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Heathrow Costs Set to Take Off Jobs

by | Nov 11, 2021 | Commercial | 0 comments

Civil Aviation Authority (CAA) approves airport charge price hike for UK’s largest airport.

Pop quiz – what do Jackie Wilson and Heathrow’s per passenger charge have in common? They just keep on being lifted higher and higher! Bad jokes aside, passengers looking to use the UK’s largest airport in the future may be faced with an increase on their ticket of between £24.50 and £34.40. This price hike has left airlines feeling pretty low (last one, I promise.) The changes are set to take effect in summer of 2022, with the previous cap of £22 per passenger from 2020 being lifted, and an interim cap of £30 being set for next year. This interim cap is necessary to “protect consumers in the gap between the current price control finishing and the next one starting” according to the CAA. However, with the proposed cap set at the higher end of the potential price raise, this will be a bitter pill to swallow for consumers. It is important to note that this amount is not set in stone. The CAA has stated its intentions to work closely with the airport, and airlines, to narrow down the potential price range in the coming months. Consultations on the aforementioned interim cap are set to run until November 17th, and the further general price proposals until December 17th. This gives airlines and Heathrow a few more months to duke it out on the negotiating table before a final decision is made. Important to note is the fact that the CAA has already rejected a request from Heathrow for a further increase to its regulatory asset base (on top of the £300M the CAA allowed in April). This is under the airports funding model which utilises landing charges to recover airport investment. This move, at least, demonstrates the middleman approach the body is set to take. Further to this, their decision to allow this price hike comes off the back of Heathrow’s initial proposed increase of between £32 and £43 per passenger. An eyewatering amount for post-Covid travellers looking for a much-needed break after consecutive years of pandemic lockdowns. It’s no secret that the last few years have hit individuals and businesses hard. With that fact in mind, it makes sense that Heathrow is looking to “safeguard a fair return for investors” according to a spokesperson for the airport. However, a balance must be struck between Heathrow’s need to recover from pandemic losses, and the need for airlines to make travel appealing to passengers again in order to do the same.

The CAA is in a bit of a sticky situation then. Facing the concerns of the UK’s largest aviation hub on one hand, as well as the frustrations of multiple aviation companies not happy about losing out on post-pandemic custom on the other. Richard Moriarty, chief executive at the CAA, stated how “these initial proposals seek to protect consumers against unfair charges and will allow Heathrow to continue to appropriately invest in keeping the airport resilient.” A contested statement, with multiple airline executives chiming in, including CEO of Virgin Atlantic Shai Weiss. Weiss stated how “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.” Weiss has a point. Heathrow is already one of the world’s most expensive airports to fly from. With the pandemic hitting individuals as well as businesses hard financially, the price increase may prevent consumers from being able to afford a much-needed trip abroad. This comes off the back of the proposed $2.6BN increase in charges from the airport over the pandemic as well – something that Willie Walsh, IATA’s director general labelled as “outrageous”. Walsh described the move as “a commercial strategy that only a monopoly could dream up.” I have to agree with the two execs here (a rarity for me). The multiple price hikes do seem a bit ‘on the nose’ to say the least. With corporations looking to squeeze every last penny out of post-pandemic financial recovery schemes, Heathrow seems set to favour investors over customers. A move which could see the airport drop in popularity dramatically. It’s not outside the realms of possibility that this may lead to my own local Gatwick claiming the title of ‘UK’s most popular’. That is, of course, if the CAA approves the higher end of the price raise. Only time will tell.


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