The Civil Aviation Authority (CAA) has proposed changes that could require Heathrow Airport to open bidding to other companies for the construction and operation of its planned third runway and new terminal. The proposal aims to introduce greater competition and control over costs associated with the airport’s expansion, which is part of a broader £49 billion investment program spanning several decades.

As part of a regulatory review, the CAA outlined a series of reforms that would force Heathrow to tender out design, construction, and operation work for new facilities to external businesses. A more significant suggestion under consideration is to allow rival firms to build and operate standalone terminals, similar to the model used at New York’s JFK airport. This option, which would require government approval, could even see an alternative developer involved in building and running the new runway itself.

The proposals come amid airline concerns that Heathrow's expansion could lead to cost overruns, resulting in higher charges for carriers that would ultimately be passed on to passengers. British Airways, Virgin Atlantic, and other airlines have criticized Heathrow’s current regulatory framework, claiming it results in higher costs compared to other major European hubs like Paris Charles de Gaulle and Amsterdam Schiphol. These carriers have long lobbied for a more radical overhaul of the airport’s financial model.

Heathrow’s shareholders have cautioned against major alterations to the existing arrangement, warning that such changes might undermine the financial viability of the runway project, which the airport argues would boost the UK economy by around 0.5 percent of GDP. The airport itself has expressed support for reforms intended to enhance efficiency and cut red tape but opposes proposals it views as potentially impeding progress or delaying economic growth.

The regulator’s consultation opens a pathway for increased competition at Heathrow, a development welcomed by Surinder Arora, a hotel magnate who has submitted a competing, lower-cost runway plan. Arora’s proposal, initially rejected by government ministers, involves a shorter runway design. The CAA’s consideration of alternative developers could revive interest in his plan, which includes plans for development that would affect infrastructure such as the M25 motorway. Arora has stated that the regulator’s proposals reflect a growing recognition of the need for competition at Heathrow.

Responses to the CAA’s consultation are due by mid-June, after which the regulator plans to decide which changes to implement later in the year. The government is expected to review a new policy document this summer that may pave the way for the third runway project, with Transport Secretary Heidi Alexander ultimately required to approve submitted plans. Currently, Heathrow’s expenditure plans are reviewed and approved by airlines every five years, but earlier this year the CAA rejected the airport’s spending framework for 2027-31, urging a stronger focus on value for money.