Update 1 – New London runways to cost billions more than bids suggest

The new Gatwick and Heathrow runways would cost £3bn to £4bn more than the bids suggest, says the Airports Commission, which works with the Department of Transport and examines the need for additional airport capacity in the UK.

According to a new report, issued by the Airports Commission on Tuesday, a second runway at Gatwick airport would cost £2 billion more that the bid estimate.

The commission says that a new runway at Heathrow would cost approximately £18.6 billion, which is a much higher figure than the £14.8 billion estimate put forward by LHR Airports Ltd.

Gatwick Airport Ltd. estimates a new runway at Gatwick would cost £7.4 billion, compared to the commission’s £9.3 billion.

The Department of Transport has tasked the commission with deciding where a new runway should be built to meet rapidly growing capacity demand in London and the rest of the South East of England.

Gatwick new runway

Gatwick Airport Ltd. says its proposal is the best one (Photo: Gatwick Airport Ltd.)

The Commission says one new runway with the capacity to handle about 200,000 aircraft movements annually will be needed to maintain the country’s connectivity and hub status.

The options being considered are: 1. A third Heathrow runway. 2. A second Gatwick runway. 3. Extending one of Heathrow’s existing runways.

Other options have been ruled out, including building a new airport either in the Thames Estuary or near Oxford.

Even the estimate by the bidders for the third option (extending a Heathrow runway) was way below the commission’s calculations – £10.1 billion versus £13.5 billion.

Airport cost increases, based on the cost per passenger, would also be higher than the bidders’ estimates, the commission added.

The commission has published its latest assessment of the three schemes, which now goes for public consultation.

Heathrow new runway

LHR Airports Ltd. says its proposal is the best option. (Photo: LHR Airports Ltd.)

Sir Howard Davies, commission chairman, said he and his team will make their conclusive recommendation on which scheme should go ahead in the final report, which will be ready in summer 2015.

In a BBC Breakfast program on Tuesday, Sir Howard said:

“On the costs, we are cautious people and we have applied a margin for luck if you like, in that the experience of large infrastructure projects tells us that there is always a degree of optimism bias in the plans put for forward by the proposers.”

“Now that may not always be their fault, it’s just that you come across obstacles you didn’t expect to find once you start to construct a big project. So part of the difference, it’s not that we are fundamentally disagreeing with the way that they have put together their budgets, but we just think the reality is that they are likely to become rather more expensive.”

Chief Executive of the British Air Transport Association, Nathan Stower, said regarding the commission’s latest appraisal:

“The Airports Commission’s final recommendation must be cost effective, offer value for money, and not rely on today’s passengers paying for infrastructure that won’t be ready until at least the mid-2020s.”

“UK airlines will study the appraisal of each option in detail to judge whether the plan is supported by a robust business case with realistic forecasts and a credible funding mechanism. I hope our politicians will wait for the results of this consultation and the Commission’s final report so that political decisions can be taken with the fullest evidence.”