Heathrow to remain world’s most expensive airport
Heathrow is poised remain the most expensive airport in the world, under plans submitted by the the UK’s aviation watchdog which permit the hub to raise its passenger fee despite a frenzied lobbying effort from the airline industry.
The Civil Aviation Authority has proposed lifting the maximum charge on carriers by 40p to an average of £28.80, in a move which risks inciting the ire of Heathrow’s restive carriers.
Airlines have been locked in a protracted campaign for the regulator to force the hub’s owner, Heathrow Airport Limited (HAL), to slash airline fees, which are the highest of any major hub in the world.
Ahead of the decision, representatives for the airline industry – including the industry body Iata – had tabled proposals for a reduction to the airport’s general fee per customer of more than £5, knowing they will also be on the hook for much of the £49bn third runway expansion.
Initial estimates suggest the cost of the megaproject, which also includes a coterie of upgrades and the construction of an entire new terminal, will amount to north of £25 per passenger, more than doubling the total fee to above £50.
HAL, which operates a natural monopoly at the airport, had proposed a fee averaging at £34.20 – £5.40 more than that proposed by the watchdog – to help it roll out upgraded security programmes and recover from the electrical fire that plunged the airport into crisis last year.
“Our primary duty is to protect consumers and at the heart of today’s proposals is doing the right thing for passengers using Heathrow airport, while supporting sustainable growth, investment, and efficiency,” said Selina Chadha, a director at the CAA.
“Our proposals for the airport charges levied by Heathrow on airlines strike the right balance between keeping passenger prices fair, while enabling the airport to make the investment needed to improve services for the future.”
Airlines demand ‘complete reset’ at Heathrow
Under a campaign dubbed Heathrow Reimagined, British Airways owner IAG, Virgin Atlantic, and baggage handler Swissport have called for radical overhaul of Heathrow’s regulatory model, arguing the current framework overcharges them. The airlines currently pass much of Heathrow airport’s fees onto customers via their plane fare.
Iata chief Willie Walsh last week demanded a “full reset” of Heathrow red tape, warning that incremental change would “not be enough” for the airport to avoid becoming economically unviable.
“What is needed is a full reset. The current model for Heathrow concentrates too much control in the hands of a single operator, with insufficient competitive tension and weak cost discipline,” he said.
Among the models being touted is a plan to give each major airline its own terminal to operate, which supporters argue would help foster competition and bring down prices for customers. Heathrow has previously said the move would undermine its Saudi and Chinese backers to reassess their pledge to help fund the third runway expansion.
The next CAA regulator envelope, dubbed H8, will cover 2027 to 2031 at the hub. Heathrow has claimed its proposal to raise the overall fee to north of £34 will help fund a £10bn investment programme, funding a noise insulation programme for over 6,500 homes and improvements in the service offered to passengers requriing additional support. It also claimed the cash would help 80 per cent of flights to depart on time, and mean 95 per cent of passengers wait less than five minutes at security.