UK airports: Boris Island crash-lands

CC pic: Thedarkarches

CC pic: Thedarkarches

There’s been a lot of talk in the UK recently about the relative merits of expanding our biggest and busiest airport, London Heathrow, or building an entirely new one in the Thames Estuary as London Mayor Boris Johnson still wants.

Reading today’s decision by the Airports Commission to drop the latter option, it seems clear to me that even if the so-called ‘Boris Island’ option of a new airport had many merits and none of the flaws the commission mentions, it still wouldn’t happen. Why? Because, as I noted over a year ago, it’s very very expensive. Not only does the commission’s report underline that, it also trashes the integrity of the Boris camp’s claims over the past few years – and this very day.

Claim 1: The airport could be paid for by the private sector. As late as December 2013, Boris was saying that a new airport “would be relatively easily financed by international investment”. His aviation adviser, Daniel Moylan, chimed in, telling Bloomberg News: “The airport is likely to be financed by the private sector”. This was already flatly contradicted by the mayor’s own submission to the airports commission, which said that government would need to finance if not actually fund the airport.

Today’s report from the commission estimates that the public sector would need to pay £67-88 billion upfront to make a new airport commercially viable, because it was simply too expensive to cover the cost from airport revenues. Whatever the actual figure turned out to be, it’s clear it would be very big; that much is not in question.

Claim 2: The cost to the public sector of building the airport could be recouped by selling it to the private sector. No, you haven’t missed anything: this does indeed contradict the previous claim that the private sector could pay the investment cost of building the airport in the first place. In January the Telegraph reported Daniel Moylan as saying: “Our work has shown that there are realistic outcomes for the Government to make all of the money it spent on constructing the new airport back – upon selling the facility to an operator.” This is wildly optimistic, as the Davies Commission has reminded us today.

As I blogged a mere 20 months ago, Boris’ team made a very generous assumption when they asserted that the government could make a £13 billion profit from the acquisition of Heathrow and construction of a new airport. Despite ministers making a £3-billion-plus loss from building the High Speed 1 railway and selling the rights to it a few years ago. The cost of new infrastructure is high in this country, and the cost of developing a mega airport in a place like London would not be recoverable simply from revenues, including disposal of Heathrow.

The commission’s assertion that government would make a loss of around £30-60 billion from selling the new airport and Heathrow looks much more realistic.

Claim 3: Other people’s estimates of the costs of a new airport are overstated.

In a palpably angry press release today Boris’ spokesperson says: “His team have been alarmed by wildly inaccurate claims being made in regard to the costs of the different schemes”. Okay, let’s take a few costs in turn.

Inner Thames Airport paper Cost to 2030 (excluding surface access but including cost of buying Heathrow) (£bn)
TfL on behalf of Mayor of London, July 2013 63
KPMG for Airports Commission, December 2013 53.7
EY for TfL/Mayor of London, May 2014 No figure but would be slightly higher than KPMG as gives higher cost for Heathrow acquisition
Airports Commission decision, August 2014 53.4-79

Hmm.

Maybe a new airport would be best for London – but I doubt it would be deliverable. In which case it’s time to stop throwing money at consultants and concentrate on what is deliverable.

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About René Lavanchy

You can contact me at rene dot lavanchy at googlemail dot com.
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