Heathrow under fire over airline charge hike proposal

Heathrow has come under fire for a proposed increased cap on passenger and airline charges from this summer which could see the hub rake in as much as £5 billion for its foreign shareholders by 2026.

But a report commissioned by aviation body Iata and leading airlines British Airways and Virgin Atlantic attacking the airport was disputed by Heathrow as “flawed”.

Virgin Atlantic chief executive Shai Weiss accused London’s main airport of abusing its monopoly position “to fleece passengers and undermine the competitiveness of Global Britain” while delivering “excessive returns” to its shareholders.

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He claimed Heathrow was “peddling flawed projections and downplaying the recovery of travel” to justify a massive increase in charges.

Weiss added: “A robust recovery of travel is well underway and Heathrow’s game is up.

“After a strong Easter, airlines continue to see bookings surge for the summer and beyond and the airport’s own April passenger figures show the strength of returning demand.

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

His comments came as the study released today (Thursday) by WPI Economics suggested the plan to hike fees at Europe’s most expensive airport came on top of more than £4 billion in dividends paid out since 2012, including a further £100 million dividend in 2020 at the height of the pandemic, while taking on £4 billion in debt over the same period.

The report by former Treasury official Matthew Oakley comes ahead of the Civil Aviation Authority publishing its final proposals for the price control on overall airport charges until the end of 2026, expected next month.

Raising Heathrow’s prices even further could lead to fewer passengers travelling through the airport and instead opting to connect to global destinations via more competitive European rivals.

Fees at Paris Charles de Gaulle and Amsterdam Schiphol were 54% and 57% lower, respectively, even before a recent price hike at Heathrow, it claimed.

More than half (56%) of connecting passengers from seven of the UK’s regional airports already chose to do so through EU hubs, rather than Heathrow in pre-pandemic 2019, according to the research.

The report warned: “A further increase in passengers switching to EU hubs could force airlines to consolidate operations outside the UK, leading to fewer new global routes that are critical to jobs, economic contribution and the UK’s ability to trade.”

Oakley, former Treasury official and author of the report, said: “Hiking charges will hurt consumers most and ultimately lead to fewer passengers choosing to connect through Heathrow.”

He added: “The more expensive flying from Heathrow becomes, the greater is the risk to Global Britain´s ambition becoming a reality. This will undermine UK´s ability to trade leading to a loss of connectivity as airlines are pushed to consolidate around more profitable routes and move more of their operations to EU hubs.”

“The government must act to ensure that its Global Britain and Levelling Up agendas are not jeopardised by an unjustified regulatory decision which puts shareholders above consumers and the economy. This might take a rethink of how Heathrow is regulated.”

A Heathrow spokesperson condemned the analysis from airlines as “so flawed it is embarrassing”.

They said: “The only thing passengers get when you underinvest in an airport is missed flights – which is what we saw at airports across Britain recently, while Heathrow operated smoothly because we have invested in service.

“Airlines appear less interested in giving passengers a reliable journey at the airport, and more interested in protecting their own profits.

“Airlines set fares to what the market will bear, and consumers will have seen fares rise by up to 100% already as airlines try to recover Covid losses.

“The increase in airport charges that guarantees a good service will reduce airline margins slightly, but have no impact on consumer prices.

“Instead of throwing false accusations, we encourage our airline partners to work with us to give passengers the smooth and predictable journeys they deserve.

“We trust that the CAA will make its decision based on the evidence, in the interests of consumers and financeability, in line with its duties.”

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