UK Endorses Heathrow's $64 Billion Expansion for New Runway

By Sarah Young

LONDON (Reuters) -Britain has backed Heathrow Airport's 49 billion pound ($64 billion) expansion and upgrade plan as the basis for adding a new runway, choosing it over a cheaper rival proposal, the government said on Tuesday.

The decision follows finance minister Rachel Reeves’ pledge in January to build a third runway at Heathrow, aiming to boost economic growth and end decades of uncertainty over the airport’s future.

The headline figure includes around 15 billion pounds of upgrade work already planned and the cost of building the runway, re-routing London's orbital motorway and adding a new terminal is about 33 billion pounds.

The government has thrown its weight behind airport projects this year, giving the green light for a runway at the country's second-biggest airport Gatwick to be brought into regular use in September and backing a new terminal at Luton in April.

Heathrow's plan was weighed against an alternative from Arora Group, which owns land and hotels near the airport. Arora estimated its proposal at under 25 billion pounds, although that figure excluded some costs.

GOVERNMENT SETS 2035 TARGET

Flights from Heathrow's new runway are targeted for 2035, with planning consent required by 2029. The government said it chose Heathrow's full-length runway plan as the "most deliverable option" to meet those deadlines.

A "swift and robust" policy review on Heathrow expansion will help shape plans in line with Britain's climate obligations, the government said, as it aims to see off potential legal challenges over air quality and emissions which have thwarted it in the past.

Heathrow, owned by owned by France's Ardian, the Qatar Investment Authority, Saudi Arabia's Public Investment Fund and others, said it welcomed the government's decision but needed the aviation regulator and the government to provide clarity on the regulatory framework by mid-December to avoid delays.

Arora said it was encouraged that no single promoter had been chosen and would revisit its plans.

AIRLINES WORRY OVER COST

Airlines, such as British Airways-owner IAG and Virgin Atlantic, have long worried that Heathrow’s high charges could rise further to fund expansion.

Located west of London, Heathrow is Europe's busiest airport and operates at full capacity. Its two runways compare with four each in Paris's Charles de Gaulle and Frankfurt Airport, and six at Amsterdam's Schiphol.

The government statement said exact details such as the length of the runway, layout and associated infrastructure implications will be considered as part of a review.

($1 = 0.7612 pounds)

(Reporting by Sarah Young, editing by Andy Bruce, James Davey and Louise Heavens)