Heathrow can increase the amount it charges airlines by no more than 1.5 per cent below inflation over the next five years, the Civil Aviation Authority has ruled.
The airport labelled the decision “draconian” and will now consider whether to appeal it.
LHR had wanted to be able to raise charges by RPI plus 4.6 per cent to continue funding improvements to infrastructure. It currently charges £20.71 per passenger.
Today’s news comes as a surprise, given that in October the CAA had recommended that Heathrow be allowed to increase its charges by RPI (see news, October 3).
Colin Matthews, Heathrow’s chief executive, said: “We are concerned by the degree of change since the CAA’s final proposals just a short while ago. In October, the CAA accepted the need for changes to its April proposals, but has now reverted to a draconian position.
“We will review our investment plan to see whether it is still financeable in light of the CAA’s settlement.”
However, the CAA said the decision, which comes into effect in April, will benefit passengers.
The authority’s chair, Dame Deidre Hutton, said: “They will see prices fall, whilst still being able to look forward to high service standards, thanks to a robust licensing regime.”
Virgin Atlantic chief executive Craig Kreeger said the ruling did not go far enough.
He said: “Today’s decision is a far cry from the reduction needed to mitigate the incredibly steep price rises customers have seen in Heathrow airport charges in the last few years.
“Prices at Heathrow are already triple the level they were ten years ago, and coupled with ever increasing Air Passenger Duty, customers flying to and from the UK are facing some of the highest travelling charges in the world.”
The CAA has also ruled that Standted Airport be free to set its own charges from April – a decision criticised by Ryanair.
The airline said in a statement: “Against evidence and its own earlier findings, the CAA now inexplicably claims that airlines are able to exert buyer power on Stansted in circumstances where Stansted was allowed by the CAA to double its charges in 2007, which caused a five-year, 27 per cent traffic collapse at Stansted while Heathrow and Gatwick were growing.
“Even Easyjet moved flights to Southend to avoid Stansted’s high charges.”