There are two main areas of capital costs associated with airport expansion:
1. the capital expenditure required for completion of the new runway and terminals (referred to as “scheme costs”); and
2. the capital expenditure required to ensure surface access capacity can meet the extra demand of passengers travelling to and from the expanded airport (referred to as “surface access costs”).
The NPS acknowledges that the Gatwick scheme “would be significantly cheaper” and require a significantly lower “level of debt and equity” than the two schemes at Heathrow, with the Heathrow NWR the most expensive of the three shortlisted schemes.” This finding is based on estimated scheme capex costs of £17.6 billion for a NWR (compared with £14.4 billion for the ENR) and £8.9 billion for Gatwick). Surface access costs are estimated at £5.0 billion for the NWR (compared with £5.5 billion for the ENR; and £787 million for Gatwick).
Table 5: Cost estimates by expansion option, including risk and optimism bias, £m (2014 prices)
A degree of uncertainty is introduced to these project costs because of the risks in predicting the likely costs of additional capacity that will not be operational for over a decade. The Airports Commission reflected these risks and uncertainties by including a risk premium in its cost estimates and a further allowance for optimism bias (OB). The OB allowance reflects the project sponsor’s initial risk evaluation, and pricing tends to assume relatively positive outcomes for the project. However, in practice, the overall price may prove to be higher, particularly for a complex project such as this where several risks can interplay.
As can be can be seen in the figure below, about half the total NWR scheme costs relate to terminal buildings and land, with the other cost sources all much smaller parts of the total.
Figure 25: Heathrow NWR, scheme capex breakdown, £m (2014 prices)
Almost all the scheme capital costs for the NWR will be incurred between 2018 and 2028. This assumes a scenario where the new runway will be built between 2019 and 2025. It is assumed that charges are passed on to airport users in the year in which the expenditure is incurred. The profile of capital cost incursions for the other schemes are represented below. The capital spend is much lower and smoother for the Gatwick scheme.
Figure 26: Scheme capex expenditure, by year and expansion option, £m (2014 prices)
HAL has proposed to cut £2.5 billion of the final scheme costs by building a smaller new terminal over existing transport and baggage infrastructure. It has also sought to manage the financial risk of the scheme by phasing its development, though the final plans for phasing remain unclear. John-Holland Kaye acknowledged in oral evidence that “we are talking only about options at this stage; we have not finalised a particular plan, and that is what we are consulting on at the moment.” The effect of a reduced scope NWR scheme was examined by the Airports Commission. The cost profile compared with the central scheme design is represented below and reflects adjustments to design of T6, the replacement of the air traffic control tower with a remote facility and scope reduction in terms of land acquisition. Cost increases are smoothed in the early part of the appraisal period, for a total cost saving of £2.35 billion.
Figure 27: Central scheme costs vs. reduced scope scheme costs, NWR, by year, £m (2014 prices)
Given that the NWR scheme design has not been finalised there are concerns over the accuracy of the current cost estimates and how they would change over the life of the project. The DfT’s updated appraisal acknowledges, in terms of scheme costs, that “it is not currently possible to identify a firm scheme cost baseline for this analysis.” Andrew Haines of the CAA also commented:
“ … there is still too much uncertainty about the detailed scope, how Heathrow is going to procure it and how it will deliver it”.
Heathrow Hub, the proponents of the ENR scheme, believe that the scheme costs should be close to £30 billion on the basis that the capital cost of £17.6 billion in the current appraisal does not account for the: anticipated inflation in surface access costs; the full compensation offering of the airport; and the additional costs that will be incurred to relocate additional sites to what’s included in the scheme appraisal. They believe their scheme had a considerable cost advantage and has been costed at £9.7 billion and could be built in phases, with little or no impact on passenger fees.
