Call for Changes to Heathrow Airport's Economic Regulation

On February 12, 2025, London Heathrow Airport (Heathrow or the Airport) announced it is proposing a phased expansionary program by upgrading its existing facilities. The phased expansion will be a multi-billion-pound capital program that will require significant private investment. Heathrow Airport also aims to submit its plan for the third runway project to the government this summer.

Key Highlights
-- Heathrow indicated that to achieve an optimal balance of risks and returns on its third runway project, it will require changes to the regulatory framework and UK airspace to accommodate more airplanes.
-- At this time, we do not believe any future changes to the economic regulatory model of Heathrow Airport will have a direct impact on our portfolio of airport credits. However, the indirect effects may result in changes in passenger traffic of the other airports in the London area.
-- The challenges in moving forward with the third runway project are significant. This includes International Airlines Group's view that the current economic regulatory model must change significantly because passenger and airlines using the Airport are paying 1.1 billion pounds more each year than other equivalent major European airports.

According to Valiant Ip, Vice President Corporate Ratings, Asset Finance, "Other airports in the London area are also planning to expand their infrastructures to accommodate future passenger growth. Nonetheless, we believe Heathrow Airport's competitive position cannot be easily displaced because it is a full-service intercontinental hub. The completion of the phased expansionary program and the third runway project will further strengthen Heathrow Airport's market position in the London area."