HEATHROW EXPANSION GETS LIFTOFF, EXPECT TURBULENCE

C O N F I D E N T I A L LONDON 000461

NOFORN
SIPDIS

E.O. 12958: DECL: 02/13/2019
TAGS: EAIR ECON EIND ETRD PGOV UK
SUBJECT: HEATHROW EXPANSION GETS LIFTOFF, EXPECT TURBULENCE

REF: A. EMBASSY LONDON DAILY 1/16/09

B. EMBASSY LONDON DAILY 1/28/09

Classified By: Acting Economic Minister Counselor Kathleen Doherty for
reasons 1.4 (b) and (d)


1. (SBU) Summary. Heathrow's expansion is a major
economic, political and environmental hot-button issue,
creating unusual alliances among its supporters and
opponents, and will likely become a key electoral issue. On
January 16, Transport Minister Geoff Hoon announced HMG plans
to build a third runway with a new terminal at Heathrow
airport by 2020. The expansion is supported by the majority
of the Labour Party, businesses and trade unions, but
vehemently opposed by Conservatives, Liberal Democrats, and
environmental groups. The expansion is expected to meet
increased capacity needs, reduce delays, and provide much
needed revenue and jobs to the UK economy. To mitigate
environmental impacts, HMG is planning for "green slots,"
which will limit use of the third runway to
environmentally-friendly aircraft. While the Conservative
Party's motion to delay expansion of the third runway failed
in the House of Commons on January 28, it will likely
continue to make Heathrow's expansion a chief "polarizing
issue" on which to win the next election. End summary.

HMG'S OVERALL PLAN
--------------


2. (SBU) The Department for Transport's (DfT) proposal calls
for adding a third runway and new terminal at Heathrow, to be
completed by 2020. HMG first backed a third runway in a
White Paper in 2003 and made the announcement on January 16
as a political statement so BAA (not related to British
Airways),planning commissions, and others could move forward
with the early stages of their planning efforts. The project
will be completely funded from private resources with no
direct financial support from HMG. BAA, which operates
Heathrow, is expected to bear the brunt of infrastructure and
planning costs for the expansion. BAA will also have to pay
the relocation costs for those in 700 homes that will be
destroyed in Sipson Village, DfT officials told ESTHOff on
February 3.


3. (SBU) Flights will be increased from 480,000 annually to
605,000 by 2020, and a review will be conducted by the UK
Environment Agency and the Civil Aviation Authority (CAA) in
2020 regarding whether to increase capacity to 702,000
flights annually by 2030. Passengers transiting Heathrow are
expected to grow from 68 million to 89 million by 2030. DfT
projects the economic benefits of Heathrow expansion will
contribute 9.7 billion GBP ($13.7 billion) in revenues to the
UK economy. Employment impacts, said DfT officials, are less
certain, but the media predicts up to 65,000 new jobs could
be created from the expansion. Transport Secretary Hoon also
noted in his January 28 parliamentary speech that Heathrow's
expansion will allow it to compete with other European cities
(i.e. Frankfurt) as an international hub for passengers
transferring to China, India, and other long-haul flights.

HMG EFFORTS TO MITIGATE ENVIRONMENTAL IMPACTS
--------------


4. (SBU) To mitigate environmental impacts, the HMG is
proposing "green slots" for the third runway, limiting its
use to only environmentally-friendly aircraft. HMG is
developing an incentive-based point system for
environmentally-friendly aircraft to obtain green slots based
on meeting certain noise, carbon dioxide, and other
requirements. According to DfT, EU airlines and the
International Air Transportation Association (IATA) responded
positively to HMG's proposal. DfT is still evaluating the
timing for implementing the rules for the green slots, as no
additional slots will be available at Heathrow until 2015.
DfT will need to make a decision whether to change rules in
2010 -- to give airlines advanced notice to purchase new
aircraft -- or wait until 2014, since international changes
to regulations and or technological changes could effect the
equation. The third runway will be 1.36 miles in length,
compared to the other two runways, each at 2.5 miles in
length. This will also restrict use to short-haul flights.


