Fonte: The Economist
BA's big bluff on a third runway at Heathrow
Aug 4th 2015, 14:03 by M.R.
GULLIVER had to do a double take on Friday after reading that Willie Walsh, the chief executive of IAG, the group that owns British Airways, now opposes expanding Heathrow Airport in London. "We did not ask for it and we do not want it," he said of the hub's proposed third runway (see map), which was endorsed by the Airports Commission this summer. Funny that, given that Mr Walsh last year told the Independent: "The case was already being made before I joined BA in 2005, but a lot of my time [as chief executive of the airline] was spent arguing for a third runway." Then there was the speech he gave in 2013, berating the government for its "tragic" failure to approve expansion. And a 2009 speech to the Edinburgh Chamber of Commerce, in which he warned that even Scottish connectivity would suffer "without additional runway capacity" at Heathrow.
If Mr Walsh's recollection seems hazy, he is at least honest about the reason for his apparent change of heart. "The costs associated with the third runway are outrageous," he blustered. "We will not be paying for it." Heathrow's boss, John Holland-Kaye, warned last year that the £17.6 billion ($27.5 billion) development could push up landing fees at the hub by 20%.
Airport charges at Heathrow are set by the Civil Aviation Authority (CAA), Britain's aviation regulator. It uses a complex formula to forecast capital expenditure, operating expenditure and capital depreciation at the airport. After doing the sums, the CAA allows Heathrow to raise or lower its per-passenger charges by a set percentage. In effect, this caps the maximum yield that Heathrow can shake out of airlines. For the period running from 2014 to 2019, the airport has permission to increase charges by inflation minus 1.5% per year. (Heathrow had proposed inflation plus 4.6%, while BA called for inflation minus 9.8%.) The CAA, in other words, reckons that Heathrow's owners are doing very nicely, and can afford to give a little back.
But 2019 is the year that construction could begin on the third runway, dramatically pushing up capital expenditure at the hub. Heathrow recently concluded its consultation into future charging levels, and had been due to unveil proposals on Sunday. The timing of Mr Walsh's outburst suggests that he got wind of its recommendations, and was none too pleased. Such indignation is entirely understandable. As BA's de facto boss, his job is to lobby the CAA to lower charges. Mr Holland-Kaye's job is to talk up the need for more cash. It is a dance that is repeated between airlines and airports around the world.
Less reasonable is the implication that BA is somehow being treated unfairly. The airline, like Heathrow, does very nicely. IAG announced a 40% jump in quarterly profits last week, putting it on track for an annual operating profit of €2.2 billion ($2.4 billion). Mr Walsh's back-of-the-envelope calculation that the runway will cost BA £400m a year, meanwhile, needs caveats. First, he is presupposing what the CAA's eventual judgment will be. Second, the regulator would only approve such a heavy financial burden if the cost-benefit analysis justified it. For proof of the CAA's impartiality, look no further than its use of "single-till" regulation. Airports prefer "dual-till" regulation, which creates a separate pot for non-aeronautical earnings from retail, advertising and so forth. By mandating the single-till approach, the CAA has gifted BA subsidies from Heathrow's luxury shops.
BA will have to pay a goodly sum towards the cost of a third runway, but expansion will also make the carrier money—and lots of it. With a 51% market share at the capacity-crunched hub, it has the most to gain from the creation of new landing slots. That is why its shareholders have always supported the option, and why they still do, irrespective of Mr Walsh's remarks. His threat to "challenge it by any and every avenue" is legal browbeating aimed at cowing the CAA into lower charges.
The posturing actually began in 2011, when Mr Walsh declared the third runway "dead" and talked up growth at IAG's other hub, Madrid. At the time, all three of Britain's main political parties had ruled out Heathrow expansion. BA was flogging a dead horse calling for a re-think. But now the ruling Conservative party is poised for a U-turn. With the all-clear looming, BA's strategy has shifted overnight from pro-expansion lobbying to anti-expansion parsimony. It's not very convincing. The CAA should ignore the brinksmanship and press on with its objective cost-benefit analysis. BA must pay its fair share towards Heathrow's upkeep, with or without new runways.
Read more at
http://www.economist.com/blogs/gulliver/2015/08/airport-expansion-london#tXFc7PI3OqB86H45.99
