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Principal risks and uncertainties

Fuel supply

The infrastructure that provides jet fuel to Heathrow is critical to the operation. Any breakdown in this infrastructure and/or contamination of the fuel supply will have a significant operational impact.

Global economic slowdown/credit crunch

Our revenue is highly sensitive to economic conditions in the markets in which we operate. Further deterioration in the global economy may have a material impact on our financial position. The financial services sector is one of our key customer segments and continued difficulties in the banking industry represent a significant risk to our revenue.

Government intervention

The airline industry is becoming increasingly regulated. The scope of such regulation ranges from infrastructure issues relating to slot capacity and route flying rights, through to new environmental and security requirements. Our ability to both comply with, and influence any changes in, these regulations is key to maintaining our operational and financial performance.

UK Government plans to double APD from 2010, and the European Union Emissions Trading Scheme, may have an adverse impact upon demand for air travel and/or reduce the profit margin per ticket. These taxes may also benefit our competitors by reducing the relative cost of doing business from their hubs.

Heathrow operational constraints

Heathrow has no spare runway capacity and operates on the same two runways it had when it opened 60 years ago. As a result, we are vulnerable to short-term operational disruption and there is little we can do to mitigate this. In February 2008, public consultation on the UK Government’s conclusion that its environmental conditions could be met to allow full use of these two runways and the construction of a third, short runway, ended. This expansion of the airport would create extra capacity and reduce delays, enabling Heathrow to compete more effectively against European hubs such as Paris, Amsterdam and Frankfurt.

Key supplier risk

We are dependent on suppliers for some principal business processes. In the current economic environment our suppliers are at increased risk of business failure. The failure of a key supplier may cause significant disruption to our operation. We describe the supplier risk in more detail in the marketplace.

Pensions

If the financial markets deteriorate further, our pension deficit may increase, impacting balance sheet liabilities, which may in turn affect our ability to raise additional funds.

Safety/security incident

The safety and security of our customers and employees are fundamental values for us. Failure to prevent or respond to a major safety or security incident could adversely impact our operations and financial performance.

chart of net debt £ million

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