Corporate behemoths rarely change direction in a hurry. The good ones, anyway.
Strategic decisions are planned months in advance, the repercussions are examined every which way, and advisers are consulted and asked to dissect what is being planned. Heathrow Airport indicating an apparent readiness to U-turn on its generational expansion plans is a case in point.
As far as we know, the board has not gathered to discuss, review and decide. Sending the third runaway scheme back for a second look, to be refined and analysed further, has not yet been broached. And yet, something is in the air.
Always view with suspicion something being portrayed as a response to an unforeseen external event, such as firms that blame the sudden onset of recession for making thousands of redundancies and branch cutbacks.
Moves like that do not just happen overnight, but that is how they are presented. It’s good PR, using the cloak of something outside their control, which affects lots of people and which everyone understands. Yes, of course they would embark on a programme of lay-offs – even though the downturn may prove temporary and the long-term prognosis is positive.
Reports, therefore, that "spooked investors could ground Heathrow’s third runway", should be treated with caution. "Foreign stakeholders appear to be getting cold feet as the Iran war drives costs even higher." Take these with a very generous pinch of salt.
There is a vital aspect to this news that is probably more significant than the Iran war or a possible cabinet refresh. This is that the Heathrow chairman is himself new. Philip Jansen took over at the start of the year. His previous job was at BT, where he had a reputation for being an investor and a customer-facing boss.
Political turmoil
Another reason is given for their hesitancy. "The future of the troubled £49 billion project looks precarious if there’s a reshuffle at No 11." It’s true that Rachel Reeves has made a third runway at Heathrow a pet goal. She hailed it as a central plank in her drive for "further and faster" economic growth.
No matter that the scheme, as currently envisaged, is not expected to become operational until 2035 at the earliest. Not much further and faster there, and not an unveiling that will occur on this present Chancellor’s watch. Even if Reeves survives a Labour rout after this week’s local elections and the inevitable blood-letting that will follow, which may be unlikely,
We are talking nine years hence. Plenty of holders of the UK public purse will have been and gone by then.
Still, Reeves is a champion of Heathrow expansion, and her presence at the Treasury would smooth the development’s path through Whitehall, in its early stages at least. In that sense, her departure would be a blow, and a new chancellor may not be so enthusiastic. It is a perennial problem with major UK infrastructure projects – HS2 take a bow – that a ministerial champion departs and the new broom applies the brakes to a vision that was not theirs.
Even so, would that explain the cooling on high at Heathrow? Unlikely. Regular rotations of ministers are factored in – they’re a facet of British public life.
What has prompted the speculation is that the chairman of Heathrow has opened talks with airlines and with the billionaire local landowner and hotel owner, Surinder Arora, to collaborate on the building of a new runway and terminal.
The Heathrow idea, which involves the diversion of the M25, Europe’s busiest motorway, into a new, specially built tunnel, was most definitely not his. Neither were the environmental protests it induced. Nor were the condemnations from the likes of the Energy Secretary Ed Miliband, Manchester mayor Andy Burnham and London mayor Sadiq Khan. All senior Labour figures, but each of them represents widely differing interests. There was plenty of opposition, too, from outside the governing party, right across the political spectrum.
Client focus
Similarly, the hostility from Heathrow’s customers, its airlines, was not of Jansen’s making. They are vitriolic in their antagonism, pointing out that they presently pay some of the highest, if not the highest, airport fees in the world. Some of these expenses are passed on to passengers, to add to the latter’s burden of sky-high car parking prices. Alongside them are the airport’s retailers, who also complain of being charged too much.
An important intervention was made by Luis Gallego, boss of the parent company of the airport’s dominant user, British Airways, when he said the bill for the new runway and associated works should be capped at £30 billion.
While Jansen inherited a full in-tray of vitriol and embarked on a series of meetings with his stakeholders, and doubtless asked his own trusted lieutenants what they thought, there was a ready alternative. There has always been a Plan B.
That was Arora’s concept of a shorter new runway, entailing no rerouting and disruption of the M25, together with a new terminal, for half the price of Heathrow’s proposal. That would meet the demands of Gallego and others, and Arora had the backing of financiers NatWest and Santander. Plus, several of the airlines were on Arora’s side.
Jansen, though, would have to make the first approach, because for years, relations between Heathrow and Arora have been fraught. He has been a constant critic, with good reason, of the airport, accusing it of "ripping off" travellers, carriers and its shops and restaurants.
Overtures from Arora to the previous Heathrow regime were dismissed, his claims and designs ridiculed. Heathrow’s objective was altogether grander and more costly; he built and ran hotels and had no experience of anything on this scale, despite Arora having hired internationally recognised leading airport engineers and specialist constructors for his team.
Reeves agreed with, or perhaps succumbed to, the intensive Heathrow lobbying. Now, there is a marked change in mood. It is hard to see how Jansen can persuade Arora and the rest to buy into the £49 billion deal. Perhaps a compromise, Plan C, can be reached. More sensible would be a reversion to the Arora model.
For that to happen, reasons and excuses must be forthcoming. To that end, the war and upheaval in Starmer's government provide a perfect face-saving screen.
