Airlines have expressed their disappointment in the Civil Aviation Authority (CAA) for agreeing Heathrow can raise its landing fees, although not by more than inflation.
Dale Keller, chief executive of BAR UK said the price regulation decision is “bad news” for the UK’s international competitiveness while Virgin Atlantic criticised the CAA for bowing down to Heathrow’s demands.
Heathrow has said its charges are justified to continue investment into the airport, but has been growing for several years and will continue to for another five.
Keller said: “Airline CEOs will be reaching for their oxygen masks in the knowledge that they will be forced to pass on excessive airport charges to their customers for the next five years.
“Consumers have benefitted from intense competition between airlines, driven by major efficiency gains and razor thin margins. Yet the CAA’s new primary duty to consumers has failed its test flight by instead rewarding operating inefficiencies and excessive shareholder returns at the monopoly that is Heathrow. Following increases exceeding 300% over the past 11 years, the latest settlement allowing further RPI increases escalates costs to consumers and weakens the international competitiveness of the UK’s only hub airport.”
In a statement, Virgin Atlantic said: “It is deeply disappointing to see the CAA has bowed to pressure from Heathrow Airport Limited and its shareholders. The decision to further increase charges at the airport for the next five years is another hammer blow for both UK consumers and overseas visitors wanting to travel to this country. Prices at Heathrow are already triple the level they were ten years ago and coupled with ever increasing Air Passenger Duty, passengers are facing some of the highest charges in the world and this is deterring inbound tourism and foreign investment.”
However, Heathrow said the raise was not far enough as it looks to improve infrastructure using funds from stakeholders and the fees.
“This proposal is the toughest Heathrow has ever faced. The CAA’s proposed cost of capital of 5.6% is below the level at which Heathrow’s shareholders have said they are willing to invest. The CAA’s settlement could have serious and far-reaching consequences for passengers and airlines at Heathrow,” said the airport’s chief executive Colin Matthews.
“We want to continue to improve Heathrow for passengers. Instead, the CAA’s proposals risk not only Heathrow’s competitive position but the attractiveness of the UK as a centre for international investment. We will now carefully consider our investment plans before responding fully to the CAA.”
Meanwhile, the CAA has listened to Gatwick’s Commitments framework to improve competition, while a decision is yet to be made for Stansted after the Essex airport agreed new deals with easyJet and Ryanair.
Dame Deirdre Hutton, CAA Chair said: “Tackling the upward drift in Heathrow’s prices is essential to safeguard its globally competitive position. The challenge for Heathrow is to maintain high levels of customer service while reducing costs. We are confident this is possible and that our proposals create a positive climate for further capital investment, in the passenger interest.”