Heathrow Airport Looks to Spend $4.7 Billion in 5 Years to 2019

Heathrow Airport Ltd. plans to spend 3 billion pounds ($4.7 billion) in the five years to 2019 to complete its new Terminal 2 facility, add taxiways and retool the baggage system at Europe’s busiest airport.

The investment will bring the total amount spent on the hub since 2003 to 14 billion pounds and drive a 41 percent increase in the average charge per passenger over the next five years to 27.30 pounds in 2019, the London-based company said.

Almost four in five long-haul flights out of the U.K. start at London Heathrow and continued investment is essential to ensure the airport remains ahead of its European and Gulf rivals, Chief Executive Officer Colin Matthews told reporters. Growth rates at major airports like Heathrow, Paris’s Charles de Gaulle and Frankfurt Airport slowed last year amid the European debt crisis and as Persian Gulf rivals grabbed a growing share of inter-continental transfer traffic.

“We need to make sure London retains its place because Paris, Amsterdam and Frankfurt are very keen to do the job for us; Amsterdam advertise themselves as the U.K.’s hub,” Matthews said. “Ultimately it has to be competitive.”

The investment plans will cover the completion of Terminal 2, due to open in 2014, and the early stages of an extension, Heathrow said. Other improvements over the next five years include the roll-out of self-service bag drops, additional automated check-in kiosks and a new baggage system to reduce the number of lost bags.

Too Steep

Airlines including British Airways and Virgin Atlantic Airways Ltd. say the proposed charges are too steep and called on the U.K.’s Civil Aviation Authority to scrutinize the plan. The CAA sets the maximum amount Heathrow is allowed to charge airlines and must approve the plan before it goes into effect in April 2014.

“Other businesses, in private and public sectors and especially airlines, are making savings and delivering on less money,” Virgin Chief Operating Officer Steve Griffiths said in a statement. “Airports should not be exempt.”

Rapid-exit taxiways and new stands will improve punctuality and help attract airlines flying the new Airbus A380, the airport operator said. Heathrow introduced penalties in 2011 to encourage airlines to use quieter planes like the superjumbo.

“We believe Heathrow Airport can make significant savings to its inefficient cost base while still investing 3 billion pounds in improving the overall customer experience,” British Airways said in an e-mailed statement.

The number of passengers flying through Heathrow is expected to climb to 72.6 million by 2019, up from 69.9 million people last year. The airport is operating close to the capacity of its two runways at 480,000 flights annually.

To contact the reporter on this story: Kari Lundgren in London at klundgren2@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net

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