Feb. 19 (Bloomberg) -- London Heathrow airport is close to completing a 2.5 billion-pound ($4 billion) building project that seeks to boost service standards and repel the challenge of fast-growing rivals to a hub with little scope for more flights.
Heathrow aims to stop travelers switching to less crowded airports by creating a new terminal on the site of buildings dating from the 1950s, allowing it to bring carriers from Deutsche Lufthansa AG’s Star Alliance -- the world’s biggest airline grouping -- under a single roof for the first time.
Terminal 2 will mirror advances in Asia and the Middle East to offer a passenger experience superior to more modest projects at hubs such as Amsterdam and Frankfurt, according to Development Director John Holland-Kaye. With the construction phase winding down, retailers are beginning to fit out their premises before the building opens for flights next year.
“This will give us a big advantage relative to our hub competitors,” Holland-Kaye said in an interview. “We’ve bitten the bullet to completely change our airport in a way that they haven’t been able to. It’s going to be a massively better in the future, more like airports in the Far East, like Hong Kong.”
Terminal 2 will feature undulating ceilings to maximize height, a streamlined check-in zone with 56 self-service bag drops, and shorter walks to gates giving more time for shopping.
While other European airports have had bigger upgrades in the past decade, including the wholly new Terminal 4 at Madrid Barajas and Terminal 1 at Barcelona El Prat, Heathrow’s biggest rivals -- Paris Charles de Gaulle, Amsterdam Schiphol and Frankfurt -- have been limited to expanding existing buildings.
Though that’s allowed them to boost passenger numbers, Heathrow’s makeover has more in common with new-build projects beyond Europe, Holland-Kaye said. Hong Kong International was built on reclaimed land to a design from Norman Foster, who was also responsible for Beijing Capital airport and worked on early plans for Terminal 2 with lead architect Louis Vidal of Spain.
Erected on the footprint of Heathrow’s original Europa Building, designed to handle 1.2 million people in 1955, and the adjacent Queen’s Building, the new Terminal 2 will initially be able to process 20 million passengers a year, the same as its predecessor. It will be extended to incorporate the current Terminal 1 from 2016, adding that site’s 10 million-capacity to produce a single structure handling 30 million people.
More space has been laid out for orientation, including an atrium-style departure lounge, while reduced reliance on stairs and elevators means some passengers will have a level 200-meter (656 feet) walk from gate to curb via baggage claim and customs.
Taken together with Terminal 5, where British Airways, the U.K. hub’s biggest carrier, is located, the plan means that 70 percent of passengers will pass through buildings less than seven years old, according to owner Heathrow Airport Ltd.
The main clients at the new building will be Star members including Lufthansa and United Airlines, as well as Aer Lingus Group Plc and Virgin Atlantic Airways Ltd., for which the Irish carrier is providing domestic feeder flights. Transfers between the Star group’s carriers, which control 21 percent of capacity at Heathrow, are currently complicated by the fact that 12 are based at Terminal 1, eight at Terminal 3 and one at Terminal 4.
“It’s a brand new facility that’s being purpose built to make sure connecting flows are short, smooth and as friendly as possible,” Star Alliance Chief Executive Officer Mark Schwab said in an interview, adding that using a single terminal will halve minimum transfer times and in turn allow for 31 percent more connections between flights based on existing timetables.
Being under one roof will also allow Star members to merge services like check-in desks and lounge facilities, saving money and improving customer service, while a more efficient layout will reduce the space required by about 20 percent, he said.
Terminal 2 will seek to replicate the success of Terminal 5 in improving passenger perceptions of Heathrow. After a botched opening in 2008 which saw baggage handling systems fail, the BA base was voted best airport facility in the world in the 2012 Skytrax survey of 12 million passengers, ahead of terminals at Singapore Changi and Beijing Capital.
Heathrow Ltd., which had an adjusted annual pretax profit of 46.4 million pounds, versus 2011’s 166.7 million-pound loss, this month proposed a 3 billion-pound, five-year plan that will complete Terminal 2, add taxiways and retool the baggage system. The proposals must be approved by the Civil Aviation Authority, which sets airline charges, before becoming effective in 2014.
The new building will also aim to sustain growth in passenger spending that’s been running at an annual 10 percent for the past three years following the addition of Terminal 5, which features 107 retail and food outlets including a 3,500 square-meter (37,674 square-foot) World Duty Free shop.
The reduction in time spent checking in, passing security barriers and walking to gates means people will have more chance to shop, with British luxury-goods companies including Burberry Group Plc, Mulberry Group Plc and Paul Smith Group Holdings Ltd. among those that could be showcased, according to Holland-Kaye. The airport has also encouraged brands such as apparel retailer Jack Wills Ltd. to test their appeal with makeshift stores.
“We don’t want to just copy what’s in Terminal 5 because some of it will be out of date by the time the new terminal opens,” Holland-Kaye said. “We want to be bringing in some people who are established, reliable and recognizable and others who are a bit different and cutting edge.”
Terminal 2 will also provide Heathrow with a chance to promote its case for remaining Britain’s hub airport after Prime Minister David Cameron ordered an inquiry into future capacity that’s due to report after the next general election in 2015.
Heathrow handled 69.9 million passengers on 471,000 flights in 2012, close to the limits of its two runways, and needs at least one more strip to keep pace with Paris and Frankfurt, which could both cope with as many as 700,000 operations a year.
Opponents including London Mayor Boris Johnson say flight paths over densely populated areas make Heathrow unsuitable for development and prefer expansion of rival sites such as London Stansted or construction of a new hub in the Thames estuary.
“There’s a very direct connection between how well we operate today and our credibility when we argue the long-term plan,” Heathrow CEO Colin Matthews said in an interview on Feb. 11. “The better we make the passenger experience, the better our arguments on capacity needs and other key issues. It’s a phenomenally important market. If you take the 10 biggest routes anywhere on earth, seven have Heathrow at their end.”
Still, the mayor’s office said today that cosmetic changes can’t overcome the airport’s fundamental lack of room to expand.
“While terminal improvements are welcome, they do not address Heathrow’s main flaws,” it said in an e-mail.
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