As if Grant Shapps, the Transport Secretary, does not have enough to worry about, here is something else: Heathrow airport needs rescuing.
The airport is owned by international financial institutions, including Ferrovial of Spain, the Qatar Investment Authority and USS, the British universities’ pension fund. Who is going to bail it out? The Civil Aviation Authority apparently thinks it should be passengers and airlines.
In its latest consultation the regulator said it is minded to grant Heathrow at least £550m of additional regulated capital via higher passenger fees to pay for expansion costs incurred so far, the “pausing” of the third runway and also legal fees.
Heathrow’s passenger fees are already the highest in the world and, as reported in The Sunday Telegraph, IAG (the owner of British Airways), is outraged at this bid to pass costs on to airlines and passengers.
Heathrow is Britain’s major hub airport and our key aviation gateway to the world, handling around 40pc of our trade by value.
But it has been brought low by the pandemic and its own mistakes. It is laying off up to 1,200 people and losing around £30m a month.
Oxford Economics predicts the decrease in airport traffic could threaten up to 43,000 jobs in the Hounslow area and cause a £200m hit to the local economy.
The company has been profligate in recent years, paying out £4.5bn of dividends since 2012 and running up £17.5bn of debts, while also embarking on its ludicrously complex third runway. But it has now had to seek a waiver of its banking covenants.
The third runway has effectively been mothballed, stopped by the courts on environmental grounds. Heathrow claims that it has only been delayed by two years, pending an appeal before the Supreme Court next month. But as passenger demand has evaporated and Prime Minister Boris Johnson is against it – refusing to commit any public money – there is almost no prospect of it going ahead.
As if the commercial situation was not bad enough, Heathrow faces an additional risk: its approach to climate change.
It is simply inconceivable that the huge numbers of additional flights originally proposed by Heathrow is compatible with the Government’s net zero emissions target by 2050. Even without its third runway, Heathrow will still be the country’s biggest carbon emitter.
What is to be done?
The first thing is for the Government, the airport and its shareholders to admit the gravity of the crisis. All sides are at fault. A previous group of Conservative ministers approved the third runway, while simultaneously putting off a review of the now defunct Airports National Policy Statement. A review is legally required to find a way forward.
Heathrow’s management is right to be advocating innovative Covid testing for arriving passengers – and the Government should give them the go-ahead.
But it is delusional to pretend that expansion has only been temporarily delayed. Lobbying the CAA to approve hundreds of millions of pounds of additional levies on passengers and airlines to pay for a defunct scheme adds insult to injury.
Having admitted the parlous state of the airport’s finances, all sides must come up with a realistic plan to put it on a more resilient, efficient and greener footing. British Airways, Virgin, the other airlines and their passengers should not be asked to foot the bill for Heathrow’s spiralling costs; rather they would be justified in demanding lower passenger fees so traffic can recover.
Assuming the Government does not want to tap up taxpayers for a bailout, the private sector, including existing or new shareholders, should contribute to a refinancing.
What is the incentive for them to do so?
It is reasonable to allow Heathrow to expand incrementally and cost-effectively, as long as environmental targets, including reducing noise and emissions, are met. Additional spare capacity would improve resilience and reduce delays, including taxi times and stacking in the air, simultaneously reducing both emissions and fuel costs while allowing some headroom for revenue growth.
I have spent the last seven years leading an independent consortium of aviation experts and investors promoting a detailed proposal to extend one of the existing runways as the best way to put both Heathrow and other international airports on a sound footing for the future.
Not only is an extended runway a substantially cheaper option, it brings no new communities into the noise footprint and would actually reduce emissions from the airport by 10pc, mostly due to fewer delays and shorter taxiing times.
Ministers have been sitting on whether to conduct the necessary review of airports policy for a year. The parlous state of the airport’s finances means they should now get on with it, as the first step to making Heathrow fit for the 21st century.
Jock Lowe is a former director of flight operations for British Airways and a director of the Heathrow Hub extended runway consortium