Heathrow gets green light from regulator to raise landing charges

Heathrow gets green light from regulator to raise landing charges

Heathrow gets green light from regulator to raise landing charges

Heathrow will be able to raise landing charges as the travel industry recovers from the pandemic, UK regulators said, a move set to deepen a bitter clash between one of the world’s busiest airports and the airlines that use it.

The Civil Aviation Authority on Tuesday proposed allowing Heathrow to increase landing fees from £22 per passenger to between £24.50 and £34.40 over the next five years. However, it blocked the airport’s effort to nearly double its fees.

Heathrow already has some of the highest charges in the world, and the costs are typically passed straight on to consumers through higher ticket prices.

Landing charges have long been a source of dispute, but the scale of the aviation industry’s losses over the past 18 months have raised the stakes for airlines and the airport. Heathrow’s plan to nearly double its charges had sparked a furious backlash.

Airlines on Tuesday said they would oppose the proposed increases in landing charges set out by the CAA “in the strongest possible terms”.

Tim Alderslade, chief executive of lobby group Airlines UK, said the CAA was airlines’ last line of defence against “a monopoly-abusing hub airport”.

“We need a strong regulator to clamp down on what is blatant gouging,” he said.

The CAA said the changes would be “affordable” for passengers while still allowing Heathrow’s owners to invest in the airport at a time of uncertainty over the strength of the recovery from the 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,” said CAA’s chief executive Richard Moriarty.

The regulator said it would work over the coming month with airlines and the airport to narrow the range published on Tuesday. The CAA will consult on its proposals, and deliver a final verdict next year.

Heathrow argues that it has fixed costs that it has to pay regardless of how many passengers come through the airport, and that airlines can flex their ticket prices up and down to reflect consumer demand. The airport said it would work with airlines and the regulator to reach a final settlement.

“While it is right the CAA protect consumers against excessive profits and waste, the settlement is not designed to shield airlines from legitimate cost increases or the impacts of fewer people travelling,” Heathrow said.

Heathrow is owned by major infrastructure investors including Spain’s Ferrovial, the Qatar Investment Authority and Canadian pension fund Caisse de dépôt et placement du Québec, and airlines point to billions in dividends taken out of the airport in the years leading up to the crisis.

“Passengers need to be front and centre here — it’s Heathrow’s shareholders and not our customers who should be asked to foot the bill,” Alderslade said.

The CAA on Tuesday also confirmed it has blocked Heathrow from a separate effort to recoup almost all of its pandemic losses, more than £2bn, by a change to the size of its regulated asset base.

The regulator earlier this year allowed Heathrow to raise an extra £300m but said the push for £2bn was “disproportionate”.