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  • IAG sounds warning on 'out of control' Heathrow expansion costs

IAG sounds warning on 'out of control' Heathrow expansion costs

IAG chief executive Willie Walsh believes that London Heathrow's has "understated" the costs of expanding the hub as planned, and that the project is "out of control".

During a results briefing today, Walsh argued there was "absolutely no way" that Heathrow Airport could complete construction of a third runway and additional terminal facilities within the budget specified in its original plan.

Walsh says that while Heathrow continues to quote a figure of £14 billion ($17 billion) for the investment required, he estimates the "true costs" at more than £32 billion.

Construction of the third runway – north of the airport's existing facilities – and associated works alone will require £14 billion, Walsh says. But a further £14.5 billion will be required to add terminal capacity and other infrastructure on the existing site, in IAG's view, while a westerly extension of Terminal 5 – home to the airline group's subsidiary British Airways – will require a further £3.5 billion.

Wash says that IAG is "particularly concerned" about an increase in planning and preparation cost to £3.3 billion, before construction can begin.

The planning cost nearly doubled to around £500 million – from £265 million – while early construction cost more than quadrupled to £2.8 billion, IAG suggests.

In the airline group's view, Heathrow does "not have the expertise to lead a project of this size" and has demonstrated "a lack of credibility" in forecasting the costs of expansion.

Walsh says IAG has "no confidence" in Heathrow and will make an effort to correct the airport's cost figures publicly.

"We have got to call them out... We need to people to wake up," he says.

Walsh calls for both the UK government and Civil Aviation Authority to "step in" and hold the airport operator to account. Officials "can't turn a blind eye to it", he argues.

Heathrow, for its part, states: "The masterplan 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.

"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."

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