‘Substantial’ subsidies needed for new runway, claims report

‘Substantial’ subsidies needed for new runway, claims report

Building another runway in the southeast will require “substantial” taxpayer subsidies regardless of the location, according to an independent analysis.

A third runway at Heathrow would potentially require £11.5 billion of government support, while expansion of Gatwick may need as much as £17.7 billion of taxpayer contributions, claims a report by KPMG for the Airports Commission.

The research was drawn up for the commission before it shortlisted two designs for expansion at Heathrow and a second runway at Gatwick last month.

A new hub airport in the Thames Estuary – a scheme backed by London mayor Boris Johnson – will undergo further investigation by the commission before it decides in the autumn whether it should be added to the shortlist.

According to KPMG’s commercial and financial assessment, a new hub airport on the Isle of Grain in the inner Thames Estuary would demand £64.7 billion of government support.

The report appears to contradict claims by airport operators that an extra runway could be financed either exclusively or predominantly by the private sector, the Telegraph reported.

Gatwick has said it could deliver a second runway for £5 billion to £9 billion with no government aid.

Heathrow has raised the prospect of £4 billion to £6 billion of taxpayer support to improve rail and road links, but has argued that a third runway, at a cost of £17 billion, would be largely funded by the private sector.

The KPMG analysis also highlights the potential burden on passengers of runway expansion.

Landing charges would have to rise by 136% at Gatwick to repay debt raised to fund a second runway, the report claims.

Charges at Gatwick would then need to increase by 2.5pc above inflation every year from 2019.

In order to fund a third runway at Heathrow, to the northwest of the airport’s current site, landing charges would go up by 13% initially, followed by annual increases of 2.5% above inflation, the research shows.

KPMG experts did not assess the Heathrow Hub scheme, which involves lengthening one of the airport’s existing runways and effectively splitting it in two.

“The scale of the proposed schemes and of the financing challenge associated with each points to the criticality of government support,” the report says.

“Government support could take various forms. For example … this could comprise government subsidy of scheme costs. The scale of this subsidy requirement varies by scheme but is in all cases substantial.”

A spokesman for Gatwick said the airport “doesn’t recognise the KPMG figures” and believes it is not a “like-for-like comparison between Gatwick and Heathrow”.

A Heathrow spokesman said: “We’ve always known that expanding Heathrow would be cheaper than building a new hub airport, but this evidence shows that both taxpayers and individual passengers would pay less for a new runway at Heathrow than at Gatwick.

“Passenger charges would rise by less with Heathrow expansion, and the taxpayer support required is less than that needed for Gatwick.”

Daniel Moylan, the Mayor’s chief aviation adviser, said he did not accept the capital expenditure figures KPMG used “nor how they have been modelled”.

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