The UK’s Civil Aviation Authority (CAA) has published a consultation on its initial proposals regarding the price controls at Heathrow airport.
The airport had initially requested the CAA to increase the cap on its charges per passenger to between £32 and £43.
The regulator has instead offered a potential range of airport charges per passenger from £24.50 to £34.40, which is an increase from £22 in 2020. An interim price control of £30 per passenger is set to be implemented from January 2022 to “protect consumers in the gap between the current price control finishing and the next one starting”.
The CAA stated that it “recognises that there is still significant uncertainty in the shape of the aviation industry’s recovery” from the Covid-19 pandemic but that its 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”.
The package of measures includes a five-year control period “to smooth charges for consumers and provide investors with medium-term certainty” which will come into force in summer 2022.
The CAA also confirmed that there would be no additional adjustment to Heathrow’s regulatory asset base to account for losses caused by the pandemic. This will rise by £300 million despite the airport requesting £2.3 billion last year.
Richard Moriarty, Chief Executive at the UK Civil Aviation Authority, 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.”
Shai Weiss, CEO of Virgin Atlantic, commented on the news:
“Today’s initial proposals from the Civil Aviation Authority fail to protect the British consumer, paving the way for Heathrow Airport to introduce unacceptable charges, just as international travel resumes at scale. 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.”
Willie Walsh, IATA’s Director General, has previously commented on the increase of airport charges, which have already reached US$2.3 billion:
“A $2.3 billion charges increase during this crisis is outrageous. We all want to put COVID-19 behind us. But placing the financial burden of a crisis of apocalyptic proportions on the backs of your customers, just because you can, is a commercial strategy that only a monopoly could dream up. At an absolute minimum, cost reduction—not charges increases—must be top of the agenda for every airport and ANSP. It is for their customer airlines.”
The consultations on the interim price cap will run until November 17, and the wider initial proposals until December 17.