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Heathrow pitches alternative £3bn infra plan

23 Jul 13 Heathrow Airport is seeking permission to increase its charges to fund a £3bn improvement programme.

Heathrow has submitted an alternative business plan to the Civil Aviation Authority (CAA) for the Q6 regulatory period, 2014-19. It wants to increase the charges it imposes on airlines by less than a pound a year per ticket to make £3bn-worth of improvements. It would also make efficiency savings of £427m.

Heathrow is proposing a total increase in charges of £5.01 by 2019, meaning airport charges would make up 5% of the average ticket price.

Heathrow’s investment plans include the completion of Terminal 2: The Queen’s Terminal and the early works on extending the building; the development of a new integrated baggage system; and the construction of new taxiways and stands which will allow Heathrow to accommodate more of the most modern aircraft.

The investment proposed for Q6 is in addition to the £11bn that has been invested in the airport since 2003. That investment includes the construction of Terminal 5, the new Terminal 2 due to open in 2014, new baggage tunnels and the refurbishment of Terminals 3 & 4.

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Every five years the CAA scrutinises the airport’s capital expenditure plans, operating costs and commercial revenues to set the maximum amount the airport is permitted to charge airlines over the coming period. Its initial proposals in April set the increase in charges at a level that would have meant Heathrow would have to cut its planned investment from £3bn to £2bn.

However, Heathrow has re-examined its original case and reduced its proposed annual increase in passenger charges from RPI+5.9% to RPI+4.6%. This has been made possible by increasing operational savings from £248m to £427m and by proposing a lower rate of return for shareholders.

Chief executive Colin Matthews said: “Investors can choose to put their money anywhere in the global marketplace. The CAA’s current proposals will make it impossible to persuade them to put anything other than the bare minimum of capital into Heathrow. We know airlines want the improvements that we’re proposing and we have done everything possible to keep the cost of those improvements to an absolute minimum. The CAA has a duty to act in passengers’ interests – today we’re making clear that passengers want these improvements and are prepared to pay for them.”

The CAA will publish final proposals in October 2013 for consultation before coming to a decision in January 2014.

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