July 2, 2015 / 2:11 AM / 5 years ago

Britain to decide on new Heathrow runway by end of year

LONDON (Reuters) - Britain will make a final decision on a 23 billion pound ($36 billion) plan for a third runway at Heathrow Airport by the end of the year, Prime Minister David Cameron said on Wednesday, setting the stage for a political battle over the issue.

Few disagree that London needs a new runway to remain economically competitive, but its location has been disputed for over 25 years and the proposal to expand Britain’s busiest airport has stoked tensions in the ruling Conservative party.

Cameron set the deadline after a government-appointed commission selected Heathrow, in densely populated west London, as the preferred location for expansion, following a three-year study.

“A decision will be made before the end of the year,” Cameron, who in 2009 promised not to approve a new runway at Heathrow, told parliament.

“It is important, now that there is a very detailed report, that we study and are very clear about the legal position. If we say anything now before studying the report, we will endanger whatever decision is made.”

Before he won power in 2010, Cameron had said that Heathrow — whose flight paths cross the affluent constituencies of some Conservative lawmakers — would not get a third runway under his watch, “no ifs, no buts”.

The commission’s recommendation was accompanied by measures to limit the noise and environmental impact of a new runway.

A previous expansion plan for Heathrow was scrapped in 2010. The new proposal was described by the Airports Commission as “fundamentally different”, citing accompanying conditions to ban night flights and introduce a noise levy.

The Heathrow runway plan beat two other shortlisted options, another at Heathrow and one at the country’s second largest airport Gatwick. It offered the best way to add “urgently required” long-haul routes to new markets and would provide the most benefits to the wider economy, the commission said.

LONDON MAYOR SAYS ‘UNDELIVERABLE’

A number of high-profile Conservative politicians, including Mayor of London Boris Johnson, have long opposed an additional runway at Heathrow.

Launching an impassioned attack on the Heathrow proposal, Johnson, a potential successor to Cameron, said it would face legal challenges.

An aircraft takes off from Heathrow airport in London, Britain July 1, 2015. REUTERS/Peter Nicholls

“This highly predictable report offers a short-termist recommendation that would be judicially reviewed from here to Kingdom come and is completely politically undeliverable,” he said.

Johnson favours an alternative plan to build an entirely new airport in the Thames Estuary east of London, by far the most populous city in the European Union.

But businesses and airlines largely favour the expansion of Heathrow, which is operating at 98 percent capacity.

Britain, whose aviation sector represents 2.1 percent of its economy, is losing ground to rival airports.

The fast-growing Dubai hub overtook Heathrow last year as the world’s busiest airport for international passenger traffic, while in Europe, Heathrow’s two runways compare to the four at Charles de Gaulle in Paris and six at Amsterdam’s Schiphol.

OPEN FOR BUSINESS?

Commission chairman Howard Davies urged the government to act to protect Britain’s reputation as an open economy.

“As we’ve gone around the world we’ve found that it’s become a rather symbolic point,” he told the BBC. “Is London prepared to make the decisions it needs to become a global city?”

The report estimated that the new runway would cost 17.6 billion pounds ($27.5 billion) plus 5 billion in additional access costs.

The new runway could add 260,000 flights a year to Heathrow, compared to the 470,000 movements currently and against the 425,000 flights in and out of Schiphol annually.

Heathrow has said that between its shareholders and the credit markets, it will be able to fund the new runway but it would expect the government to help with road improvement costs.

A third runway would add more than 1 billion pounds in incremental revenue a year, according to a Heathrow spokesman. The commission estimates the new runway could be built by 2026.

Slideshow (8 Images)

Heathrow’s largest shareholder is Spanish infrastructure firm Ferrovial (FER.MC). Other partners include Qatar Holding, China Investment Corp and the Government of Singapore Investment Corp.

Gatwick, south of London, which is run by investment group Global Infrastructure Partners and whose other shareholders include Abu Dhabi Investment Authority, National Pension Service of Korea, California Public Employees’ Retirement System and the Future Fund of Australia, believed it was still in the race.

“We are confident that when the government makes that decision they will choose Gatwick as the only deliverable option,” Gatwick CEO Stewart Wingate said. ($1 = 0.6392 pounds)

Additional reporting by Estelle Shirbon, William James and Sudip Kar-Gupta; Editing by David Goodman, Keith Weir and Guy Faulconbridge

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