Heathrow passenger charge to be curbed

Heathrow Airport has been told it cannot raise its passenger charges for airlines by as much as it wanted.

At present, the airport can charge up to £22 per passenger for the cost of operating terminals, runways, baggage systems and security.

It wanted that to rise to as much as £43 in January, but the Civil Aviation Authority now says it will be capped at £24.50 to £34.40 for five years.

An interim figure of £30 has already been set for 2022.

The move comes as the aviation industry is struggling to recover from the impact of the coronavirus pandemic.

Last year, Heathrow reported a £2bn annual loss after passenger numbers during the pandemic dropped to levels last seen in the 1970s.

CAA chief executive Richard Moriarty told the BBC the industry had gone through "a really difficult period".

He said the CAA had tried to "keep the charges as low as possible, whilst recognising it's really important for Heathrow to invest and maintain a high-quality airport".

Nothing is more guaranteed to raise an airline executives' hackles than the prospect of increased charges at Heathrow, the London hub that is a must-have destination for an international route network.

Airlines have always complained Heathrow charges are too high - even two decades ago, when they were cheaper than at comparable large airports - and the collapse in traffic following the pandemic has only made that feeling worse.

Carriers currently pay on average £22 per passenger. Heathrow asked for an increase of up to £43 per passenger over the next five years, saying Covid-19 had severely hit the number of passengers using the terminals without defraying the airport's necessary multi-billion pound running and investment costs. The CAA has come down between the two, setting a range of roughly £25 to £35, with next year's per passenger charge set at £30.

There was an understandably angry reaction from airlines, with Shai Weiss, the chief executive of Virgin Atlantic, complaining that the airport's owners were abusing its "monopoly" position. They point out that the airport had built up substantial debt in the run-up to the crisis and its shareholders had taken billions of pounds in dividends.

Expect more lobbying of the CAA by the carriers and Heathrow before the final decision next year. Either side can still then appeal against the findings to the Competition and Markets Authority.

The CAA also reconfirmed its decision earlier this year on Heathrow's regulated asset base, which determines how much money the airport can recover from its customers through charges.

This will now rise by £300m, rather than the £2.3bn requested by the company.

Mr Moriarty said Heathrow had in effect wanted to recoup its pandemic losses from consumers, but the CAA had refused.

The plans will be subject to consultation until mid-December, with a final decision being taken in January.

If the airlines that use Heathrow or the airport itself want to contest the plan, they can then take the matter to the competition regulator, the Competition and Markets Authority.

A Heathrow spokesperson said: "Our aim is to reach a settlement that enables us to give passengers a great service while operating a safe, resilient and competitive hub airport for Britain.

"That Heathrow is ranked by passengers as one of the best airports in the world is testament to the power of private investment over the past decade, and to enable this to continue, we believe the settlement should safeguard a fair return for investors.

The spokesperson added that the settlement was not designed to "shield airlines from legitimate cost increases or the impacts of fewer people travelling".

However, trade body Airlines UK has reacted angrily, with chief executive Tim Alderslade saying it would oppose the increase "in the strongest terms".

"The CAA is our last line of defence against a monopoly-abusing hub airport," he said.

"Monopolies will always try it on and that's why we need a strong regulator to clamp down on what is blatant gouging. How on earth can it be in the interests of consumers to ramp up charges by as much as 50%?

"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."