Heathrow Expansion – what next?

The construction of a third runway to the north-west of Heathrow Airport has long been the subject of controversy and has attracted its fair share of political debate.

The Department for Transport claims the privately funded £14 billion runway could create an additional 16 million long-haul seats by 2040 along with £61 billion of economic benefits over a 60-year period. However, the journey to bringing the proposed runway to fruition has not been plain sailing for Heathrow Airport Limited (“HAL”).

Judicial review challenges to the Airports National Policy Statement

In June 2018, the Secretary of State for Transport designated the Airports National Policy Statement (ANPS) under the Planning Act 2008. The ANPS stated the preferred scheme for expansion of runway capacity in the south east of England to be a new runway to the north-west of Heathrow’s existing northern runway. Gatwick Airport is still promoting a second runway despite the preference expressed in the ANPS for a north-west runway at Heathrow – Gatwick’s proposals will bring an in situ emergency runway into full time use. The ANPS sets out the specific requirements to be met for development consent to be granted for a new north-west runway at Heathrow.

In August 2018, five judicial review challenges against the ANPS were brought by a number of parties, including the Mayor of London, some London local authorities and various environmental groups. They were rejected by the Administrative Court, but some of the claimants were given permission to appeal.

As reported in our earlier article here, the Court of Appeal granted the appeal on the grounds that the ANPS failed to take into account the Paris Agreement on climate change.
The government has decided not to appeal against the Court of Appeal’s judgment. However, HAL and Arora Holdings Limited (more about this party below) have been given leave to appeal to the Supreme Court, with the hearing listed for 7th and 8th October later this year.

Civil Aviation Authority’s controls on expenditure

In December 2019 the Civil Aviation Authority (the “CAA”), the UK’s aviation regulatory body, issued a publication (CAP 1871) which prompted HAL to issue a press release announcing a delay to the ambitious target date of 2026 by which to complete the new runway. The CAA had concerns about sunk costs in relation to early spending on the project and the effect such sunk costs would have on consumers.

The costs of expansion divided into categories:

• Category A costs, which would be incurred before the designation of the ANPS (which were not dealt with in this particular publication, given the designation had been made over a year earlier);
• Category B costs, which would be incurred for planning costs related solely to seeking development consent; and 
• Category C costs, which would be incurred in relation to the actual implementation of the runway.

CAP 1871 updated regulatory policy following HAL’s increased forecasts of Category B and ‘early’ Category C costs (early Category C costs are those incurred before the grant of a DCO).

CAP 1871 favoured a scenario put forward by HAL in response to a consultation held by the CAA in July 2019 which would result in a delay to the new runway’s 2026 target, but would reduce the amount spent in relation to early Category C costs. There will be further regulatory arrangements to be made in relation to Category C costs in due course, however the draft licence condition consulted upon in the publication proposes a cap on early Category C costs of £1.6 billion and an operational delivery date of 2029. HAL had estimated their early Category C costs would be £2.4 billion in order to bring the runway forward in 2026.

Competing Development Consent application

HAL are not the only party who are looking to expand at Heathrow Airport; Heathrow West Limited (“HWL”) (supported by the Arora Group, a privately owned hotel, property and construction consortium) submitted a scoping report to the Planning Inspectorate, which has subsequently issued a scoping opinion for HWL’s proposals to overlap and replace some element’s of HAL’s expansion scheme. HWL’s main consultation document includes a high level overview of the components of expansion it would look to bring forward, which include a terminal facility, alterations to roads (including the M25) and expansion of the airfield to service the new runway, amongst other things and claims that its plans will introduce competition at Heathrow Airport. However, the proposals rely on HAL bringing forward the runway itself.

If both applications are submitted, this would be the first time there have been competing development consent applications. It remains to be seen how this would work in practice if both parties are successful, especially as HWL’s proposals are reliant on HAL bringing forward the runway and would amend or replace elements of HAL’s scheme.

Coronavirus

It’s no secret the aviation industry has been hit hard by COVID-19. HAL has called the pandemic ‘the biggest crisis the aviation sector has ever experienced’ in its written evidence to the government’s Transport Committee (which can be seen here). During the Transport Committee’s meeting on ‘Coronavirus: the implications for transport’, HAL’s Chief Executive, John Holland-Kaye, confirmed despite the pandemic, they still intend to pursue the appeal to the Supreme Court). However, he also mentioned the need for expansion being contingent on the economy recovering after the pandemic.

What next?

The outcome of the Supreme Court hearing in October will no doubt be the most influential factor as to whether the expansion will go ahead. However, the impact of COVID-19 could mean further delays than those already made manifest by the CAA’s regulation on costs. If the expansion is brought forward, it remains to be seen whether there will be one promoter or two, depending on which party (or parties) are granted development consent.

The Court of Appeal judgment has already led to a claim being issued to challenge the government’s National Policy Statements for Energy Infrastructure (EN1 to EN6). The Planning Act 2008 requires the Secretary of State to review National Policy Statements when he thinks it appropriate to do so and the claimants are alleging the government’s net-zero carbon by 2050 commitment as well as the ratification of the Paris Agreement should have triggered that requirement. The claimants rely on the Court of Appeal judgment on the ANPS and so, depending on the Supreme Court outcome, could mean the repercussions of the designation of National Policy Statements reach further than just Heathrow.