Heathrow passengers must pay more to ‘bail out’ airport, says IAG Business News

Britain’s largest airport is at the center of a dispute over passenger charges.

The Civil Aviation Authority (CAA) says Heathrow may increase its fees to help offset losses caused by the coronavirus crisis. But while the airport owner says the increase is not enough to offset the collapse in passenger traffic, Heathrow’s largest airline group warns users will be “unfairly penalized.”

Heathrow passenger traffic fell 92% year over year in February 2021, the last reasonably comparable month.

Because demand is normally so high for travel through Heathrow, charges are regulated by the CAA rather than determined by market forces.

Airport officials had asked to be able to recover the £ 2.6bn lost so far as a result of the coronavirus pandemic – with an interim adjustment of £ 800m.

But the CAA says that initially only £ 300million in Covid-related losses can be passed on to airport users.

Paul Smith, Director of the UK Civil Aviation Authority, said: “We have made the decision that early intervention at scale [Heathrow’s] the demand is disproportionate and not in the best interests of consumers.

“We recognize, however, that these are exceptional circumstances for the airport and that there are potential risks to consumers if we do not take short-term action.

“The move we announced today will encourage and allow Heathrow to maintain investment, quality of service and be proactive in supporting any potential increase in consumer demand later this year.”

In addition, passengers will have to shoulder the £ 500million in costs incurred for expansion plans at Heathrow, although there is no certainty as to whether the third runway project will go ahead.

The total expenditure of £ 800million – which is subject to an ‘efficiency’ review – will add around 5 percent to the airport’s ‘regulated asset base’, a figure which is used to calculate passenger charges at Heathrow.

A Heathrow spokesperson said: “The CAA has accepted the need to act to meet its obligations to consumers and Heathrow’s financial capacity – but today it has failed to keep his promises.”

“It undermines investor confidence in regulated companies in the UK and puts the government’s infrastructure program at risk.”

The financial impact on passenger charges is expected to reach 80 pence, with the increase taking effect in 2022 and continuing for many years.

But IAG – which, as the parent company of British Airways, Aer Lingus and Iberia, has more than half of the slots at Heathrow – immediately hit the CAA decision.

A spokesperson said: “We are extremely disappointed with the CAA decision which will unfairly penalize consumers.

“Heathrow is the most expensive airport in the world. For more than seven years, passengers have paid higher airport charges at Heathrow to cover the risk in the event of a drop in traffic.

“Meanwhile, Heathrow shareholders have earned almost £ 4 billion in dividends. The airport has deliberately rewarded its investors at the expense of consumers and now the regulator is asking passengers to bail it out.

“The role of CAA is to protect the interests of consumers, not the profits of Heathrow shareholders. After Brexit, this makes the UK even less competitive and will generate traffic to other airports. We are evaluating our options. “

It is believed that IAG may consider judicial review of the CAA’s decision.

Heathrow currently only uses two of its four terminals.

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This notice was published: 2021-04-27 09:54:37