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Heathrow take-off stalls

Plans for a third runway at Heathrow were finally approved earlier this year. But how will it all be paid for? Marina Gerner reports.

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Heathrow: expansion questions

Plans to build a third runway at Heathrow airport have long been beset by rows and protests, but the project seemed finally to be getting somewhere in June this year, when the UK government approved a plan for the expansion (subject to various conditions, such as a ban on night flights and stringent air quality targets). However, in his latest update on the project, Richard Moriarty, chief executive of the UK aviation regulator, the Civil Aviation Authority (CAA), has warned the Department for Transport (DfT) that Heathrow Airport needs to answer some questions "urgently and decisively", reports Russell Hotten on the BBC.

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The runway itself is expected to cost £14bn. Heathrow says a planning application is on target to be submitted in 2020, with opening set for 2026. But the CAA warns it is struggling to get details from the company on both the exact timetable and on how it plans to pay for expansion. Airlines in particular, says Moriarty, are worried they might face higher charges to operate out of Britain's biggest airport, despite promises to keep costs close to current levels of £23 per passenger. Indeed, British Airways owner IAG has described Heathrow's failure to date to break down its expansion costs as "outrageous". If details are not forthcoming, notes Hotten, "the CAA has legal powers to force the airport's owners to reveal information".

A shrug of the shoulders

In most industries, notes Nils Pratley in The Guardian, a rebuke of this kind "would be met with an immediate promise to do better". But Heathrow's response to reiterate its target dates and note that it plans to present a "detailed preferred masterplan" to stakeholders next year "amounted to a shrug of the shoulders". This is not good enough apart from anything else, we need to know "who is on the hook if the cost of the project explodes"? Existing revenue won't cover it Heathrow (owned by a consortium led by Spanish infrastructure giant Ferrovial), saw pre-tax profits fall to £426m in the nine months to the end of September, notes Josh Spero in the Financial Times, while passenger revenue rose to £2.2bn.

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The airport does at least have a "rudimentary" plan, says Alistair Osborne in The Times. It can't borrow any more money because it wants to keep its investment-grade credit rating. Instead, it aims to boost current capacity by an extra 25,000 flights a year (rather contradicting the "Heathrow mantra that the airport is already full") in order to raise funds for the runway. Flights are capped at 480,000 a year, but if Heathrow can get this lifted to 505,000 by 2022 this would go a long way to lifting passenger numbers and thus revenues, without raising charges. Yet surmounting objections from local residents, airlines with scheduling and disruption concerns, and other issues such as air and noise pollution won't be easy. "There's a long way to go before this project takes off."

Too many cooks spoil restaurant profits

It's been a hard year for British restaurants. More than 1,100 restaurant businesses went under in the first nine months of this year, according to the Insolvency Service. In 2017, the figure was 1,075 for the entire year. High-profile high-street names such as Byron, Gaucho, Carluccio's, Gourmet Burger Kitchen and Jamie's Italian have all either gone into administration, restructured or been forced to make deals with their creditors via company voluntary arrangements (CVA).

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It's partly due to social media "accelerating changes in consumer tastes", says Paul Pittman of accountants Price Bailey, quoted in The Times. "Chain restaurants are particularly vulnerable to changing consumer fads," argues Pittman. In an age of "pop-up" food stalls and posting pictures of meals to sites such as Instagram, "what was once flavour of the month can quickly go out of fashion". And given the huge costs of renting in city centre locations, a restaurant can't afford to carry many empty tables. Yet the real problem for restaurants, says Ed Cumming in The Guardian, is simply the "ancient tale of oversupply". The woes of various mid-market chains reflect a huge expansion of this sector in recent years in many cases fuelled by speculative private- equity funds with more money than opportunities which has over-saturated the market.

Meanwhile, the growth of home-delivery services such as Deliveroo has vastly widened the choice available to consumers. In short, "whatever your price point, there is no longer any excuse for a bad meal". Restaurateurs would do well to bear that in mind.

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