UK should demand cost pledge for new runway-airline bosses

By Sarah Young

LONDON, Feb 20 (Reuters) - British lawmakers should force Heathrow to promise not to raise passenger charges before they give the airport the green light to build a new runway, airline bosses said on Tuesday.

Transport Secretary Chris Grayling has said that the government aims to give the formal go-ahead to a new runway at Europe's busiest airport in the first half of 2018 subject to consultation work and securing the backing of parliament.

Heathrow has pledged to keep down costs but the bosses of British Airways owner IAG and Virgin Atlantic said that the government should demand a guarantee that the airport would not become more expensive as it gets bigger.

"They (Heathrow) should give the commitment that they've so far refused to give which is a guarantee that passenger charges will not increase," IAG CEO Willie Walsh told the Transport Committee of lawmakers.

Walsh warned that if building the new runway and associated terminals and new infrastructure gets too expensive, the expansion won't bring the extra flights that the government hopes will boost trade and the economy.

"You won't get additional flights if Heathrow becomes even more expensive," he said.

Virgin Atlantic Chief Executive Craig Kreeger said a guarantee would incentivise Heathrow to stick to its spending plan.

"They should bear the risk of their estimate being grossly off-target rather than where we find ourselves today, (which is) being quite concerned that we and our customers, or some combination thereof, would be left holding the bag for any overspending," he said.

Heathrow said in December it could shave 2.5 billion pounds ($3.50 billion) off the original bill, bringing it down to 14 billion pounds but has not given any guarantees over passenger charges.

A Heathrow spokeswoman said: "Our expansion cost projections are ... robust and we will continue to work to reduce the cost further. Last year we confirmed potential cost savings of up to 2.5 billion pounds which illustrates our ongoing focus and progress in this area. It is a shame this hasn’t been recognised by Mr Walsh in this instance."

British Airways is Heathrow Airport's biggest airline, accounting for more than 50 percent of the available take-off and landing slots and Walsh has long said that British Airways would look to expand elsewhere if Heathrow hikes its fees.

After decades of government indecision over airport expansion, Heathrow was named as a preferred site in 2016.

But as well as its cost being fretted over, the new runway plan has also provoked opposition from residents, environmentalists and local councils worried about the impact on air quality and noise levels in London.

Walsh has also said that costs could be kept down if the government opened up the airport to competition. Allowing other companies to be involved in designing, building and running facilities at Heathrow would make the airport more efficient he said.

Heathrow Airport Holdings is owned by Ferrovial (Amsterdam: FV6.AS - news) , Qatar Investment Authority and China Investment Corporation among other shareholders. ($1 = 0.7148 pounds) (Reporting by Sarah Young; Editing by Adrian Croft)