CAA Proposes Rival Bids for Heathrow's Third Runway to Curb £33bn Costs

The Civil Aviation Authority wants rival firms to bid for Heathrow’s third runway and new terminal to keep the £33 billion expansion from inflating costs for airlines, businesses and passengers.

Heathrow Airport Limited (HAL) plans to add a third runway and a new terminal that would lift annual capacity to 756,000 flights and 150 million passengers. The project carries a price tag of roughly £33 billion, prompting warnings that the expense could be passed on through higher airline charges, business fees and ticket prices. The government previously signaled a preference for HAL’s design over an alternative proposal from the Arora Group.

The aviation watchdog proposes letting competing companies design, finance, build and operate the runway and terminal, arguing that competitive tendering will curb construction costs. HAL said it welcomes reforms that improve efficiency but cautioned that any policy undermining its plans could delay the economic growth the country needs. Surinder Arora, chairman of the Arora Group, noted that competition at Heathrow, which was absent two years ago, is now strong and growing because the case for change is so strong.

In November the government favored HAL’s plan for a 2.2‑mile runway that requires a new road tunnel and a shift of part of the M25, while the Arora Group offered a shorter, lower‑cost runway that would leave the M25 unchanged. The CAA is now reviewing four possible governance changes, including tighter spending controls and the competitive tendering element described above.

If competitive bidding is adopted, the final bill could fall below the current £33 billion estimate, reducing the pressure on airlines to raise fares and on businesses to absorb higher airport charges. However, splitting the development between multiple firms might introduce coordination challenges that could affect the project’s schedule or safety standards. Stakeholders will watch whether the promised cost savings materialise without compromising Heathrow’s reputation for punctuality and service quality.

The CAA will consult on its shortlist of reforms, with a government planning decision on Heathrow expansion expected by 2029.