Heathrow told to keep check on credit rating amid expansion plans
Heathrow airport has been warned it may be obliged to maintain an investment grade credit rating to reassure investors of its financial position while its third runway gets built.
The UK’s aviation regulator, the Civil Aviation Authority, said it would explore a proposal to make it mandatory for Heathrow to hold such a rating, to “provide a further incentive for HAL [Heathrow Airport Limited] to run its business in a financially prudent and robust way”.
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The CAA is currently holding a consultation into Heathrow’s financial resilience which will close in mid October.
In its working paper, which forms part of the consultation, the regulator said it would look into whether Heathrow’s licence protections needed to be strengthened in the wake of the “corporate financial distress” that has been seen on other construction projects.
It also said Heathrow should be prepared to curtail dividends to shareholders in the event it lost its investment grade credit rating.
A Heathrow spokesperson said: “Heathrow already has a dividend lock-out policy and a robust investment grade credit rating – we’re also already fully committed to maintaining both throughout expansion.
“As an entirely privately financed project, maintaining our rating is key to delivering expansion affordably while fostering our strong global credit investor community. We will continue to engage with the CAA to ensure that the regulatory model supports this objective in the most efficient way possible.”
Heathrow’s consultation into the third runway is currently underway and will close on 13 September.
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The airport maintains it can deliver the third runway and further expansion for £14bn, but last week its biggest customer, International Airlines Group (IAG), accused it of covering up the real costs of expansion, which critics claim could amount to £30bn.
Willie Walsh, the chief executive of IAG, which owns British Airways, accused the airport of “treating customers with contempt” and said the group had “absolutely no confidence in its ability to deliver cost-effective expansion”.