Q6 Full Business Plan - Heathrow Airport

6. Dependencies and risks
6.4. Risks to the cost base
6.4.1. Cost Forecasts
There are a number of significant risks to the cost
projections shown in this plan. These risks are covered in
Chapter B6, but the most material are:
• Unprecedented volatility in energy prices – only part of
which is passed on through ORCs;
• Material changes in security requirements and
regulations may make the security cost forecasts
invalid and inadequate – only part of which could be
recovered by the ‘S’ factor;
• The operational costs of new facilities such as T2 are
difficult to forecast precisely, in the absence of any
historic actual costs;
• The timing of T1 closure in order reduce operational
costs, is dependent on a series of projects, many of
which are dependent on third party projects;
• Shocks such as meteorological events, industrial action,
or one-off events that change passenger volume
profiles (such as the Olympics) have an impact on the
cost base when they occur;
• Pension liabilities are subject to demographic and
investment return uncertainty, and the outcome of
triennial negotiations with trustees.
6.4.2. The economic environment
The business plan has been developed at a time of
considerable on-going economic uncertainty. For
example, if the risks to a deeper European recession
materialise, this would of course have wider economic
impacts and will almost certainly affect demand at
Heathrow and elsewhere. Similarly, risks of a slowdown
in the US following removal of fiscal stimuli, or slower
growth in China impact on Heathrow. Both the
passenger numbers and the commercial revenue at
Heathrow are highly sensitive to the macro-economic
assumptions made.
6.4.3. Airline developments
Airlines may delay or cancel fleet upgrades, fail or merge,
and new airlines may acquire landing slots at Heathrow.
Each of these will have impacts on the passenger
forecast and the facilities and services required at
Heathrow, and the corresponding operating cost.
We have assumed within this business plan that the
recent decision on terminal occupancy – instigated due
to the acquisition of bmi by IAG – is final.
Page 50 Heathrow Q6 Full Business Plan - Public version | Chapter 6 © Heathrow Airport Limited 2013