The LACC expressed their concern “over cost escalation across the whole project lifecycle and the abundance of project risks, many of which are unquantified.” Willie Walsh was particularly critical of the lack of cost certainty at this stage of the project:
We do not know what the budget is yet… Heathrow are saying, “Trust me; I will be able to deliver something for you for about £14 billion.” We do not know what that something is. We do not know when it will be built. We do not know what makes up all the constituent parts. When we have asked for disclosure about that, they say, “We don’t really have it, but we will have it after you’ve given us approval to build.”
Craig Kreeger believed costs, at this point, were “a very unpredictable outcome.” Phil Graham of the Airports Commission played down the importance of costs “because in many ways the costs are being borne by the private sector, in which case, it is international investors.” The costs are being borne in the short-term by the private sector. But like any private sector investor, they expect a return on their investment. Because of this and the way costs are recouped through the current regulatory framework (see below), it will be airport users who will bear a large degree of the cost risk from this project. On this basis, costs are a material consideration.
The Arora Proposal
One notable aspect of the revised draft NPS is the change made at paragraph 1.15 which states in this additional sentence:
For the avoidance of doubt, the Airports NPS does not identify any statutory undertaker as the appropriate person or appropriate persons to carry out the preferred scheme.
Arora Group have developed an alternative proposal that they believe will save a minimum of £5.2bn compared to the £17.6bn costs of the HAL plans published by Jacobs. The scheme proposed will be “the same length runway in the same location, the same perimeter around the airport, the same targets for capacity increase and the same sustainability and environmental protections.” The specific points of difference between its scheme and the one currently proposed in the NPS are as follows:
Arora also proposes separate terminal ownership to the incumbent owners. They believe that “it will lead to much greater competitiveness and efficiency in subsequent ownership and operations.”
Heathrow are adamant that it is “the only appropriate promoter of the project”, particularly because “there would be obvious and highly challenging practical difficulties for a different promoter to apply for, construct and then operate a part of the airport.” Also, they state that the “introduction of a second operator would create complexity and uncertainty in delivering a comprehensive mitigation package.” HAL believe it would be in the public interest for the NPS to set out the criteria that any DCO applicant would have to meet in order to guard against multiple adverse impacts that could be generated by the uncoordinated promotion of the north-west runway. Secretary of State also commented:
There are some people who have argued that we could somehow split Heathrow in half and build a runway, with somebody separately building a runway. I am highly cautious that that is a realistic prospect. We never rule out any option and we have to get through the process of securing a wide range of agreements on this, but Heathrow airport is already an operational airport under one management, and we want this to happen in a timely, affordable, deliverable and, ultimately, workable way. We would not naturally think that splitting this airport in half and having competition within the airport is the right way of doing things, having one runway owned by one organisation and another by another one. I am not convinced that that would be the right way forward.
Willie Walsh, Chief Executive of International Airlines Group, was supportive of the concept of intra-airport competition as a way to induce greater cost efficiencies in the delivery and operation of an additional runway:
I have argued that in the NPS we should allow for competition within the airport. We should allow for alternative providers of terminal capacity. That would force Heathrow to deliver or, if they do not do it, it would enable somebody else to do so. That power should be given to the CAA. The CAA should have the power to force competition within the airport.
I am not talking about somebody having the runway. Let’s leave the principal infrastructure of the runway and the taxiways within Heathrow, but I see no argument against introducing competition in terminal provision at the airport. That is something the CAA should be given, and it is something that this Committee should insist on being included in the NPS.
Virgin Chief Executive Craig Kreeger was more cautious about this proposal commenting “While I am very intrigued by it and supportive of the idea, there are a couple of elements I would be concerned to add to the equation, to ensure that at the end of the process there is a level playing field and the benefits of competition are shared by all who utilise the airport and not just those who might fit into a terminal that one person is managing versus another.”
Financing and investment risk
Heathrow Airport is privately owned and operated by Heathrow Airport Holdings Ltd. It is predominantly financed through the bond market, with debt at the time of the Airports Commission report, of c. £11.7 billion made up of A- and BBB bonds. It also had £275 million of revolving credit facilities. It had equity of c. £2.7 billion in ordinary share capital.
