Passengers will bear the brunt of higher Heathrow landing fees Business

Heathrow tricked the Civil Aviation Authority (CAA) into inflating costs and understating revenues to justify steep increases in landing fees, according to a report by a former Treasury official.

The findings also allege Heathrow’s majority foreign shareholders are in line for a £5billion salary at the expense of British passengers.

A long-running row between Heathrow and airlines such as British Airways and Virgin Atlantic is set to come to a head in the coming weeks as the CAA decides how much the airport can raise its landing fees over the next few years – charges that are generally passed on to passengers.

Heathrow said the findings were “so flawed it’s embarrassing” and accused the airlines of trying to “protect their own profits”.

The analysis, written by former Treasury official Matthew Oakley and commissioned by the airlines, says the regulator made a series of errors when assessing Heathrow’s bid.

It found that operating costs were overstated by £750m, revenues were understated by £1bn and passenger numbers were understated by up to 57m over the four coming years.

Meanwhile, the airport overstated costs by an additional £3 billion to justify the rate of return needed to increase investment from its shareholders, the report’s authors claimed.

Shai Weiss, chief executive of Virgin Atlantic, said: “Already Europe’s most expensive airport, Heathrow is abusing its monopoly position to divert passengers and undermine the competitiveness of ‘Global Britain’, all to offer excessive returns to its shareholders.

“WPI Economics research shows Heathrow’s desperate attempt to thwart the process, peddling flawed projections and downplaying the resumption of travel, to justify a massive fee increase.”

A Heathrow spokesperson hit back, saying: ‘Airlines seem less interested in providing passengers with reliable travel at the airport and more interested in protecting their own profits.

“Airlines set fares based on what the market will bear, and consumers will have already seen fares rise by up to 100% as airlines try to recoup Covid losses. The increase in airport charges that guarantees good service will slightly reduce airline margins, but will have no impact on consumer prices.

Luis Gallego, Chief Executive of IAG, said: “Heathrow’s passenger forecast is deliberately pessimistic to pursue an unwarranted 90% fee increase. His view is completely inconsistent with industry expectations, including including Eurocontrol forecasts, which suggest passenger volumes could easily top 70m this year.

“Heathrow is underestimating the resumption of air travel and customers are already suffering. Around 40% of Heathrow passengers are connecting to other destinations and could travel via other European hubs. The doubling of charges in what is already Europe’s most expensive airport will be detrimental to UK consumers and the economy. Global Britain needs a competitive hub.”

The quarrel between airlines and airports has been brewing for almost two years. Heathrow wants to raise charges to an average of around £40 per passenger – but has agreed to defer some of the payments for several years.

The increase would be considerably higher than the £22 charged last year and even the £30 currently charged.

The CAA is responsible for reviewing a rate framework every five years. Heathrow is owned by a group of investors, including Spain’s Ferrovial and sovereign wealth funds from Qatar, Singapore and China.

The British pension fund USS holds a 10% stake. Virgin Atlantic has calculated that if Heathrow is successful, the cost of a family of four vacation to Florida would rise by £200.

Mr Weiss added: “A robust recovery in travel is well underway and Heathrow’s play is on the rise. After a strong Easter, airlines continue to see bookings rise for the summer and beyond and the airport’s April passenger figures show the strength of the return in demand.

“Unlike our customers who are facing current cost of living pressures, Heathrow is protected from inflation and the CAA must step up its efforts to fulfill its primary duty to consumers, by regulating a monopoly to set a price cap fair.”

A Heathrow spokesperson said: “Instead of making false accusations, we encourage our airline partners to work with us to give passengers the seamless and predictable journeys they deserve. We are confident that the CAA will make its decision based on the evidence, in the interests of consumers and financial capacity, in accordance with its duties.

The CAA is expected to issue its final decision in July. He did not comment further.

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This notice was published: 2022-05-12 05:00:00

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