The possibility of Heathrow airport being expanded by a rival company has moved a step closer, as the regulator announced that an alternative developer model is among four shortlisted options for boosting capacity at the west London airport.
Regulatory Options Shortlisted
The Civil Aviation Authority (CAA) has outlined four potential frameworks for how Heathrow could increase its capacity. One option involves an alternative developer, which would align with the Heathrow West proposal by hotel tycoon Surinder Arora’s company, Arora Group. This plan would allow a third party to build, own, and operate a third runway and new terminal at Heathrow.
Heathrow Airport Limited (HAL), the airport’s owners, are keen to deliver the expansion themselves, arguing that maintaining control of all terminals under a single body would be more efficient. However, an alternative developer would compete directly with HAL, which is largely owned by overseas investors, including private equity giant Ardian and the sovereign wealth funds of Qatar and Saudi Arabia.
Dependence on Government Policy
The implementation of the alternative developer model would depend on amendments to the Government’s Airports National Policy Statement (ANPS), which are set to be consulted on by July, and the developer obtaining planning permission.
Other shortlisted options include improving the existing regulatory framework for the airport, such as more scrutiny of spending, and a model to support cost-effective longer-term financing. The final option would create new obligations on HAL to competitively tender elements of expansion, potentially resulting in a third party designing and building assets, while HAL retains overall responsibility for coordinating and financing the work.
Consultation and Arora Group’s Plan
A consultation on the shortlist will run until June 15. Arora Group previously expressed interest in installing a 2,800-metre new runway at Heathrow, which would not require moving the M25 motorway, unlike HAL’s plan for a full-length, 3,500-metre runway. In November, Transport Secretary Heidi Alexander announced her preference for a full-length runway.
HAL’s expansion scheme is estimated to cost £33 billion, including £1.5 billion to move the M25, and is expected to be fully privately financed. If approved, it would increase Heathrow’s capacity to 756,000 flights and 150 million passengers per year.