The Airports Commission assumed a corporately financed cash flow approach, with the existing operator developing the scheme. In considering Heathrow’s expansion and core costs and revenues, the Airports Commission believed that HAL could plausibly meet its financing requirements through the issuance of bonds at a scale and structure to allow HAL to maintain its current A- credit rating. Where this is not possible, equity is injected. In the early stages, the scale of operations restrict the quantum of debt that can be realised, requiring greater equity injections. By contrast, at the later stages of expansion the capital expenditure is funded by a greater proportion of debt (figure below).
Figure 28: NWR Scheme, Debt and Equity Balances vs. Capex, £m, nominal prices
The Airports Commission found that HAL would require between £22.1 and £27.0 billion in debt financing and between £5.5 and £7.0 billion in additional equity. This is significant and will put HAL at the high end of the range of financing for infrastructure projects in the UK. Andrew Haines observed that the NWR scheme “is probably the largest privately financed infrastructure project anywhere ever in the world.” This assumes no surface access cost contributions from HAL. For comparison, the ENR scheme has lower build costs, translating into lower aero charges and financing. The costs are much lower for Gatwick, and the scale of the debt and equity requirement is lower (Table 6).
Table 6: Debt and equity requirements, by expansion option, £bn (2014 prices)
Having assessed these financing requirements, the Airports Commission assessed the potential availability of debt and equity with market participants. While the Airports Commission “was content with its assumptions about the availability of finance”, it did identify risks with its assumed approach. It believed there were equity risks associated with the level of aero charges the airport would be able to apply under a future regulatory framework and within a competitive operating environment. The Airports Commission concluded that “the availability of debt and equity suggest that market participants believe this risk is manageable.” This was on a presumption that aero charges increase to a potential peak of c. £31 per passenger, and aero charge revenues increase as required in the year in which costs are incurred. The airlines were highly critical of the prospect of pre-funding.
The other major element of investment risk identified by the Airports Commission was how investment of this scale will be treated when determining the costs of capital and therefore the returns on investment, under a Regulatory Asset Base model. The Airports Commission believed that investors would command sufficient returns under any future regulatory framework to enable Heathrow to access liquidity via bonds across several different currencies. It concluded that the “the structure of the regulatory system would be a key factor in their decision-making.”
In identifying these risks, the Airports Commission identified several options available to HAL to mitigate these financing risks, including: ensuring that the revenue-generating elements of the scheme are completed as early as possible or investigating the possibility of pre-funding; taking steps to increase non-aero revenues at the airport so that they contribute a larger proportion of total scheme costs; and utilising value engineering to control the costs of construction. The Airports Commission also acknowledged the possibility of the Government to “contribute funding to some or all of the surface access requirements” in a situation where the financing or investment risks increase, noting that “commitment to do so may provide investors with a level of assurance and so reduce the price they place on the risks.”
Because the assessment of the Airports Commission is a few years old, some of the underlying assumptions of their assessment have changed, particularly around the costs of capital (i.e. the return to investors and lenders). This is evident through historically lower yields on government and corporate bonds (@1.92%); and softer expectations for future interest rate rises. The macroeconomic and financial market environment, has meant Heathrow Airport has been recently been able to secure financing below the cost of new debt than was previously assumed. Andrew Haines, Chief Executive of the CAA, believed that the changes in changes in market conditions had changed the financing picture. He was also more optimistic about airport charges being held flat post-expansion:
[ … ] we are facing historic low levels of cost of debt … This will be largely new debt, so it allows Heathrow to place that debt in the market at an almost uniquely low point in time. When we look at all those factors together, and we model them and share that model with Heathrow and with the airlines, we see that it would be possible to do this project, as currently scoped, at flat prices.
Willie Walsh also believed that the Airports Commission’s assessment was not accurate and that development could occur in a way that would not require passenger charges to increase. He said this was down to the significant headroom included in the previous cost estimates and a significantly lower cost of debt today.
