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Britain's Heathrow says business travel lagging in COVID bounceback

Passengers from international flights arrive at Heathrow Airport, following the outbreak of the coronavirus disease (COVID-19), London, Britain

By Sarah Young and Muvija M

LONDON (Reuters) -London's Heathrow Airport, Britain's main travel hub, expects passenger numbers this year to be at the upper end of its forecasts, as demand continues to bounce back after COVID restrictions despite business travel lagging.

Heathrow, owned by Spanish group Ferrovial, Qatar Investment Authority and other investors, forecasts it will carry 58-73 million passengers in 2023, which is around 90% of pre-pandemic levels at the upper end of the range.

Pent-up demand for leisure travel after three years of COVID-19 restrictions is driving passenger numbers, said Heathrow's Chief Executive John Holland-Kaye on Thursday.

"Business demand is probably the only area that is lower than we would have expected," he said.

Business travellers represented 28% of passenger numbers during the final three months of 2022, compared with 32% in the same period pre-pandemic, he said.

"What we're seeing there, is a lot of consulting companies, banks, tech companies, who are big travellers, are pulling back on travel as they're making the cost reductions," he said.

In 2022, Heathrow reported passenger numbers of 62 million, in line with forecasts, representing 75% of pre-pandemic levels.

The company's annual adjusted loss before tax narrowed to 684 million pounds ($825 million) from the 1.27 billion pound loss it made a year earlier, when COVID-19 travel restrictions were still in place at the beginning of the year.

In Britain, normal travel was reintroduced in March, but Heathrow struggled to keep up with demand, and last year's performance was affected by staff shortages and the airport imposing a cap on passenger numbers during the summer.

Asked if Heathrow would return to profit this year, Holland-Kaye, who will step down this year once his successor is appointed, told Reuters it was "unclear at the moment".

No dividends were paid in 2022 and none are planned for 2023, Heathrow said.

The airport is waiting for Britain's aviation regulator, the CAA, to confirm how much it can charge its airlines in the coming years. An announcement is slated for March. Heathrow said it would appeal to the competition regulator, the CMA, if it believed the price set was too low.

"For any infrastructure investment, you need to pay dividends to be able to attract investment," Holland-Kaye said.

Spain's Ferrovial is considering options for its 25% stake in London's Heathrow, sources told Reuters last year.

($1 = 0.8287 pounds)

(Reporting by Sarah Young and Muvija M; editing by William James and Elaine Hardcastle)