5. (SBU) DfT officials conceded the flight path will be used
for the new runway will cause more noise for nearby residents
and is taking measures to minimize the impacts, while
balancing other needs. HMG is also studying adding
high-speed rail linkages from Manchester, Leeds, and the
Midlands close to Heathrow to reduce the number of short-haul
flights for those passengers connecting to international
flights. Night flights, already limited, will continue to be
closely regulated under HMG's plan. The current quota on
night flights will come up for review in 2012. DfT ruled out
the idea of mixed mode -- having landings and take-offs on
all runways at the same time -- because it would only provide
a marginal improvement in capacity (approximately 12
percent),and would be outweighed by the noise impacts.

FIRST MAJOR POLITICAL HURDLE OVERCOME
--------------


6. (SBU) On January 28, the House of Commons defeated a
motion by the Conservatives to oppose the construction of the
third runway at Heathrow by a margin of 19 votes. The debate
on the issue encompassed seven hours and resulted in 28
Labour MPs breaking with their own party on the vote. Shadow
Minister of Transportation Theresa Villiers argued HMG's caps
on increased flights until 2020 will not last. She also
claimed HMG's efforts to reduce pollution by permitting only
energy-efficient aircraft to use the third runway does not go
far enough. Villiers and other conservative MPs pushed for
high-speed rail, particularly a North-South link, as an
alternative solution. Other MPs raised the Mayor of London's
proposal to build an airport close to the Thames Estuary,
which Secretary Hoon called a "non-starter." Hoon and UK
Department of Energy and Climate Change Secretary Ed Miliband
stressed throughout the debate the importance of balancing
economic growth along with environmental concerns.

WHAT'S NEXT?
--------------


7. (SBU) DfT expects it will take BAA two or three years to
prepare its planning application for Heathrow's expansion,
which will be submitted to the UK Planning Commission. DfT
is simultaneously drafting a National Policy Statement (NPS)
on Airports, which will incorporate Heathrow expansion plans.
The NPS will undergo parliamentary scrutiny before it is
sent to the Planning Commission. It is expected to be
formally published by 2011.


8. (C/NF) Some accuse the Conservatives of using Heathrow's
expansion as a political tactic to burnish their
environmental credentials, attack Labour's commitment to the
environment, and split support within the Labour Party. DfT
officials said they expect the Conservatives would not try to
derail the project -- despite the current political rhetoric
-- if they win the next election. BAA will have likely
already invested close to $2 billion GBP ($3 billion) in the
process by then, they said, and the Conservatives would lose
credibility if they overturned the project. Labour MP Jamie
Reed expressed concerns in another meeting, however, that the
Conservatives might try to slow down the UK Planning
Commission implementation process as a tactic to derail the
timeline. HMG also expects legal action from environmental
groups and campaigners.

OPPORTUNITIES FOR US AIRLINES
--------------


9. (SBU) DfT noted a company called Airport Coordination
Limited, which has exclusive responsibility for the
allocation of landing slots, would make the determination of
which airlines will obtain new landing slots. DfT will study
the options given its regulatory role. British Airways gets
a certain percentage of these "prime" landing slots given
London is its hub. DfT officials noted, however, because of
the Open Skies Agreement which allows other airlines equal
access to Heathrow, Standsted, and Gatwick, U.S. and other
foreign carriers will be able to obtain a fair percentage of
landing slots.

COMMENT
--------------


10. (C/NF) Heathrow's third runway expansion will continue to
be a hot political issue in the upcoming elections. PM
Brown's credibility has been hurt by the rebellion of some of
the Labour MPs, who are siding with the Conservatives and
Liberal Democrats on the issue. Some claim Heathrow's
operator, BAA, has made promises -- and broken -- them
before, so trust among politicians and the public is low.
However, as the UK fights to survive one of the worst
recessions in 30 years, it is likely environmental concerns
will take the back-seat to economic growth.

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