The bosses of British Airways owner IAG and Virgin Atlantic have joined forces to urge an “urgent and fundamental review” of Heathrow by the Civil Aviation Authority amid government backing for a third runway.
They want the aviation regulator to act over “spiralling costs” at the London hub, warning that the cost of expansion “would be paid for by passengers”.
Writing in The Times today (Monday) IAG and Virgin Atlantic chief executives Luis Gallego and Shai Weiss said: “With runway expansion being drawn up, the scale of investment means that passenger charges will rise again.
“There must be wholesale reform, which is necessary and achievable without delaying spades in the ground.”
The bosses of the airline that fly from Heathrow are joined by Nigel Wicking, who leads Heathrow Airlines Operators’ Commitee (AOC), and Surinder Arora, who operates hotels there.
They claim that Heathrow’s regulatory model “actively encourages inefficient overspend and leads to the highest charges in the world, leaving passengers paying more for less”.
The letter says: “This incentive to spend inefficiently has resulted in more than £15 billion of capital expenditure in the past two decades, which has led to charges doubling in real terms. This is far more than among its peers.
“Heathrow’s price increases meant that in 2024 passengers and airlines paid £1.1 billion more than if its charges were in line with other big European airports. In return they get a declining experience and ageing infrastructure.
“For too long the regulatory model’s failure to constrain the monopoly has harmed consumers, led to squandered spending and diminished Heathrow’s hub status and competitiveness.
“With the prospect of expansion, which would be paid for by passengers, it is now time for the regulator to take action.This is why we have come together to submit our joint proposal to the CAA for an urgent and fundamental review of Heathrow.”
They argue that the collective call is due to “spiralling costs” at Heathrow “which are being shouldered by customers and airlines alike”.
The letter notes: “As Britain’s only hub airport, Heathrow should offer an exceptional experience for passengers but today it is the most expensive airport in the world, with a service that falls well short.
“We believe that Heathrow can achieve much more for Britain. Record-breaking passenger numbers, an airport at near-full capacity and the prospect of a third runway all mask the fundamental problem with Heathrow.
“It is now time for the CAA to investigate what has gone wrong before passengers and airlines get locked into higher charges for decades to come. It is more than 15 years since the last detailed review, undertaken by the Competition Commission.
“An airport that has been the most expensive of its peers for a decade but has failed to modernise at the same pace is a clear sign of the failure of the regulatory system.”
The airline chiefs argue that alternative international hubs have realised the opportunity to stimulate growth in more efficient ways.
“New terminals at Munich, Frankfurt, Madrid and Barcelona all cost half or less, when adjusting for terminal size, than the upgrades to Heathrow Terminals 2 and 5,” the letter points out.
“If Heathrow is to expand and build a third runway, it cannot continue to gold-plate its construction costs and spend inefficiently.
“As UK-based carriers and businesses, we of course support sustainable growth and expansion but only if it is affordable and offers value for money to UK plc.
“The time to act is now. The regulatory model is not fit for purpose. We are asking the regulator to undertake a fundamental review of Heathrow: the first step towards a reimagined Heathrow that delivers for consumers, the government’s growth agenda and the country.”
They point to Heathrow being crucial to the government’s growth mission, supporting 133,000 jobs, delivering 76% of Britain’s long-haul connectivity and processing 70% of its air cargo by value.
“For Britain to remain competitive, Heathrow must be an efficient option for those connecting passengers,” the letter adds.
A Heathrow source said that the airport management has already told airlines and government that it would propose to look at a different, longer-term regulatory model for a third runway but that, as with other goods that consumers buy, those that use a service or product have to pay for the cost of providing or producing it as is the case today.
It makes little sense to suggest that passengers will have new runways and terminal buildings for free as they will require investments over and above current regular investment levels. Heathrow is keen to run a transparent process and work in partnership with airlines, the regulator and ministers to put in place a model that delivers the benefits of expansion for the UK as quickly as possible – including the lower airfares that consumers can expect as a result of new capacity being unlocked.