Expansion could affect Gatwick’s credit rating

Moody’s report, entitled ‘New runway will have mixed credit implications for London’s airports’ says Gatwick would suffer financially with expansion and that if it is chosen as the site for a new runway, it would not gain any extra traffic from Heathrow.

It also predicts passengers would pay for a second runway at Gatwick as the airport increases charges.

Gatwick Airport has disputed the claims saying the Airports Commission, which is considering options for airport expansion in the South East, has reported the delivery risks there were ‘relatively low’.

Xavier Lopez del Rincon, Moody’s vice president and author of the report said: “A new runway will have mixed credit implications for London airports.

“A runway at Heathrow would allow the airport to benefit from growth in future traffic volumes, and a new runway at Gatwick would not take significant traffic from Heathrow.

“Gatwick, on the other hand, would be vulnerable to airlines switching to an expanded Heathrow, whilst a new runway at Gatwick would increase its airport charges and could alienate its price-sensitive airlines.”

The agency says a runway at Heathrow would allow the airport to accommodate expected growth in London passenger traffic.

By 2050, Heathrow would be able to accommodate between 133 and 149 million passengers, which is almost double current traffic levels.

While Heathrow’s hub airport status could come under pressure from a new runway at Gatwick, it would remain London’s largest airport as it would still be expected to handle around 20 million more passengers per annum than Gatwick by 2050.

Moody’s expects that Gatwick will be more vulnerable to competition if Heathrow were to build a new runway as it would be at risk of losing scheduled airline traffic to Heathrow, where carriers can typically earn more per passenger mile.

Conversely, the construction of a Gatwick runway would almost double aeronautical charges at the airport, putting it at a huge competitive disadvantage to Stansted, which is its main competitor in the low-cost airlines segment.

A spokesman from Gatwick Airport said: “The Airports Commission has concluded Gatwick’s delivery risks are relatively low and the financing requirements comparable to other airports and infrastructure projects. We remain confident that the business plan we have put forward is robust and can be privately financed without public subsidy.

“It is just a shame that Moody’s, who do not rate Gatwick’s debt, have not spent time getting to understand our business and expansion plans. We hope Moody’s accepts the invitation we have already extended to learn more about our operation.

“Gatwick can improve competition, lower fares, and enhance resilience in the London airport system. Our scheme is comparatively straight-forward, deliverable without significant interruption to surface access, at a much lower economic and environmental cost.”

Sir Howard Davies, the chairman of the Airports Commission will meet community groups in Crawley next week to gather their opinions on expansion.

The commission is expected to make a recommendation to the Government next summer about whether Heathow or Gatwick should be expanded.

It would be Parliament’s decision which option is taken forward.