We noticed you're blocking ads.

Keep supporting great journalism by turning off your ad blocker.

Questions about why you are seeing this? Contact us

Font Size

- Aa +

Thu 15 Dec 2011 01:10 PM

Font Size

- Aa +

Heathrow resists capacity crunch in face of rival hub

UK airport turns to bigger jets, glitzier shops to add growth amid drive for new coastal hub

Heathrow resists capacity crunch in face of rival hub
British Airways is based at Heathrow and the airports No.1 carrier

London’s Heathrow airport, hemmed in by urban sprawl and
barred from adding a new runway, is turning to bigger jets and glitzier shops
to keep growing in the face of a campaign to build a rival hub on the Thames

Heathrow owner BAA will widen taxiways to handle more A380
jets, adding seats, while an upgrade of its oldest terminal should lift sales, chief
executive officer Colin Matthews said in an interview. A government pledge to
maintain a global hub in the UK may signal an easing of antipathy toward
expanding the busiest international airport, he said in London.

“Until the last year, very senior people were arguing that
transfer traffic wasn’t important,” Matthews said. “They’re not saying that
now. There’s an understanding that to give business people starting or ending
their journey in London the frequencies and destinations they want you have to
fill the rest of the plane.”

Chancellor George Osborne said Nov. 29 the government will
“explore all options” for retaining a UK hub, “with the exception of a third
runway at Heathrow.” The remark suggested he may favor an offshore airport as
proposed by fellow Conservative and London Mayor Boris Johnson. Architect
Norman Foster, designer of Hong Kong airport, has also drawn up plans for a
coastal site.

Matthews, 55, said that with the government persuaded that a
hub is vital to the economy, BAA’s No. 1 task is to convince lawmakers and
officials that Heathrow can raise its capacity without disrupting people’s

“People feel really strongly about noise and we have to do a
better job of getting an understanding of that story on the table,” he said.
“It’s about quieter engines and airframes, different landing technologies and
ways of operating the airport, about flight paths and the time of day you

A small aerodrome in open country when chosen as London’s
main airport after World War II, Heathrow, located 14 miles west of the city
center, is now part of Europe’s biggest urban area.

Heathrow’s runways also run east-west, so in prevailing
winds planes descend over London 70 or 80 percent of the time, taking off above
the city on remaining occasions. Paris Charles de Gaulle and Frankfurt airports
are north and south of the urban areas they serve, so jets don’t affect
residents as much.

A third runway, as proposed by BAA, would lift Heathrow’s
capacity of 480,000 flights a year by 50 percent, Matthews said, allowing
passenger numbers to almost double from a maximum 68 million based on existing
aircraft sizes to about 130 million.

Prime Minister David Cameron’s government, which includes
pro-environment Liberal Democrats, blocked the plan after taking power in 2010.
It also opposes more capacity at London Stansted, which an antitrust ruling may
force BAA to sell, and Gatwick, the busiest single-runway airport, which it
disposed of in 2009.

While the Department for Transport is evaluating a new
aviation policy, it’s headed by Justine Greening, who represents a district
located directly under the Heathrow flight path and has previously been a vocal
campaigner against expansion plans.

Matthews says complaints from well-heeled suburbs ignore the
“slightly uncomfortable truth that one of the features that makes them
attractive is their connectedness to Heathrow.”

Howard Wheeldon, senior strategist at BGC Partners in
London, said the CEO’s optimism is probably wishful thinking.

“The Conservatives are clearly against the idea of a third
runway, so I don’t see any chance of it happening over the next three years,
and possibly longer than that,” he said.

Article continues on
next page…

While it waits for the political tide to turn, BAA, bought
by Spanish builder Ferrovial for £10bn ($16bn) in 2006, will spend hundreds of
millions of pounds to lift the number of Airbus A380s Heathrow can handle to 35
a day.

