Skift Take

It's strange to see an airport and its biggest customer at loggerheads. IAG CEO Willie Walsh is rapidly losing his patience with the expansion project, and the UK government might decide to follow suit.

Willie Walsh, the CEO of Iberia and British Airways parent company IAG, has renewed his battle with Heathrow Airport over the “outrageous costs” associated with its plans for a third runway.

Walsh has long been critical of the project and wants it stopped or at least done much cheaper.

Of course, he isn’t an objective observer. IAG is the biggest airline group at Heathrow with 56 percent of slots and is no doubt concerned that the airport will pass any increase in the building costs on to the airline.

“The regulator needs to step in. This is completely unacceptable. The costs are out of control. And we still challenge Heathrow to demonstrate that they can do it. [The] government needs to be very focused on this,” Walsh told analysts on an earnings call on Friday.

According to IAG, the real costs of building the third runway are $39 billion (£32 billion) and not the $17 billion (£14 billion) that Heathrow claims.

IAG’s figure includes additional costs associated with terminal infrastructure, which Walsh said was now not included in the headline cost.

“Heathrow is out there trying to con people that this is good for the UK plc. It’s not — it’s good for them and them only,” he said.

Heathrow would counter that the whole country would benefit from expansion for years to come but some people, including academics, are not so sure.

Walsh believes the scheme is at a pivotal moment and is urging action.

“We really do need people to wake up to what’s going on here because if we don’t stop it now and force them either to deliver to the original plans that they have or stop them, what we’re going to be left with is the most expensive piece of infrastructure that will be underutilized because you’re not going to get people coming in here if the costs are driven up as they will be based on this ridiculous investment profile that Heathrow is looking at,” Walsh said.

Skift asked Heathrow about IAG’s revised estimate on the true cost of the project, but a spokesperson declined to answer specific questions, offering the following statement.

“The master plan we’ve recently published outlines how we will grow the airport affordably and sustainably to 140 million passengers by 2050. It includes the £14 billion expansion project plus already planned investment that will ensure the existing airport infrastructure continues to deliver for our passengers,” a spokesperson said.

“All money spent to 2050 has been worked into our calculations to expand whilst delivering on the affordability challenge and keeping airport charges close to 2016 levels.”

UK members of Parliament last year backed Heathrow’s plans, but one potential stumbling block could be new Prime Minister Boris Johnson. Johnson had been a vocal critic of the plan and previously said he would lie down “in front of those bulldozers and stop the building, stop the construction of that third runway,” but he skipped the country when the crucial vote was taking place. His current view is unknown.

The topic of Heathrow’s third runway remains controversial with campaigners complaining over the cost — although the airport stresses it will all be privately funded — and the potential environmental impact.


(Source: Airports Council International)

Second-Quarter Results

IAG bucked the trend seen in a lot of other European airlines and managed to grow profits in the second quarter. Pretax profit increased 20 percent to $1 billion (€921 million) with revenue up 9 percent to $7.5 million (€6.8 billion).

Walsh also said IAG was “not seeing any evidence of a Brexit impact.”

The results also showed that British Airways will appeal the $222 million (£183 million) fine handed out by the UK’s information regulator and outlined how it would pursue “all available appeal routes should they be required,” which means we’re likely to be waiting a very long time for the final outcome.

“It has not been proven that British Airways failed to comply with its obligations under GDPR and the UK Data Protection Act,” IAG said.


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Tags: british airways, heathrow, Heathrow Airport, iag

Photo credit: A British Airways 747 in Landor livery arrives at London Heathrow on 09 March 2019. Parent company IAG is worried about spiralling costs associated with a new runway at Heathrow. Nick Morrish / British Airways

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