Fri, Nov 21, 2014
Ian Hannam Backs Heathrow Hub
U.K. financier Ian Hannam, one of the backers of Heathrow Hub, has said that Gatwick would find it much more difficult to fund expansion than either of the proposals for expansion at Heathrow.
Mr Hannam's comments come after the EasyJet CEO Carolyn McCall indicated that a potential 150% increase in passenger charges at Gatwick in order to fund expansion could wipe out low-cost airlines' profits margins and undermine Gatwick's low-cost business model.
"Carolyn McCall's intervention in this debate is a very powerful one," Hannam said. "The business case for expansion at Gatwick is clearly weaker. Unlike the other proposals, Heathrow Hub has already had to raise money to back its concept. It would be the easiest to finance from private sector resources, without making any call on the taxpayer. This is on top of Heathrow Hub's other advantages, such as enabling arrivals to land on the Western extension during the critical early morning period."
He said expansion at Heathrow is obviously much lower risk because the airport has pent up demand from a huge number of airlines, a much bigger asset base and bigger revenues. "Furthermore, Gatwick is a significantly smaller airport and relatively speaking would have to issue much more debt and equity. The proposed expansion at Gatwick would mean that it could no longer function effectively as a low cost airport."
The Airport Commission's consultation documents show that financing Gatwick's proposal could increase its air passenger charge by 150%. Heathrow Hub's proposal would increase the air passenger charge at Heathrow from by 50%, and Heathrow Airport Ltd's proposal would increase the air passenger charge by 60%, according to Hannam.
"The Airports Commission is also right to draw attention in its consultation documents to the risk to Gatwick's demand forecasts that such a large increases in passenger charges would bring," Hannam said. 'As the Commission makes clear, this in turn increases investment risk and therefore cost of capital. Whichever way you look at it, I believe the best option for UK plc is expansion at Heathrow by extending the existing runway as Heathrow Hub proposes."
(Image provided by Heathrow Hub)
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