It is difficult at this point to know what exactly all this will mean for the NWR scheme. The CAA, who will ultimately make the judgement as to what a sufficient return is for Heathrow, are at a relatively early stage in their overall programme of price control in the next regulatory period. As part of this process, the CAA commissioned PwC to provide a view of an initial range for the weighted average cost of capital (“WACC”) for the H7 period (currently defined as the 2020–2024 period). The table below provides a comparison of the assumptions between when the Airports Commission completed their work and the most recent assessment. The WACC assumptions are lower than previously anticipated due to macroeconomic changes. While the newer cost of capital assessment did not mention anything firm on airport charges, it would be reasonable to assume that, for the time being and for the costs assumed, a third runway should not require charges higher than the levels indicated in the 2015 reports.
Table 7: Heathrow WACC calculations, 2015 vs. 2017
Heathrow has two main sources of income. The first being aeronautical income, which includes passenger fees, landing charges and airport parking charges. Passenger fees are based on the number of passengers on board an aircraft, and are levied in respect of all departing passengers. The level of passenger fees charged are based on route area: European, domestic and rest of the world. Transfer and transit passengers benefit from a discount. Landing charges are levied on almost all aircraft and are calculated in accordance with the certified maximum take-off weight of the aircraft and are banded into categories for aircraft weighing less than and those weighing more than sixteen tonnes, which includes nearly all commercial aircraft. These charges are adjusted, where applicable, in accordance with each aircraft’s noise-rating, its emissions and time of day, with landing charges at Heathrow being higher during peak traffic times than off-peak traffic times. Aeronautical revenue accounts for most of Heathrow’s revenue, at around 61% in 2016 (figure below). Heathrow’s revenue from airport charges has risen significantly over the past decade or so. In 2016, revenue from airport charges were reported at £1,699 million, up from £479 million in 2004/05. The second type is non-aeronautical income which HAL generates from a variety of sources, including concession fees from retail operators; direct income from car carks, advertising revenue and VIP products: the rental of airport premises such as aircraft hangars, warehouses, cargo storage facilities, maintenance facilities, offices and airlines lounges; the provision of facilities such as baggage handling and passenger check-in; and fare revenue from the operation of the Heathrow Express rail service.
Figure 29: Heathrow Airport revenue, by source, 2016, £m
The 2016 Leigh Fisher Airport Performance Indicators report shows that HAL’s real revenue per passenger rose consistently between 2006 and 2016 (figure below), even following the modest reduction in the recoverable price cap on those elements of revenue that are regulated by the CAA. HAL has managed to increase its revenue from nonregulated airside services. By way of comparison, between 2006 and 2016, the real revenues of airlines operating out of Heathrow has remained mostly flat. This is because real air fares haven fallen by 6% over the period, though this has been partially offset by increased airline revenue from ancillaries and other fees.
Figure 30: Airline and airport revenue per passenger, 2006–2016
Figure 31: Heathrow Airport, Operating Margin, %
The CAA has powers under the Civil Aviation Act 2012 to economically regulate Heathrow Airport, as it qualifies under the market power test. Heathrow is regulated on a quinquennial basis in which the CAA sets a price cap to limit the amount that Heathrow can levy by way of airport charges. It specifically adopts a regulatory mechanism known as RPI +/-”X” that limits price increases to the rate of inflation plus or minus a certain percentage (the “X” value). The “X” value is the percentage that the airport can charge on a per passenger basis and is formulated by taking into consideration the “Building Blocks” of the business. Under this approach, a regulated asset base (RAB) is defined and valued. As time progresses, capital expenditure (capex) is added to the RAB. The RAB drives two of the fundamental building blocks that make up a company’s revenue requirement: the cost of capital (the return on the RAB) and the depreciation allowance (return of the RAB). These two building blocks are then added to the projected level of operating expenditure (opex) to calculate the total revenue requirement for the business. In short, the regulatory framework allows Heathrow Airport to earn a “reasonable return” on their asset base and operating expenses.
