HEATHROW
From Heathrow's 2014 accounts they got revenue of £2.7bn, made up of £1.7bn from air operations, £0.5bn from retail, and £0.5bn from others (car parks etc).
Their actual operating expenses were £1.6bn, made up of £1.1 operating costs and £0.5bn of depreciation of past investment.
With 73 million passengers, each therefore contributes on average £37 to revenue, made up of £24 air ops, £7 retail (one coffee plus doughnut at prevailing rates), £7 others.
That's a huge margin for a regulated monopoly. Quite why R3 has to cost £18bn is an absolute mystery to the construction industry, but is a handy figure to justify jacking up charges in advance. Manchester opened full length runway 2 in 2001 at a cost of £172m, and although 15 years have passed and the Heathrow scheme is more than just a runway, a cost which is more than 100 TIMES as much as Manchester paid is just ludicrous, given that much of the land purchase has been steadily made over the years, including whatever houses in Harmondsworth etc come onto the market (they are then rented out short term), and thus are already in the sunk costs.
Their actual operating expenses were £1.6bn, made up of £1.1 operating costs and £0.5bn of depreciation of past investment.
With 73 million passengers, each therefore contributes on average £37 to revenue, made up of £24 air ops, £7 retail (one coffee plus doughnut at prevailing rates), £7 others.
That's a huge margin for a regulated monopoly. Quite why R3 has to cost £18bn is an absolute mystery to the construction industry, but is a handy figure to justify jacking up charges in advance. Manchester opened full length runway 2 in 2001 at a cost of £172m, and although 15 years have passed and the Heathrow scheme is more than just a runway, a cost which is more than 100 TIMES as much as Manchester paid is just ludicrous, given that much of the land purchase has been steadily made over the years, including whatever houses in Harmondsworth etc come onto the market (they are then rented out short term), and thus are already in the sunk costs.
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Are Heathrow charges still calculated as a rate of return on the cost of assets employed?
It used to be that their charges for the directly aviation related services were regulated and limited to a set rate of return. So if they spent megabucks their rate of return was based on that spend. There was thus an incentive to spend as much as possible on infrastructure and this might explain the disproportionate proposed costs of R3 vs MAN R2.
It used to be that their charges for the directly aviation related services were regulated and limited to a set rate of return. So if they spent megabucks their rate of return was based on that spend. There was thus an incentive to spend as much as possible on infrastructure and this might explain the disproportionate proposed costs of R3 vs MAN R2.
You give out contracts for say road works to the "lowest bidder", that is for the one who quotes the lowest rates for the various activities. You even ask them to report their costs. But they in turn have the opposite incentive, to eat up as much cost as possible. If they are going to be allowed 10% on top of costs, 10% on a large amount is better for them than 10% on a small amount.
Heathrow, being a regulated monopoly, owned by Ferrovial, can of course give out construction work "at cost" if they wish, to construction contractor Amey, owned by Ferrovial, who would be delighted to build a little runway for £18bn, especially as three of Heathrow's directors are ex-Amey.
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Yes, you have hit the nail on the head.
Several years ago the CAA (Heathrow's regulator) looked at alternatives to the cost-plus approach to regulation. However, the airlines (led by BA) were vehemently opposed to a change. This short sighted approach has regrettably led to the current situation.
Things are unlikely to change now, as the chap now in charge of CAA regulation is regarded as a died in the wool regulator, not open to new ideas. And now that the grossly inflated costs of T5 and T2 are in the regulated asset base it is difficult to turn back the clock.
Several years ago the CAA (Heathrow's regulator) looked at alternatives to the cost-plus approach to regulation. However, the airlines (led by BA) were vehemently opposed to a change. This short sighted approach has regrettably led to the current situation.
Things are unlikely to change now, as the chap now in charge of CAA regulation is regarded as a died in the wool regulator, not open to new ideas. And now that the grossly inflated costs of T5 and T2 are in the regulated asset base it is difficult to turn back the clock.
On the £1.1bn profit made by LHR last year - a number of volunteers (I believe) are still being utilised by the airport to assist passengers on their journey through the airport. Although a small number were recruited prior to the Olympics, the opportunities that they gave to those people continued for some after this event. Does it not seem a bit crude that a company making such a huge profit margin, they still fail to pay anything for these people?
Just watching the Sky News debate now. In my opinion it has to be Heathrow RWY 3. AMS, DXB, FRA and even bloody CDG have been gutting LHR, and therefore the whole UK economy for years. I and several people I know actively avoid LHR because of the fragility of the schedule due to it being at capacity all day every day, when it used to be our default long haul transfer hub. Gatwick RWY #2 will not solve this problem. You'll get far more marginal routes to South America/China etc in LHR than you would in LGW.
The idea of extending the north runway to 6,000m and making it 2 runways works.,...assuming there's never a go around there again. Madness
I'm not a U.K. Tax payer, so it all depends on whether you folks paying the bills are willing to pay more to get more. In my opinion the tax payer contribution will be repaid by direct taxation at LHR and increased economic activity hundreds of times over in the long run.
Give Heathrow the go ahead, BUT if Gatwick still want to privately fund their own runway too, absolutely let them, as 10 years after this runway being debated now is completed, another will be needed.
