UK aviation regulators have set an initial range for London Heathrow airport to increase its passenger charges by between 11% and 56% over the next five years, but rejected the hub’s request for a higher rise to offset losses incurred during the pandemic.
Heathrow Airport had called for an increase in its charge per passenger from £22 ($30) currently, to between £32 and £43 – a move which prompted an angry response from airline bodies.
In proposals submitted for consultation today, covering the five years from the start of the summer timetable in 2022, the UK CAA has proposed potential airport charges per passenger of between £24.50 and £34.40. It expects to narrow this range before a final decision early next year.
Specifically the CAA ruled out any additional adjustment to account for losses caused by the pandemic – beyond the £300 million it allowed earlier this year. Heathrow airport had been seeking £2.3 billion.
CAA chief executive Richard Moriarty says: ”While international air travel is still recovering, setting a price control for Heathrow Airport against the backdrop of so much uncertainty means we have had to adapt our approach. Our principal objective is to further the interests of consumers while recognising the challenges the industry has faced throughout the Covid-19 pandemic.
“These initial proposals seek to protect consumers against unfair charges, and will allow Heathrow to continue to appropriately invest in keeping the airport resilient, efficient and one that provides a good experience for passengers.”
Passenger traffic has plummeted at Heathrow since the pandemic hit, as long-haul travel remains sharply curtailed. In September the airport handled 2.6 million passengers, its highest level since the crisis began but still well down on the 6.8 million it handled in the same month in 2019. The airport recorded a net loss of £917 million in the first half of 2021.
In setting out the proposed charges, the CAA points to the difficulty in projecting the likely strength of the recovery in air traffic following the pandemic. As a result it intends to “test different scenarios” with the industry and continue to monitor the sector’s recovery over the coming months. ”This means we will be able to hone our assumptions and narrow this range as we finalise the price control next year,” the CAA says.
It has also set out traffic risk-sharing mechanism: should traffic traffic levels fall short of its mid-point projection, it will allow Heathrow to recover part of the difference by charging slightly higher prices in future price control periods. Conversely, if traffic is higher than expected, it will reduce the amounts that Heathrow can charge.
While falling short of the levels Heathrow had requested, airlines have still voiced concerns at the scale of the potential increases.
Virgin Atlantic chief executive Shai Weiss says: ”Today’s initial proposals from the Civil Aviation Authority fail to protect the British consumer, paving the way for Heathrow Airport to introduce unacceptable charges, just as international travel resumes at scale. The world’s most expensive airport risks becoming over 50% more expensive, as Heathrow and its owners seek to recoup their pandemic losses and secure hundreds of millions in dividends to shareholders.
”It is concerning that the regulator has failed in its first opportunity to step in, and together with industry partners, we will oppose these proposals in the strongest terms to protect passengers.”