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In the past two years, Heathrow leaped a few big hurdles that few thought they could. It appears there were a few bruised egos along the way.
Heathrow has started the search for a new chief executive after announcing that Colin Matthews is to stand down after six years running Britain’s largest airport.
Matthews joined in March 2008 in the wake of the shambolic Terminal 5 opening and has overseen a gradual restoration of Heathrow’s reputation, although he presided over one public relations disaster in December 2010 when a snow flurry paralysed the airport.
As well as operating Britain’s main international gateway, his successor faces a tough political challenge in persuading the three main parties to back a new runway – an option being considered by the independent airports commission.
Matthews said he had decided the time was right to “pass on the baton” and will leave after the new Terminal 2 is opened in June.
“I’ll be 70 by the time the thing [a new runway] opens. It’s impossible to see through to the absolute end. It’s not going to be over any time soon. It’s been a great six years and it’s appropriate that someone takes it on to the next phase,” he told the British Chambers of Commerce annual conference. The most prominent internal candidate is the development director, John Holland-Kaye, who is charged with the Terminal 2 revamp, but previous appointments have come from outside the airport group, which dropped its former title of BAA when Heathrow sold its other London airports Stansted and Gatwick.
Under Matthews customer satisfaction has increased markedly at Heathrow. According to the airport’s statistics, the proportion of passengers rating their journey through Heathrow as good or excellent went up from less than 50% to more than 75%. After its opening day fiasco, when undertrained staff grappled with a new baggage system leading to hundreds of flight cancellations, Terminal 5 has established itself as one of the world’s finest airport terminals.
Sir Nigel Rudd, chairman of Heathrow, said: “Colin has done a fantastic job of improving Heathrow for passengers and will remain as chief executive until his successor is in place to ensure a smooth transition.”
While Heathrow’s performance was not blemish-free in the first half of Matthews’ tenure – notably over Christmas 2010 when five inches of snow caused chaos – – it avoided a potential pitfall with a smooth operation during the Olympics.
Matthews, 57, who joined from utility group Severn Trent, has seen his tenure dominated by the debate over expansion. The airport had plans for a third runway finally approved by Labour in 2009, before they were scrapped the following year by the coalition. Matthews has since overseen a discreetly judged lobbying effort that culminated in the government setting up the Airports Commission, which next year will recommend building additional runways at either Heathrow or Gatwick.
News of Matthewss departure came as Heathrow decided not to fight the cap on landing charges set by the Civil Aviation Authority for the next five years, a ruling the airport had described as a draconian position that could curb investment. Heathrow’s biggest shareholder remains Ferrovial, the Spanish construction firm, although it has cut its stake substantially to a third since it led a consortium that bought BAA in 2006.
The sovereign wealth funds of Qatar, Singapore and China snapped up Ferrovial’s shares controlling a combined shareholding of more than 40%. The remainder is owned by the Canadian pension fund Caisse de dépôt et placement du Québec and the private equity firm Alinda Capital Partners.
Heathrow claims that its shareholders could be put off investing in expanding and improving the airport after the CAA announced a cut in charges by 1.5% below the rate of inflation each year from 2014-19, to £19.10 per passenger. Airlines including British Airways and Virgin Atlantic, who had complained that charges would remain excessively high and drive up fares, have also accepted the decision for the next five-year period, known as Q6.
In a statement on Tuesday morning, the airport said: “Heathrow has not exercised its right to appeal [against] the CAA’s final Q6 regulatory decision. We understand that other parties have chosen not to appeal [against] the CAA’s decision. We are focused on delivering our business plan for 2014-18 and further improving Heathrow for passengers.”
Challenges facing the new chief executive
1 Build a new runway
The big task facing Matthews’ successor. Heathrow’s detailed expansion plans for a third runway should be submitted to the independent airports commission, led by Sir Howard Davies, before the new boss is in place. But experience suggests that winning the competition with Gatwick for a new London runway will be only the start of the battle. The airport will still have to convince ministers and local politicians – let alone neighbouring communities and environmentalists – to accept the case for a runway. There is plenty more lobbying, consultation and wooing of public opinion ahead.
2 Avoid disruption
Even if Heathrow eventually gets a new runway, it is going to be operating at the limit of landings and take-offs for the next decade or so, making it vulnerable to severe disruption. A mild winter has kept cancellations to a minimum, but the flooding debacle at Gatwick in January is a reminder of how the weather can test the best-laid plans. At least passengers stranded in the new Terminal 2 will have a nicer place to sleep if floods, snow, wind or fog strikes.
3 Keep airlines, staff, passengers and shareholders happy
Matthews has departed as the curtain fell on the public pantomime of airlines demanding a cut in landing charges. Heathrow has called for higher returns to keep sweet its array of foreign shareholders (which include the sovereign wealth funds of Qatar and China). The next settlement will likely come towards the end of Matthews’ successor’s time, but for now the regulator has decided to trim the fees, rejecting Heathrow’s arguments that lower income could mean cuts in investment. The well-rehearsed argument is that multi-billion-pound investments such as Terminals 2 and 5 need a stable regulatory environment, while Heathrow’s detractors argue that the business is a monopolistic cash and profit machine that owns Britain’s only international airport. Airlines – led by the cost-conscious Willie Walsh of British Airways’s parent International Airlines Group – say it is time for the airport to cut costs. That could mean fewer staff, but no airport boss will want to risk jeopardising Heathrow’s hard-won turnaround of its dismal reputation among the travelling public.
This article originally appeared on guardian.co.uk