Airport charges at Heathrow are the highest in the world and increased significantly from just under £8 per passenger in 2005 to just over £23 per passenger in 2014 (figure below). It should be noted that the figure below shows average charges for the airport. Charges vary depending on the route operated. For example, EU short-haul services have a charge of £18.72 per departing passenger, while long-haul services have a charge of £40.21 per departing passenger. Airport charges at Heathrow, on average, have been capped to fall in real terms by 1.5% per year in Q6.
Figure 32: HAL’s average airport charge, £ per passenger
Increases in landing charges at Heathrow over the last decade have largely been driven by the extensive investment programme at the airport, which includes the construction of the new terminals 5 and 2, as well as major upgrades to terminals 3 and 4. Between 2005/06 and 2013/14 period HAL invested £10.6 billion (in 2014 prices) in the airport. HAL’s RAB has subsequently doubled over the past decade or so; though the RAB growth has slowed during Q6.
Figure 33: Heathrow Airport, regulatory asset base, £m
Because the current regulatory price controls on Heathrow expire on 31 December 2019, the CAA has launched a review called ‘H7’ to determine the appropriate regulatory arrangements that should be put in place after that date, including its approach to the economic regulation of new airport capacity and any associated costs that may be incurred during Q6. The CAA has stated that for H7 it intends to continue with its traditional approach of remunerating HAL’s investment through its RAB and an estimate for its WACC. Though Andrew Haines cautioned that the CAA was still at “a relatively early stage of this process as well [and that] proposals, on which we are currently consulting, would not lead us to make a final decision on costs until the very end of 2020 or 2021 at the earliest.”
Reflecting on the success of the regulatory framework, many of the airlines were critical of the mechanisms used to date in controlling Heathrow’s capital spend and the growth in airport charges. Craig Kreeger, Chief Executive of Virgin Atlantic, commented:
Through whatever combination of vehicles over the last several years, Heathrow is by a pretty significant margin the most expensive airport at which to do business. The capabilities of the existing regime, and the teeth in the existing regime, have not led to a reasonable conclusion on charges for the airlines.
This was not necessarily a criticism of the CAA and the way they had executed their responsibilities but a critique of the powers available to them. Andrew Haines conceded that powers in the past were very restricted and only enabled them to “set a price cap and then [walk away].” He believed the powers available to the CAA had improved and they “now have the ability to issue a licence and to put in place controls” giving them “much more flexibility in how we oversee those costs.” Willie Walsh still wanted “to see the CAA having more power and delivering it more strongly.” With respect to proposals for the CAA to take on additional powers, Andrew Haines said he would be “nervous” about such a prospect because of the potential delay it might cause as introducing such powers would require primary legislation.
The costs of the NWR and the way it is financed will affect how much money the airport operator will need to raise through airport charges to meet investor returns. The Airports Commission estimated that expansion will result in an increase from c. £20 per passenger to a weighted average charge of c. £28-30 per passenger and a potential peak of up to c. £31. This was described by the Airports Commission as a “significant increase in aero charges in a context where HAL will be competing with other airport operators.”
Why airport charges matter
The business case of the NWR scheme rests on the assumption that any change in airport charges would be absorbed by the airlines and not passed onto passengers. This is unlikely to happen in practice. Airport charges account for a reasonable share of airline operating costs, particularly for low-cost carriers (Table 8).
Table 8: Airport costs, as a % of operating costs for airlines, 2016
The airlines also operate in highly competitive and relatively thin profit-margin environment (Figure 34). This gives them less scope to absorbing airport charge increases as is assumed in the appraisal supporting the NPS.
Figure 34: International airline operating margins vs. oil prices
A marked rise in airport charges, which would be absorbed by passengers, would undermine the strategic benefits endorsed in the NPS. Such an increase will either make using Heathrow unaffordable for some passengers; or for those that continue to use the airport, the passenger benefits–which make up over 90% of the economic benefits–will be eroded and may even be burdened with additional charges to cover the spend incurred.
