Treasury casts doubt on Stansted runway

Serious doubts about the financeability of a second runway at Stansted airport have been raised in Treasury papers released under the Freedom of Information Act.

Serious doubts about the financeability of a second runway at Stansted airport have been raised in Treasury papers released under the Freedom of Information Act.

The papers, submitted in confidence to a High Court hearing last year, reveal the Treasury is "concerned about the potential for serious delay" to the new runway unless it is cross-subsidised by the users of London's other two main airports, Heathrow and Gatwick.

If the runway is built on a "stand-alone" basis and funded only by airlines using Stansted, which is the Government's preferred option, then peak-time passenger charges might have to increase almost fivefold to £16 per flight, the documents add. The Treasury believes this could result in a "high degree of revenue risk" because the owner of Stansted, BAA, might not be able to force the low-cost airlines who predominantly use the airport to pay such a big increase.

According to the documents, there was agreement between the Treasury, the Department for Transport and the Civil Aviation Authority that the new runway could be built in time to open in 2011-12 provided there was a "system approach" to financing, using the pooled revenues from all three London airports. "There is collective agreement between DfT, HMT and CAA that we cannot state categorically that a new runway at Stansted is not financeable on a stand-alone basis but due to the higher degree of revenue risk, BAA could choose to delay the development to allow the financing situation to improve," the document says.

Ryanair, the biggest operator at Stansted, is leading a high-profile campaign against the cost of the new runway, arguing it could be built for one-tenth of the price quoted by BAA.

But BAA will face an equally big outcry from airlines based at other airports if it tries to cross-subsidise Stansted from landing charges paid by passengers at Heathrow and Gatwick.

The Treasury documents are based on a construction cost for the new runway of £2.6bn. BAA's latest cost estimate is between £1.7bn and £2bn, which it says would be enough to pay for the second runway, additional terminal facilities and new road and rail links into the airport.

Outlook, page 39