging the government to make Heathrow airport provide a detailed breakdown of its expansion costs to ensure airlines’ customers are not ripped off.

In a submission to the consultation on its Airports National Policy Statement, IAG argued there is no transparency on how cost proposals are calculated.

The third runway expansion plans are now slated to cost £14 billion.

This is on top of day to day forecast expenditure of around £17 billion, meaning airlines’ customers will have to fund a total of £31 billion to 2035.

IAG believes the government must focus more on Heathrow’s expansion costs to ensure customer charges remain at today’s level and that all costs are justifiable.

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The group says the airport frequently increases project costs without any reasonable explanation and overcharges for facilities that are available much cheaper on the open market.

For example, Heathrow said that building a new baggage system in Terminal 3 would cost £234 million.

In the end the project cost £435 million, nearly double the original amount.

In addition, Heathrow’s plan included spending £1 million on a smokers’ shelter without any breakdown of the costs involved.

Willie Walsh, IAG chief executive, said: “It’s unacceptable that a monopoly can charge these prices without having to explain why.

“Heathrow’s project costs frequently increase substantially from their original budget without any justification.

“No one using Heathrow knows what they are paying for, how can that be right?

“The current regulatory system incentivises Heathrow to spend an exorbitant amount of money at passengers’ expense and the regulator is unable, or unwilling, to force the airport to provide a detailed cost breakdown.

“Heathrow is already the most expensive hub airport worldwide and risks becoming a European white elephant if costs spin further out of control.

“The government must protect consumers by putting a cap on what they pay to use Heathrow.

“Charges should not increase from today’s levels if the airport is to have a future.

“Britain needs cost-effective airport infrastructure that benefits the country’s economy rather than Heathrow’s shareholders.

“This is even more critical if the UK wants to compete on the global stage post Brexit.”

The government argues that £49 billion of the economic benefits of Heathrow expansion will come from lower fares.

In its submission, IAG says that this will only happen if there are lower costs therefore it’s critical that new capacity is affordable otherwise the economic argument collapses.

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