Excessive charges incurred by the airlines are also likely to limit the degree of airline competition at an expanded airport. As Simon McNamara of Flybe put it “we will expand if the costs work, but we will not expand if the costs do not work and we cannot access that capacity.” Willie Walsh believed many of the airlines would not be able to affordably offer the anticipated routes of Heathrow and some may even be forced out, as has happened in recent years.
Higher airport charges are likely to have a detrimental impact on the competitiveness of Heathrow with the other major European hubs. Transfer passengers, which underpin the value of hub airports, are much more sensitive to price than other segments of the market and an excessive increase in airport charges would see these passengers utilise other hubs that are more price competitive(Table 9). Rafael Schvartzman of IATA believe that “it will certainly impact a lot on the competitiveness of Heathrow compared with other hubs in the world.”
Table 9: International passenger charges, by major European hub
Willie Walsh summed up the importance of airport charges in the context of the scheme’s strategic case and feasibility–“What I am saying very clearly is that, if the charges increase, you are not going to get the expansion at Heathrow that has been talked about. Therefore, the third runway will become a white elephant.” Mr Schvartzman also concluded “we still think that those numbers cannot sustain the level of charges needed to remain competitive.”
HAL are seeking to “maintain airport charges per passenger close to current levels in real terms.” When pressed on pressed on whether HAL could make a firm commitment on costs, John Holland-Kaye commented:
At this stage I could not. We were given a challenge by the Secretary of State to deliver expansion at close to current charges. We have accepted that challenge. It would be a mistake at this stage to make any guarantee about particular costs. When we think about how much work still needs to happen, we still need to go through the development consent order process and finalise what our master plan will be like based on the consultation we are currently holding. We cannot finalise those costs yet.
The Secretary of State also expressed his desire for landing charges not to increase in real terms:
From day one in dealing with Heathrow and with the airlines, my approach is that I want this to be a value for money exercise. It is clearly private money, but I do not want a massive hike in landing charges as a result. Nor do I want passengers paying for this new runway years in advance. I have been very clear to Heathrow that I see no reason, given the fact that the capacity of the airport is effectively increasing by around 60%, for a material change to landing charges.
When questioned on whether it should be a condition of the third runway that landing charges be held more or less at their real costs now, the Secretary of State believed that it was an issue to be dealt with by the CAA and not the NPS:
That is what we will be working to achieve. Effectively, we give the CAA the regulatory powers to ensure that we do not get inappropriate cost hikes. That is the real mechanism to do this. We have already given them the powers to do that. Those powers expire shortly and we are working on how we replace them, but I am very clear that we need a watchdog with teeth to ensure that this project does not end up leading to a big hike for passengers.
The airlines were universally critical of the lack of focus on costs and airport charges in the NPS and were firmly of the view that this was an issue to be dealt with ahead of an NPS being designated. They believed that HAL had to be better incentivised, and a cap on airport charges would be an appropriate tool to incentivise HAL to focus more on costs and efficiency in scheme delivery. Andrew Haines believed that a strict cap on airport charges was not the right approach and may not be in the best interests of the consumer.
Willie Walsh also wanted a milestone incorporated in the planning process for a final decision to made as to whether HAL can “demonstrate that they can deliver what they have promised within the costs that have been identified, so that passenger charges do not go up.” He added that “if they cannot do that, or if that demand is not acceptable to them, maybe you should look at alternative proposals.”
The other scheme proponents believe that the ambitions to keep charges at current levels was unrealistic. Heathrow Hub assert that “the NWR scheme is fundamentally incompatible with the Government’s requirement that user charges remain at current levels.” They believe their scheme can be delivered “with little or no impact on passenger fees.” Gatwick also believe it is impossible to finance “the project with airport charges held flat.” Gatwick have made a commitment they are willing to cap the airport charges that can be charged with expansion; though Commission estimates assume the weighted average passenger charge will increase from £9 to £16.
348 There will be other cost considerations post expansion related to core capex, asset replacement and operating expenditure.
349 It should be noted that all of capital cost estimates in support of the NPS still rely on the Airports Commission work. As such, the analysis in this section of the report relies upon that used by the Airports Commission as presented in the .
