Christian Wolmar

As Heathrow Airport Limited loses Judicial Review, CHRISTIAN WOLMAR argues that the lengthy and costly dispute demonstrates the pitfalls of private investors’ involvement in the rail industry

Access charges to Heathrow.

“The notion that one of the main functions of the £15 billion Crossrail service - to better serve air passengers - could be stymied demonstrates the ridiculous complexity of our railway network.”

IT is remarkable that with the opening of the Crossrail tunnel between Liverpool Street and Paddington now less than 18 months away, there is still no clarity about the operation of the service to Heathrow. Indeed, a dispute between the owner of Heathrow (Heathrow Airport Limited, known as HAL) and the Office of Rail and Road, with Transport for London and the Department for Transport on the sidelines, remains unresolved.

This complex and expensive row has been rumbling along since the mid-2000s, costing literally millions in legal fees, and is very much a cautionary tale about the encouragement of private investment in the rail industry. A report in the Sunday Times business pages on May 21 even suggested that Transport for London has contingency plans not to use the Crossrail trains into Heathrow if the dispute cannot be resolved, with passengers having to change at Hayes & Harlington on to the existing Heathrow Connect service.

This seemed like a bargaining chip rather than a genuine possibility, but the notion that one of the main functions of the £15 billion Crossrail service - to better serve air passengers - could be stymied demonstrates the ridiculous complexity of our railway network.

The origin of the dispute is simple. Twenty years ago, the airport’s owner paid for the construction of the five mile-long tunnels linking the Great Western Main Line with the airport, and has charged passengers royally for their use ever since. At £25 for a single journey it is one of the most expensive train fares per mile in the world, and given relatively high usage it has repaid a considerable amount of the cost of building the line.

However, since HAL does not publish separate accounts for Heathrow Express, it is impossible to ascertain exactly how much of the original cost of the £260 million to build the line has been recouped. Moreover, HAL claims that the cost of introducing the service was £1bn, but that is because it includes the cost of trains and various bits of other associated investment. HAL has therefore been pressing to recoup that money by charging future Crossrail passengers exorbitant amounts to reach Heathrow.

With the advent of Crossrail, HAL faces something of a dilemma. It has announced that it wants to keep running, but its business model, which relies on premium pricing, will be completely wrecked (as I wrote in RAIL 787). Why would anyone get off a Heathrow-bound Crossrail train to transfer to a far more expensive Heathrow Express train? And who will struggle to try to get to Paddington, when joining Crossrail trains anywhere on the route will be an easier way to get to Heathrow?

So in a rational world, Heathrow Express would be a dead duck and become defunct, especially as its track access agreement to get into Paddington ends in 2023. Nevertheless, HAL is fighting to keep its service going, given its high level of profitability and its past investment.

In the light of this uncertain future, HAL is very keen to make as much money as possible out of its investment, and consequently has said it wants to charge passengers at a rate which would repay the cost of building the tunnels. According to HAL, this would amount to £597 per service, plus £107 in track access charges, completely wrecking TfL’s plans to greatly reduce the cost of getting to the airport by train.

This dispute has been rumbling on for a decade, and recently reached the Administrative court of the High Court. When the ORR considered the issue, it decided a year ago - after consulting widely in the industry - that HAL’s claim was completely unfounded. HAL then asked for a Judicial Review in the High Court, and in late May it was announced that it had lost the case. HAL is now “considering its options” - it could, in theory, pursue this case all the way up to the Supreme Court.

It was noticeable, however, even to a nonlawyer such as myself, that HAL’s case was extremely thin. While there is no space to go into legal technicalities (and anyway, no one would continue reading...), suffice to say the key point in the case was whether HAL built