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A Virgin Atlantic A330 at London Heathrow. (Photo: AirlineGeeks | James Dinsdale)

Heathrow Reveals Business Plan, Lays Out Investment Options for Next Decade

Heathrow has created an initial business plan to submit to the CAA showing how it will deliver its expansion and connect the entire U.K. to global growth.

The plan — which Heathrow CEO John Holland-Kaye says “ticks all the boxes” — has been created using data gathered from engagement with consumers, business groups, communities close to the airport and airlines. A press release issued by the airport earlier this week revealed that all parties were asked what expansion should deliver for them.

The press release went on to say that the business plan contains a balanced approach towards the requirements given by the focus groups to “help deliver an expanded Heathrow that lowers airfares and delivers more choice of destinations for passengers.” Other areas that Heathrow is looking to focus on with its plan for the next decade include boosting Britain’s global connectivity and investing in meeting sustainability targets.

The plan also contains a financial assessment which, according to Heathrow, has been rigorously reviewed to confirm that the airport can expand within the total costings originally submitted in 2014 to the Airports Commission, as well as how all sources of finance are private with no cost to taxpayers.

Britain’s busiest airport reports that a lack of available capacity at Heathrow over the past decade has suppressed airline growth and the new plan opens up the hub for other carriers to “achieve their ambitions.”

The airport’s CEO said in a press release that “New capacity at Heathrow will help drive down airfares, attract up to 40 new long haul as well as more domestic routes and connect all of Britain to global growth.”

“It delivers a sustainable airport at the cost we said without a penny of taxpayer money. Expanding Heathrow will make Britain the best-connected country in the world, at the heart of the global economy,” continued Holland-Kaye

Heathrow’s plan outlines two options to focus investment on over the next 15 years. One is to prioritize further enhancement to passenger service, which would involve identifying areas requiring investment to give consumers better service, such as access to the airport through investment in rail schemes, and a less stressful experience in it by potentially investing in terminal amenities and more reliable infrastructure.

This would mean prioritizing service with airfare savings being at the lower end of figures researched by Frontier Economics, delaying the third runway and making slower terminal expansions which would lead to a slower release of new slots in an aim to make sure Heathrow champions service for consumers.

The other is to prioritize rapid growth in an attempt to deliver more connectivity and greater airline competition sooner. According to Heathrow’s business plan: “the sooner [Heathrow] can deliver new capacity, the greater the benefit for consumers. Faster passenger growth also helps airport economics by bringing in more passengers, sooner, spreading the costs of investment.”

This approach prioritizes savings with the third runway open as soon as possible and terminal expansion occurring quicker and simultaneously to make sure slots and capacity can be released at a faster rate for a speedier passenger growth. This, however, would mean that only a basic investment would be given into services such as washrooms and terminal infrastructure.

Both options are said to lead to lower overall airfares and ensuring the third runway is delivered by 2030. Heathrow stated in a press release that it will engage with stakeholders to gain feedback on the plan and which of the two options best meets their priorities.

Analysis by Frontier Economics states that the average return ticket price for passengers will drop by 21GBP-37GBP on short-haul flights and 81GBP-142GBP on long-haul flights — depending on the investment path chosen —over the next decade due to Heathrow’s expansion enabling competition amongst airlines which is supposed to benefit passengers as airlines would lower their prices to stay competitive.

All feedback is to be published in a Final Business Plan in 2020 which will show the investment decision that the airport has made or even a hybrid of both options. However, the CAA will have the casting decision to determine the investment approach Heathrow will pursue after reviewing the business plans.

Connor Sadler
Connor Sadler
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