Heathrow rival could lead expansion, watchdog says

Heathrow Airport could be forced to allow rival firms to bid to build its third runway and new terminal, under proposals by the aviation watchdog aimed at keeping a cap on construction costs. It is one of several regulatory changes being considered by the Civil Aviation Authority (CAA) if Heathrow expands, to "better serve the interests of consumers". It follows concerns that Heathrow's £33bn development plan could push up costs for airlines, businesses and consumers.

Heathrow Airport Limited (HAL) said it welcomed reforms that improved efficiency but warned against policies that could "undermine" its plans or delay economic growth. Businesses have been calling for a review of the regulations, claiming the current model makes Heathrow the most expensive airport in the world. They include tighter control over its spending and competitive tendering elements of the expansion. Another proposal would allow an alternative developer to compete to design, finance, build and operate a new terminal. Under this scenario, the CAA says, the developer could "directly provide services to airlines and recover its revenues from them, in direct competition with Heathrow Airport Limited". Heathrow proposed a new 2.2-mile (3.5km) runway, which would require a new road tunnel under the airport and moving a section of the M25. Arora's alternative plan was for a shorter runway at a lower cost, and did not require altering the M25. The CAA will now consult on its shortlist of potential changes. The government hopes for a planning decision on Heathrow expansion by 2029. HAL's scheme would see the airport's capacity increase to 756,000 flights and 150 million passengers a year. Surinder Arora, chairman at Arora Group, welcomed the consultation. "Two years ago competition at Heathrow wasn't on the cards and now is very much alive and kicking because the case for change is so strong," Arora said.

Key points

• Heathrow Airport Limited (HAL) said it welcomed reforms that improved efficiency but warned against policies that could "undermine" its plans or delay economic growth.
• Businesses have been calling for a review of the regulations, claiming the current model makes Heathrow the most expensive airport in the world.
• They include tighter control over its spending and competitive tendering elements of the expansion.
• Another proposal would allow an alternative developer to compete to design, finance, build and operate a new terminal.
• Under this scenario, the CAA says, the developer could "directly provide services to airlines and recover its revenues from them, in direct competition with Heathrow Airport Limited".