Heathrow and Gatwick new runway costs 'underestimated'

Plans to build new runways at Heathrow and Gatwick will cost substantially more than the bidders have estimated, a report says.

The Airports Commission says a second runway at Gatwick would cost £2bn more than the bid suggests.

Two separate plans to expand Heathrow are predicted to cost £3-4bn more.

The commission has been tasked with weighing up where a new runway should be built to meet rising capacity demand in the South East of England.

It is considering three options - a second runway at Gatwick, a third runway at Heathrow, or an extension to one of the existing Heathrow runways.

Alternative proposals, including building new airports near Oxford or in Thames Estuary, have already been ruled out.

Analysis: Richard Westcott, transport correspondent, BBC News @BBCWestcott

This report goes into a lot of technical detail about the pros and cons of each runway scheme. But, what it doesn't do, what it can't do really, is quantify the politics of it all.

Heathrow splits MPs. Cabinet members like Justine Greening, Phillip Hammond and Vince Cable have spoken against expansion in the past. Officially, the Liberal Democrats don't want any new runways at all, not unless another one is closed elsewhere.

Then, there's the rumour that the Labour leader, Ed Miliband, was once prepared to resign as energy secretary over plans to expand Heathrow. Although, it's thought his thinking may have changed recently.

Meanwhile, many business leaders support Heathrow and have told the chancellor as much.

And I haven't even mentioned Boris Johnson, who's regularly called Heathrow expansion a disaster… and he could well be one of the airport's neighbouring MPs after the election.

Whatever Sir Howard Davies recommends, it's the politicians that will have to deliver it. And, that's the hard part.

No decision made

The commission has released its latest analysis of the three shortlisted plans at the beginning of a three-week public consultation period.

But the head of the commission, Sir Howard Davies, said no decision had yet been made.

"We have not yet taken a view on which proposal strikes the most effective balance between the assessment criteria," he said.

"It is important first that we provide an opportunity for this evidence to be examined, challenged and improved. This consultation gives everyone with an interest in the issue of airport expansion that opportunity."

However, the report does suggest that all three bids have underestimated the costs involved.

It also suggests that landing charges to airlines would need to increase in order to pay for the expansions.

The BBC's transport correspondent Richard Westcott said higher landing charges could mean higher fares for passengers.

According to the commission's analysis, Gatwick's plan to add a second runway is the quietest and easiest to deliver.

But, expanding Heathrow is seen as more likely to deliver a bigger boost to the economy, and create more jobs.

Sir Howard is not due to issue his final recommendation to the government until the summer of 2015 - after the general election.

Gatwick identified three options for a second runway, but the Davies Commission shortlisted Option 3, which would allow fully independent operation.

Predicting the future

Sir Howard said the three options for expansion presented "an interesting choice of airport model".

"If you look at the last 10 years or so, you can see it's low cost traffic that has grown much more quickly than the full service, all singing all dancing model [such as British Airways and KLM]. That's a big element of the debate - how the world is going to look in 10 year's time - that's the tricky bit," he told BBC's Radio 4.

Gatwick chief executive Stewart Wingate said on Tuesday that airlines are increasingly opting for new planes that fly direct from smaller airports, doing away with the need for major hubs such as an expanded Heathrow. He also said expanding Gatwick would cost taxpayers less.

"As the Commission underlines Gatwick can actually be delivered by 2025. We have a safeguarded site with little risk and no complex construction across major motorways. Our new runway can be funded without a penny of taxpayers' money at a time when there are a lot of other competing priorities for public funds," he added.

However Heathrow's chief executive, John Holland-Kaye, says expanding his airport would benefit the UK economy.

"Only Heathrow can get us to the growth markets of the world such as China, only Heathrow can help us to double our export volumes because Heathrow already handles over a quarter of all Britain's exports - Gatwick less than 2% - but also only Heathrow can be a solution for the whole UK, not just London and the south-east," he added.

The Board of Airline Representatives (BAR), the industry body representing the majority of airlines operating to the UK, said costs were an important factor in the final decision.

"Since airlines and ultimately the travelling public fund the vast majority of the UK's airport infrastructure, unlike road and rail, airlines will be closely examining the Commission's findings on the business case and cost model for each of the Gatwick and Heathrow options," said BAR chief executive, Dale Keller.