Heathrow has been warned that it cannot afford the third runway without adding billions of pounds of debt to the business.
The rating agency said in a nasty new report that the expansion of planned expansion could endanger the airport by significantly increasing borrowing, which has reached nearly £20 billion.
S&P said that in addition to increasing debt, the project will also result in higher passenger charges at Heathrow Airport, which is already the highest in Europe.
According to S&P, “This could lead to a weakening of Heathrow’s competitive position relative to other European hubs” – raising new concerns about the airport’s position as a global transport hub.
Heathrow insists that the planned expansion will not require any financial support from taxpayers, although Standard & Poor claims it would not be able to afford the third runway without a large amount of cash injection from its shareholders.
The airport’s supporters are largely composed of overseas investors, led by French private equity giant Ardian, Qatar Investment Authority and Saudi Arabia’s public investment fund.
“Despite the strong regulatory environment and excellent competitive position of Heathrow’s agency, we believe that our problem rating of Heathrow’s agency debt is limited and we cannot obtain additional additional leverage,” S&P said.
“In our opinion, it would be difficult for the new runway to fund the money without strong fair support.”
After Prime Minister Rachel Reeves supported the £20 billion project, she was concerned about how Heathrow would pay for the third runway as she stepped up efforts to boost economic growth.
Heathrow Airport will submit its expansion plans later this year, with CEO Thomas Woldbye claiming a third runway could be used in 2035.
Under Standard & Poor’s, the plan could increase the airport’s capacity from 80 million passengers to 140 million pounds per year, costing £20 billion to £2.5 billion.
Mr Woldbye said the third runway would cause passengers to lower their air fares as it would remove the flight capacity limits responsible for the inflation price.
Meanwhile, the airport’s latest annual report shows that Heathrow’s entire enterprise is worth more than £19 billion in debt, resulting in more than £600 million in financial costs last year alone.
However, these did not prevent the airport from releasing £917 million in profits from £3.6 billion in total revenue.
A Heathrow spokesman said: “The expansion of Heathrow will be fully privately funded and therefore must be financeable. Policy changes, including adjustments to the regulatory regime for the third runway, will be key to the successful delivery of the project.”
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