Heathrow urges Budget support for SAF and tax free shopping

UK consumers will pay more to travel in the future if ministers do not speed up the delivery of a domestic sustainable aviation fuel (SAF) industry, Heathrow warned today.

The airport also called on chancellor Jeremy Hunt to make the UK “a magnet for international tourism spend” by levelling the playing field with the UK’s European rivals and bringing back tax free shopping. 

The London hub made the pre-Budget double plea as it reporting its first annual profit for last year since before the pandemic in 2019.

“The spring Budget should not miss the chance to deliver change on both of these key issues for the economy,” Heathrow said, calling on ministers to use the March statement “to stand up for Britain”.

Passenger numbers recovered to 79.2 million in 2023 – the third highest in the airport’s history – and a target for a record 81.4 million has been set for 2024 against 61.6 million last year.

A strong performance in the fourth quarter helped deliver the first adjusted profit in four years of £38 million against loss of £684 million in 2022.

But Heathrow said: “Airport charges were reduced by 20% in real terms at the start of 2024 in line with the Civil Aviation Authority’s H7 settlement, which means maintaining even a small profit will require us to close a £400 million gap with efficiencies and investment trade-offs over the next three years. 

“We are finalising a refreshed business strategy, which will be shared in the months ahead.”

Heathrow confirmed that 146 security lanes were being upgraded as part of a £1 billion investment in next generation security equipment. A lead contractor has also been appointed to replace the Terminal 2 baggage system.

Chief executive Thomas Woldbye (pictured), who joined the airport in October, said: “2023 was a good year for Heathrow from a challenging start to a great finish.

“We delivered much improved service for our customers, and managed to turn a small profit after three consecutive years of losses. 

“That’s a great platform to build on, although in 2024, we are expected to deliver even further improved service to more passengers, but with airport charges cut by 20% in real terms. 

“We will have to pull every lever to become more efficient and make tough choices on where we spend and invest our money to overcome the huge cost challenge set by the CAA and remain profitable over the next three years.”

He added: “We have started to see the benefit of the investments made in recruitment and training over the past two years, with much improved service for our customers. 

“We also made significant progress in security performance, with 92.8% of direct passengers passing through security within five minutes, compared to 69.4% in 2022. 

“Our baggage connection rates remained stable, and we were able to reduce the gap between departures and arrivals punctuality from 11.2% in 2022 to 3.6% in 2023.”

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