Heathrow will be allowed to raise significantly its landing charges from next summer, the aviation regulator has announced, although it has ruled out the near-doubling of charges proposed by the airport.
Airlines reacted with dismay at the Civil Aviation Authority’s proposals, which could allow the UK’s biggest airport to increase charges by up to 56% by 2023 as it seeks to recoup losses from the pandemic.
The CAA has launched a consultation on a range of airport charges a passenger from £24.50 to £34.40, an increase from £22 a passenger in 2020. It said it sought to protect consumers against unfair charges, and that it would work closely with Heathrow, airlines and others to narrow this range over the next few months.
The range will come into effect from summer 2022, with an interim cap of £30 for next year.
Heathrow had called for the charges to range from £32 to £43 a passenger, as it seeks to recoup losses caused by the coronavirus pandemic – a sum that led Willie Walsh, the ex-AIG boss leading the global airline body Iata, to accuse the airport of “gouging” its customers.
The airport said in July that its total losses since the start of the pandemic had reached £2.9bn. In September, passenger numbers were 38% of pre-pandemic levels.
Richard Moriarty, the CAA chief executive, said: “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.”
The CAA rejected Heathrow’s request for an additional adjustment to its regulatory asset base to make up losses caused by the pandemic on top of the £300m it allowed in April. Heathrow had asked for a £2.6bn increase under the funding model that recovers airport investment through landing charges.
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.
“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.”
However, airlines said the proposals were unacceptable. Shai Weiss, the chief executive of Virgin Atlantic, said they “failed to protect the British consumer”, adding: “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.”
Luis Gallego, the chief executive of the British Airways owner IAG, said: “International connectivity is vital for the UK’s economic recovery. Heathrow is already the world’s most expensive hub airport. The disproportionate increase compared to other European hubs will undermine its competitiveness even further and UK consumers will be losing out.”
He said that IAG would engage in the regulator’s consultation “to advocate for UK consumers over the interests of Heathrow’s shareholders”.