The idea of extending the north runway to 6,000m and making it 2 runways works.,...assuming there's never a go around there again. Madness
I'm not a U.K. Tax payer, so it all depends on whether you folks paying the bills are willing to pay more to get more. In my opinion the tax payer contribution will be repaid by direct taxation at LHR and increased economic activity hundreds of times over in the long run.
Give Heathrow the go ahead, BUT if Gatwick still want to privately fund their own runway too, absolutely let them, as 10 years after this runway being debated now is completed, another will be needed.
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Fear not, Lord Blackadder has solved the conundrum. Looks like everyone was looking in the wrong place....
@LrdBlackAdder
#HeathrowVsGatwick 3rd runway s/b at Manchester, best domestic connections, best road rails, central location ...
#HeathrowVsGatwick 3rd runway s/b at Manchester, best domestic connections, best road rails, central location ...
Paxing All Over The World
I am repeating myself:
- I agree that we need R3 more than 20 years ago.
- If R3 is built, it will make no substantial change to the situation.
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Just watching the Sky News debate now. In my opinion it has to be Heathrow RWY 3. AMS, DXB, FRA and even bloody CDG have been gutting LHR, and therefore the whole UK economy for years. I and several people I know actively avoid LHR because of the fragility of the schedule due to it being at capacity all day every day, when it used to be our default long haul transfer hub.
It really is so obvious. Don’t know why Davis came up with a shortlist of three when only one is necessary. Perhaps it’s because of ludicrous fixed term parliaments nonsense and the consequent delayed election that Davis has to buy time before the final report.
This will almost certainly be kicked into the long grass (more taxpayers' money wasted).
Gatwick RWY #2 will not solve this problem. You'll get far more marginal routes to South America/China etc in LHR than you would in LGW.
The idea of extending the north runway to 6,000m and making it 2 runways works.,...assuming there's never a go around there again. Madness
Give Heathrow the go ahead, BUT if Gatwick still want to privately fund their own runway too, absolutely let them, as 10 years after this runway being debated now is completed, another will be needed.
I am repeating myself:
1. I agree that we need R3 more than 20 years ago.
2. If R3 is built, it will make no substantial change to the situation.
That is because only a small amount of the hub pax will return. Folks in the regions have got used to going to the usual suspects or the new suspects (M.E.) and have their FFMs etc. We are, as so often, 25 years to late to catch the horse.
1. I agree that we need R3 more than 20 years ago.
2. If R3 is built, it will make no substantial change to the situation.
That is because only a small amount of the hub pax will return. Folks in the regions have got used to going to the usual suspects or the new suspects (M.E.) and have their FFMs etc. We are, as so often, 25 years to late to catch the horse.
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Missed the debate unfortunately, was it good?
Very poor fair, I had not heard of Ian King and to be honest I now know why.
Come back Paxman all is forgiven, even "Philomena Cunk" would be more forensic.
It was trailed as a Q and A but save for 3 questions from "TWITland" it was really just a forum for the respective parties to restate their case.
No questioning of the LGW CEO about quite how they actually turn LGW into hub when it's clear there is little demand from the carriers who are part of the problem at LHR and see LGW as an irrelevance.
No questioning of the LHR CEO about the various issues re cost which is touted at a higher figure than The Channel Tunnel !
Very poor fair, I had not heard of Ian King and to be honest I now know why.
Come back Paxman all is forgiven, even "Philomena Cunk" would be more forensic.
It was trailed as a Q and A but save for 3 questions from "TWITland" it was really just a forum for the respective parties to restate their case.
No questioning of the LGW CEO about quite how they actually turn LGW into hub when it's clear there is little demand from the carriers who are part of the problem at LHR and see LGW as an irrelevance.
No questioning of the LHR CEO about the various issues re cost which is touted at a higher figure than The Channel Tunnel !
It wasn't great. The 2 CEO's just got to make a few classic PR speeches and neither were really challenged about their facts and figures, and neither really attacked the other on the more debatable details of their respective arguments.
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" AMS, DXB, FRA and even bloody CDG have been gutting LHR, and therefore the whole UK economy for years."
Really? We're doing WORSE than France???
There is absolutely no evidence that you need a single large airport to be successful - see Switzerland, the USA, Germany, China
Really? We're doing WORSE than France???
There is absolutely no evidence that you need a single large airport to be successful - see Switzerland, the USA, Germany, China
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There is absolutely no evidence that you need a single large airport to be successful
Ireland - DUB (restricts BFS)
Germany - FRA / MUC, OK that's two but FRA is waaaay ahead
France - CDG
Netherlands - AMS
Switzerland - ZRH (GVA still smarts at only one LX GVA-JFK)
Austria - VIE
Denmark - CPH
Sweden - ARN
Norway - OSL
Portugal - LIS
Dubai - DXB
Qatar - DOH
Abu Dhabi - DOH
ETC ETC
They all have one thing in common. Large airport, usually capital city, a country mile ahead of local competition with a based legacy network carrier or alliance member. I get the impression you have a personal beef clouding your judgement on a fairly obvious market truth.
Nothing about the ME3 is typical.....
