Virgin Atlantic’s CEO Shai Weiss says new analysis shows Heathrow airport is “peddling flawed projections and downplaying the recovery of travel”, in order to justify a proposed increase in charges.
The analysis from consultancy firm WPI Economics – commissioned by IATA, Virgin Atlantic and British Airways, and authored by former Treasury official Matthew Oakley – claims that “flawed projections used to set charges at Heathrow could lead to [a] £5 billion miscalculation”.
The report, entitled ‘Clipping Britain’s Wings’, said there are “significant concerns about out-of-date, deliberately pessimistic projections which underpin Heathrow’s proposal to increase charges by a disproportionate 117 per cent and in turn, the Civil Aviation Authority’s (CAA) initial proposals published in October 2021, which have already led to a 56 per cent interim rise in charges in 2022”.
It says that independent evidence suggests the CAA is “wildly over-estimating Heathrow’s future operating costs by £750 million”, as well as “under-estimating Heathrow’s future commercial revenue by £1 billion”, “under-estimating passenger numbers by as much as 57 million over the next four years”, and “grossly over-stating the rate of return needed to raise investment leading to increased costs of as much as £3 billion”.
The report warns that if the projections are used to calculate fees, it could lead to charges being “at least £5 billion more than needed”.
A final decision on Heathrow’s price control through to the end of 2026 is expected to be made this summer, and the report said that “hiking Heathrow’s prices even further could lead to significantly fewer passengers travelling through the UK’s only hub airport and instead opting to connect to global destinations via other, more competitive European rivals”.
The report concluded that the CAA should “urgently revisit its analysis”, and suggested that the UK government “could change the legislation around the CAA’s duties to make it clear that it should pay regard to the financeability of any operator at Heathrow, rather than just the incumbent operator”.
Commenting on the report Shai Weiss, CEO, Virgin Atlantic said:
“Already the most expensive airport in Europe, Heathrow is abusing its monopoly position to fleece passengers and undermine the competitiveness of Global Britain, all to deliver excessive returns to its shareholders.
“WPI Economics research shows Heathrow’s desperate attempt to game the process, peddling flawed projections and downplaying the recovery of travel, to justify a massive increase in charges.
“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.”
Business Traveller contacted Heathrow for a response to the above, and received the following comment:
“This ‘analysis’ from airlines is so flawed it is embarrassing. 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 per cent 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.”
Last month the airport said that it will not make a profit in 2022, stating that “demand remains very volatile” and that it expects passenger numbers to “drop off significantly” after the summer months.
