Updated: CAA seeks to limit Heathrow passenger fees hike

The aviation regulator has revealed consultation over proposals which could see Heathrow’s charges per passenger rise by more than £10 from 2020 levels.

The potential range of airport charges per passenger was outlined as being from £24.50 to £34.40, an increase from £22 per passenger in 2020 instead of between £32 and £43 proposed by the London hub to recover Covid-19 losses.

The airport can currently charge up to £23 per passenger for the cost of operating terminals, runways, baggage systems and security.

The Civil Aviation Authority pledged to “will work closely with Heathrow, airlines and other stakeholders to narrow this range over the next few months” while considering an interim price cap for 2022 “to protect consumers from any undue increase in airport charges”.

The CAA also reconfirmed a 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 £300 million, rather than the £2.3 billion requested by the airport. 

The outline plan will ultimately set the maximum charges the airport can charge airlines for using the airport for the next five years from summer 2022.

The consultation was published following airlines led by Iata director general and former British Airways boss Willie Walsh warning of a 90% hike in Heathrow landing fees.

Virgin Atlantic chief executive Shai Weiss claimed the CAA proposals failed to protect the consumer, paving the way for “unacceptable charges”, just as international travel resumes at scale.

He warned: “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.

“Abusing its unique position as the UK’s only hub airport, Heathrow’s proposed increase of charges will hurt the UK’s economic recovery and unfairly hit the pockets of families and businesses around the nation. No other airport in the world is proposing increases on this scale and by becoming unaffordable, competing EU hubs and airlines will benefit.”

Airlines UK chief executive Tim Alderslade said: “The CAA is our last line of defence against a monopoly-abusing hub airport. 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. We will oppose this in the strongest terms.”

International Airlines Group chief executive Luis Gallego said “international connectivity is vital for the UK´s economic recovery” noting 1.5m British jobs are supported by the aviation industry, accounting for 4.5 per cent of Britain´s GDP.

“Heathrow is already the world’s most expensive hub airport,” he said. “The disproportionate increase compared to other European hubs will undermine its competitiveness even further and UK consumers will be losing out.

“A cost-efficient Heathrow would benefit travellers, businesses and the UK economy as a whole.

“Airport charges must be competitive if Global Britain is to become a reality. We will engage in the regulator´s consultation to ensure aviation can play its part to deliver this, and to advocate for UK consumers over the interests of Heathrow’s shareholders”.

Announcing the initial price control proposals, the CAA said it “recognises that there is still significant uncertainty in the shape of the aviation industry’s recovery from the Covid-19 pandemic.

“These proposals will deliver affordable charges for consumers and allow the airport to continue to invest in service quality, while also supporting consumer demand as the industry recovers.”

Measures set out in the consultation include a five-year control period, which will allow the airport to “smooth charges for consumers and provide investors with medium-term certainty”.

Consultation on the interim price cap and the wider initial proposals will run until 17 November 17 and December 17 respectively, with a decision due in January.

CAA chief executive Richard Moriarty 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.

“We look forward to working with all stakeholders as we refine this package of measures in the coming months, before setting out our final proposals next year.”

The airport said in July that its losses from the Covid-19 pandemic had hit £2.9 billion.

Passenger numbers in September were just 38% of pre-pandemic levels.

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