The Court of Appeal said the government did not follow policy on climate commitments when it gave the green light to a third runway.
However, the judges added the project can go ahead if it fits with the country’s environmental pledges.
Heathrow Airport said it will appeal to the Supreme Court and it is “ready to work with the government” to fix the issues raised.
The government, instead, said it will not appeal and the project is only backed by the industry.
Airport expansion is core to boosting global connectivity. We also take seriously our commitment to the environment. This Govt won't appeal today's judgement given our manifesto makes clear any #Heathrow expansion will be industry led.— Rt Hon Grant Shapps MP (@grantshapps) February 27, 2020
IAG tanked 9% to 509.2p on Thursday morning.
“Having their [IAG’s] key hub at Heathrow, that probably has some effect,” AJ Bell’s Russ Mould told Proactive. “It probably will be a big deal.”
Asset manager Sarasin & Partners said the decision is "game-changing" as governments are increasingly being held accountable for their commitment to the Paris Agreement.
"We sold our holdings of Heathrow debt from our Climate Active strategy in 2019, due to the lack of a demonstrable commitment by the holding company," said Natasha Landell-Mills, head of stewardship at the firm.
"Investors putting capital to work in carbon-intensive activities risk bearing the cost of similar litigation and resulting stranded assets," she added.
British Airways’s sector mates were also having a bad day, with Wizz Air Holdings PLC (LON:WIZZ) and easyJet PLC (LON:EZJ) both down 8% to 3,402p and 1,064p, respectively, while Ryanair Holdings plc (LON:RYA) slipped 6% to €11.87.
But according to Mould, the ruling on Heathrow had little to do with the budget airlines, as they were mostly hit by increasing concerns on the coronavirus outbreak.
“As coronavirus reached Brazil for the first time yesterday, I think in every continent in the world except the Arctic and the Antarctic people are concerned,” Mould commented.
“We had President Trump yesterday talking about considering banning inbound flights not just from China but from other countries if the spread gets worse.”