The announcement of the UK government’s approval for a third runway at Heathrow last month was welcomed in a strangely subdued way. You would think that a decision that big, and that long in the making might have received more fanfare. But there are many hurdles to go through before the bulldozers can move in. Local residents, for one, will be doing everything they can to stop the expansion going ahead.
The airlines are nervous, judging by the press releases that followed the announcement. Indeed they did not really welcome the decision at all. One of their concerns is the cost – expected to be in the region of £16 billion, more than doubling the value of the airport’s current asset base – and who is going to pay. The expectation is that the cost of building the new runway will be recovered through landing fees. However it is still up for debate how much these charges will be and how exactly they will be distributed across airlines.
Amongst the main concerns of the airlines when it comings to funding the new runway is the issue of pre-funding. This would allow Heathrow to recover at least some of the cost of building the new runway prior to it becoming operational. For the airlines, that is the worst of all worlds.