Heathrow says rise in passengers backs case for new runway

* Heathrow airport passenger numbers up 3.4 pct in 2013

* Airport passengers reach record numbers of 72.3 million

* Aircraft using Heathrow are bigger and fuller

* CEO says more capacity at Heathrow would boost UK GDP

* Heathrow's core earnings jump 23 pct to 1.4 bln stg

By Sarah Young

LONDON, Feb 24 (Reuters) - Britain's biggest airport, Heathrow, served 3.4 percent more passengers last year, an increase the airport said bolstered its case for a new runway.

Heathrow, situated west of London, is at the centre of a long-running political tussle over airport expansion in the south-east of England. It was shortlisted last year as a location for a new runway.

The chief executive of Heathrow Ltd., Colin Matthews, said on Monday that the airport was serving more passengers from countries in Asia and Latin America.

"We would have more flights to those countries if we had more capacity," he said in an interview. "With more capacity, we would make a bigger contribution to UK GDP."

Passenger traffic at Heathrow, the third busiest airport in the world, reached a record 72.3 million in 2013, up from 70 million the year before. Aircraft using the airport were larger and fuller than they were in previous years, Heathrow Ltd. said.

The airport is operating close to capacity. Around 470,000 flights departed and landed in 2013, meaning the airport is operating at 98 percent of the 480,000 flight capacity permitted.

Lawmakers and business leaders agree that south-east England needs new runways to help the country remain economically competitive. But building more capacity in the densely populated area is unpopular with voters, and a decision on expansion has been repeatedly pushed back.

That decision may now come in the second half of next year, when the Airports Commission is due to issue its final recommendations on where a new runway should be built.

Matthews was positive on the work of the Commission.

"I think it's the best chance, we, speaking as a country, have got of coming to what is inevitably a difficult decision," he said, adding that he believed the economic case for expanding Britain's airport capacity was clearer and better understood than in the past.

EARNINGS GROWTH

Heathrow Limited, owned by unlisted Heathrow Airport Holdings (HAH), reported earnings before interest, taxes, depreciation and amortisation of 1.42 billion pounds in 2013, 23.1 percent higher than in the year before.

The airport's higher passenger numbers combined with a rise of 15.1 percent in the average aeronautical income per passenger received by Heathrow helped lift earnings.

Earlier this year, Britain's airport regulator put a cap on what Heathrow can charge airlines, leading the company to warn it might struggle to expand its business.

Matthews said Heathrow would decide whether to launch an appeal against that price cap at some point in March.

While the price cap would not directly affect the case for funding any new runway at Heathrow because of differing timelines, Matthews said it was damaging for sentiment.

"If regulators make decisions that mean the returns are too low, then investors will put their investment into other countries rather than here," he said.

Parent company HAH is co-owned by Spanish infrastructure firm Ferrovial (Madrid: FER.MC - news) , its largest shareholder with a 25 percent share. Partners (Other OTC: PGPHF - news) include Qatar Holding, China Investment Corp. and the Government of Singapore Investment Corp.

HAH also owns and runs three other British airports, at Aberdeen, Glasgow and Southampton.