350 The Commission’s forecasts include 15% for OB.
351 Airports Commission, , July 2015, p 104
352 Airports Commission, , July 2015, p 106
353 Airports Commission, , p 109
354 Airports Commission, , p 107
357 This is based upon the reduced scope scheme discussed in the Operational Efficiency: Phasing and Facilities Review report
358 Jacobs, Leigh Fisher, Cost and commercial viability: reduced scope scenario costs, June 2015
359 Department for Transport, , October 2017
361 The Commission’s estimate of £17.6bn total capex, which relies on Jacob’s2015 cost estimate, includes only £0.27bn for “residential property purchase,” £0.48bn for “environmental compensation and mitigation” and £0.35bn for “community impacts
362 Heathrow Hub Ltd ()
363 Heathrow Hub Ltd ()
364 LACC ()
365 Q578; Q581
367 Q7; Q26
368 Q104, Q578
369 Airports Commission, , July 2015, p 109
370 This includes a profile of scheme capex, coupled with the airport’s core capex, asset replacement, opex RAB depreciation and non-aero revenues
371 Details of the approach used to assess this are found in the PwC, , July 2015
372 PwC, , July 2015
373 Airports Commission, , July 2015, p 113
375 Heathrow has expressed its desire to reduce costs by £2.5 billion, this would come off the financing costs. But it has also acknowledged that it has set aside £2 billion for surface access contributions. These will broadly balance out in these figures. There are also uncertainties as to how much Heathrow will eventually have to pay out in noise insulation compensation, this is linked to the flight-paths and the subsequent noise footprint, which at this stage is unknown
376 Airports Commission, , July 2015, p 117
377 Airports Commission, , July 2015, p 112
378 Airports Commission, , July 2015, p 116
379 Q579, Q607
380 Airports Commission, , July 2015, p 112
381 Airports Commission, , July 2015, p 114–15
382 PwC Economics, , November 2017
383 PwC Economics, , November 2017
386 PwC 2015; PwC 2017
387 Heathrow Airport Holdings Limited, , year ended 31 December 2016
388 Heathrow Airport Holdings Limited, , year ended 31 December 2016
391 Heathrow Airport Holdings Limited, , year ended 31 December 2016
392 CAA, , accessed 12 February 2018
393 The sixth quinquennial review (Q6) started on 1 April 2014 for Heathrow will run until 31 December 2018.
394 Airport operators typically recover their allowable revenues through three types of airport fees and traffic charges: passenger fees, based on the number of passengers on board departing aircraft; landing charges, calculated in accordance with the take off weight of the aircraft and adjusted, where applicable, in accordance with each aircraft’s noise-rating and emissions, and the time of day; and aircraft parking charges, based on the duration of the ground stay and aircraft weight.
395 The RAB is essentially the asset base of the airport, with a depreciation allowance.
396 Heathrow Airport, , accessed 12 February 2018
397 Defined as revenue per passenger.
398 CAA, , Strategic themes for the review of Heathrow Airport Limited’s charges (“H7”), March 2016
399 Heathrow Airport, , 4 August 2017
400 Heathrow Airport Ltd ()
401 Heathrow Airport Holdings Limited, , 31 December 2017
402 For more information, see: CAA, , accessed 12 February 2017
403 , Strategic themes for the review of Heathrow Airport Limited’s charges (“H7”), March 2016, p 24; For background, see: IATA,
411 These revenues for the airport are charges raised against airlines operating at the airport (landing charges), but also could feed through to the costs incurred by passengers when paying for a flight (passenger charges).
412 Airports Commission, , July 2015, p 112
413 Heathrow Airport Limited ()
418 Q579, Q581, Q585, Q593, Q613
421 Heathrow Hub Submission to the DfT Consultation, p 2
422 Heathrow Hub ()
423 Submission by to the Department for Transport’s draft Airports National Policy Statement Consultation, p 5
Published: 23 March 2018