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Heathrow airport told to cut passenger charges

·Finance Reporter, Yahoo Finance UK
·3-min read
Airport workers stand next to lines of passenger luggage arranged outside Terminal 2 at Heathrow Airport in London, Britain, June 19, 2022. REUTERS/Henry Nicholls
Heathrow argues it needs to be able to charge more to invest in the passenger experience amid continuing disruption. Photo: Henry Nicholls/Reuters

London’s Heathrow airport will be forced to lower the amount of money it can charge airlines per passenger amid a surge in demand for flights, the aviation regulator announced.

The Civil Aviation Authority (CAA) said the landing fees at the UK’s busiest airport will fall from £30.19 per passenger to £26.31 by 2026. However, Heathrow wanted to increase it to £41.95.

“When the effects of inflation are removed, this is equivalent to nearly a 6% reduction every year from today’s level up to 2026,” the CAA said.

The regulator said the reduction in charges reflected the recent rebound in passenger numbers, and would still allow the airport to invest.

The charges are paid by airlines, but can then be passed onto passengers via airfares. The fees go towards operating terminals, runways, baggage systems and security.

Read more: How BA strike will impact your summer travel plans

The decision follows a bitter dispute between the airport and airlines about what the cap should be.

Heathrow, which lost almost £4bn during the COVID pandemic that all but shut down global travel, is expected to remain loss-making this year as it tries to get back on its feet after the disruption.

Still, nearly £4bn in dividends to shareholders has reportedly been paid out by the airport since 2012.

Its chief executive, John Holland-Kaye, said of the CAA's proposals: "As the industry rebuilds, our focus is to work alongside airlines and their ground handlers to give passengers a reliable and consistent journey through Heathrow.

"The CAA continues to underestimate what it takes to deliver a good passenger service, both in terms of the level of investment and operating costs required and the fair incentive needed for private investors to finance it.

"Uncorrected, these elements of the CAA's proposal will only result in passengers getting a worse experience at Heathrow as investment in service dries up."

The CAA believes Heathrow will still be able to invest in improvements, such as next-generation security scanners and a £1.3bn upgrade of baggage facilities at Terminal 2, replacing technology that failed this month.

Responding to the announcement on Heathrow’s charges, Virgin Atlantic chief executive Shai Weiss said: “In its final proposals for Heathrow charges, the CAA has taken a positive step towards a price cap that puts customers first.

Read more: Heathrow flight cancellations: 15,000 passengers left stranded

“However, the regulator can and must go further to lower the cap beyond the proposed average of £28.39, adjusted for inflation, up to the end of 2026, reflecting robust demand for travel this summer and beyond.

“With travel recovery under way, our collective focus should be on upholding the best possible experience for customers with fair charges, especially with consumers facing cost of living pressures and our Global Britain aspirations at stake.”

The CAA said these are its “final proposals”, with a “final decision” due to be published in the autumn.

The decision can be appealed to the Competition and Markets Authority.

Watch: Heathrow warns on investment as regulator eyes reduction in passenger charges

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