Stansted runway could add £10 to air fares

GOVERNMENT plans for airport expansion in the South East looked to be in chaos today after secret Whitehall documents cast doubt on a new runway at Stansted.

The papers reveal that even the Treasury is worried the £2.6bn Stansted scheme could be economically unviable because it could add up to £10 to ticket prices.

Such a price rise would cause an exodus of no-frills, low-cost airlines from the Essex airport, ruining its future.

Ministers are keen to use Stansted to meet the rising demand for air travel expected over the next 20 years. A second runway could boost passenger numbers at the airport from 21m a year to 80m.

BAA, owner of Stansted, has said it could carry out the investment with fares rising by no more than 'the price of a cup of coffee'. But the Whitehall memo, submitted as evidence to a High Court challenge to the plans, shows the extent of senior civil servants' fears about the scheme.

Entitled Financing New Runway Capacity At Stansted Or Heathrow - Key Messages, the document says the Treasury is 'concerned that a new runway at Stansted might not be financeable' by the Department for Transport's favoured opening date of 2012.

The plans are bitterly opposed by residents and several local authoritiesincluding Essex and Hertfordshire county councils. Campaign groups from communities around Heathrow and Luton airports, along with Hillingdon and Wandsworth councils, are also backing the legal challenge.

Because Stansted runs at a loss, BAA's figures are based on using money from Heathrow and Gatwick to cross-subsidise the project. But the government papers say the Civil Aviation Authority (CAA) the industry regulator, believes Stansted should be developed on a 'stand-alone' basis and the CAA 'would need compelling evidence' to change its mind.

The memo adds that due to the 'higher degree of revenue risk' at Stansted, 'certainly compared with Heathrow, BAA could choose to delay development to allow the financing situation to improve'.

The document includes economic modelling figures that show landing charges at Stansted 'will need to rise between £6 and £10 if the new runway is to be funded on a stand-alone basis'.

It adds: 'HM Treasury (with CAA support) is concerned that there is a high degree of revenue risk as the required level of increase in landing charges is likely to be difficult to achieve at Stansted.'

It says landing charges are lower at Stansted because it has to keep Ryanair and easyJet on board. Even a £3-a-passenger increase would result in a 25% reduction in profit for Ryanair - though the Transport Department sees £3 as 'a very marginal part of the costs of travel for passengers', and believes low-cost airlines have limited options to move elsewhere.

But industry experts say Ryanair chief Michael O'Leary, who has called the new runway a 'white elephant', would move to Luton or even outside the UK altogether.

Carol Barbone, a director of Stop Stansted Expansion, a 6,000-strong group of residents backed by most local authorities in the area, said if they were to lose in the High Court they would be ready to go to the European Court of Justice.

She said: 'Everyone for miles around the airport would be affected by expansion. The Government's preferred location for a second runway, well away from the existing one, leaves the threat that BAA would one day demand a third and a fourth.'