Heathrow currently offers six daily flights on the 525-seat
plane, two each by Singapore Airlines, Qantas Airways and Emirates of
Dubai, which has ordered 90 of the jets. British Airways, based at the airport
and its No. 1 carrier, will start taking delivery of 12 of the double-deckers
starting in 2013.

“With all those A380s we need to have more stands, but
they’re wider than other aircraft and the taxi layout needs to be different,”
Matthews said. “It’s expensive, it’s not quick, and it won’t be hugely visible,
but the plane gives an increase in the number of passengers without any
increase in movements.”

BAA is also spending £2.6bn renewing Heathrow’s Terminal 2,
built in 1955. Due for completion in 2013, the plan is aimed at improving the
check-in experience, and will add no capacity. Matthews said the investment
will pay off by boosting retail sales that contribute one-quarter of revenue.

“There’s a strong correlation between retail spending and
the customer rating of the quality of security,” he said. “I won’t buy a tie or
a bag unless I’m relaxed. If I’ve just been really aggravated in security I
won’t, if I’m delayed I won’t.”

BAA is also in talks with airlines about demolishing 42-
year-old Terminal 1 and integrating it with Terminal 2, Matthews said. The
six-year plan will create a complex handling 30 million people annually, the
same as BA’s base at Terminal 5, which had a chaotic opening in 2008 just weeks
before the CEO took over as baggage systems broke down, earning the sobriquet “Heathslow.”

Matthews said runway capacity remains the ultimate concern,
and Heathrow is already feeling the strain, falling from second to fourth by
passengers in 2010 as the total slid 0.2 percent to 65.9 million, overtaken by
Beijing with 13 percent growth and Chicago with 4.1 percent. Atlanta remained
the world No. 1.

Article continues on
next page…

“There has been this kind of stasis gripping London’s
airports over the last 25 or 30 years,” said Peter Morris, chief economist at
London-based aviation consultants Ascend. “The furniture has been rearranged
quite dramatically, but no new airports or runways have been built. All they’ve
done is spread things round old air bases from the Second World War.”

While Heathrow is Europe’s busiest airport, it serves only
180 destinations - down from 227 in 1990 - as airlines focus slots on the most
profitable routes, versus more than 250 at Amsterdam, CDG and Frankfurt, which
all have four runways.

“If we take too long over the debate we are, by default,
making a choice,” Matthews said. “Paris and Amsterdam will do the jobs that
could otherwise be happening here.”

Mayor Johnson has said he’s also concerned about London’s
shrinking global connections and the relative paucity of links with emerging
markets in Asia, while maintaining that “massive environmental dis-benefits”
mean expanding Heathrow won’t do.

Johnson instead favors a £30bn hub dubbed “Boris Island,” to
be built at Shivering Sands, off Whitstable in Kent. Architect Foster’s Thames
Hub would be located closer to London on the Isle of Grain. Both feature four
runways, 24- hour flying, high speed rail links and capacity of 150 million
people a year.

“There are people who dislike the concept of developing an
airport in a relatively unspoiled location, but I don’t see the public anger
that was evident with the third runway at Heathrow, or extending Gatwick or
Stansted,” BGC’s Wheeldon said.

Ferrovial, which cut its BAA holding to 49.99 percent Oct.
10 with the sale of a 5.9 percent stake to US infrastructure firm Alinda
Capital Partners for £280m, fell 1.5 percent and was down 1.1 percent at €9.03
as of 11:57 a.m. in Madrid, paring gains this year to 22 percent. The deal
valued BAA at £4.76bn, less than half the 2006 offer price.

Matthews said a coastal hub would take 25 years to deliver
and come with a price tag that could prove to be Heathrow’s biggest advantage
in its own push for additional capacity.

“Sooner or later people have got to put numbers on the table
and figure out what the costs and benefits are,” he said. “If a new airport
ends up costing four times more than investing in Heathrow, landing charges are
going to be four times higher.”

Arabian Business digital magazine: read the latest edition online

For all the latest transport news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.