BA Owner Seeks To Land Heathrow Hub Scheme

The boss of Heathrow Airport's biggest customer has issued a fresh warning about the cost of a new third runway and told ministers that a rival scheme should become the preferred option to resolve Britain's aviation logjam.

Sky News has learnt that Willie Walsh, chief executive of British Airways' owner, International Airlines Group (IAG), has in recent weeks written to the Department for Transport (DfT) to argue that Heathrow Hub - a scheme to extend the airport's northern runway - should be given serious consideration.

IAG, which has long been opposed to the estimated £23bn total cost of a third runway , is understood to have expressed its views in "forthright" language, according to a Whitehall insider.

Mr Walsh's latest intervention has emerged as the founder of Heathrow Hub - former Concorde pilot Jock Lowe - is seeking urgent talks with George Osborne to discuss the details of his proposal amid signs that it could be gaining renewed momentum.

In a letter from Mr Lowe to the Chancellor, which has been obtained by Sky News, the promoter of the extended runway plan warns that a new third runway proposed by Heathrow Airport Holdings "could require a Government guarantee from HM Treasury".

A section of Mr Lowe's correspondence headed 'IAG, cost and phasing' refers to "a letter sent by IAG to Patrick McLoughlin [the Transport Secretary] on this subject" and argues that the entire Heathrow Hub project can be constructed for £9.7bn.

"The Airports Commission omitted to consider the cost of expansion on the [Regulated Asset Base] regime, on airlines and the consumer," Mr Lowe wrote.

"The emerging view of airlines and of the City is that: the third runway is prohibitively expensive; it cannot be phased; that Heathrow Airport would struggle to raise the £4.2bn-£8.4bn equity component; and in extremis it could require a Government guarantee from HM Treasury."

Gatwick, London's second-biggest airport, is also seeking the Government's go-ahead to build a new runway, and remains under consideration despite not being recommended last year by the Airports Commission chaired by Sir Howard Davies.

The owners of Gatwick argue that it would be far more cost-effective and deliver additional capacity more quickly than a new third runway at Heathrow.

Sources said that depending upon the outcome of this week's EU referendum, David Cameron may make an announcement about the location of new runway capacity in the south-east of England as soon as next month.

It (Other OTC: ITGL - news) is expected to be the centrepiece of a post-poll policy blitz from the Prime Minister, with the intention of work beginning on a new runway before the 2020 General Election.

Repeated delays to a decision to recommend and implement a scheme to increase capacity have infuriated business leaders who believe that billions of pounds of economic activity are being squandered by the continuing procrastination.

In his letter to the Chancellor, which was also copied to Tom Scholar, the Treasury's new permanent secretary, Mr Lowe said that Heathrow Hub would be "at least £6bn cheaper than Heathrow Airport Ltd's third runway" and that "uniquely, it can be built in three distinct phases".

Mr Lowe added that his proposal was also superior from the perspectives of safety, noise respite and the need to abolish hundreds fewer homes.

He also insisted that Heathrow Hub's scheme would "produce the same capacity of 740,000 [Air Traffic Movements] as (the third runway)", saying that the Airports Commission "assessed our capacity incorrectly at a lower level".

Spokesmen for IAG, the DfT, Heathrow Airport and Heathrow Hub declined to comment on the latest developments on Monday.