Heathrow Airport Ltd’s new 3rd runway “now costly and difficult” to finance, says financier Ian Hannam

Mr Hannam is a financial backer of the Heathrow Hub extended runway concept, an independent and cheaper alternative to the 3rd runway. He said: “Mr Walsh’s intervention is significant; IAG is Heathrow’s biggest customer and would effectively pay more than half the construction costs of Heathrow expansion via increased air passenger charges.

“Heathrow Airport Ltd shareholders would be required to support the raising of substantial equity and debt to meet the overall £15.7bn cost of the 3rd runway. This is much larger than normal capital market activity. The payback period for them will be lengthy and the likelihood is that they would not receive dividends for many years while construction takes place and then new routes are added.

“The Heathrow hub proposal is simpler, with phase 1 costing only £3.7bn. This could easily be financed in the bond or bank markets off Heathrow Airport’s current and forecast cashflows with only limited new equity.

“The Treasury should also be concerned that the cost, political risk and complexity of Heathrow Airport Ltd’s 3rd runway means the private sector will struggle to finance it, especially the equity component.

“I worked with Eurotunnel – a project of equivalent scale - for more than 10 years and my experience is the 3rd runway will require Government support directly or indirectly in addition to significant increases in passenger fees which would be paid by airlines and, ultimately, consumers. The last thing George Osborne and David Cameron and UK taxpayers want on their hands is another costly infrastructure project which the private sector is unwilling to finance without assistance. I urge them to listen to Mr Walsh’s wise words.”