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Markets manage small rise despite Heathrow charges hitting airlines

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London’s top stocks traded up slightly flat on Tuesday as losses for the owner of British Airways were offset elsewhere on the exchange.

IAG, which is behind the flag carrier, was hit after proposals to hike airport charges at Heathrow were revealed.

The new proposals, from the Civil Aviation Authority, would allow Heathrow’s charge to rise from £22 per passenger to £34.40.

“Heathrow is already the world’s most expensive hub airport. The disproportionate increase compared to other European hubs will undermine its competitiveness even further and UK consumers will be losing out,” IAG chief executive Luis Gallego said.

His company’s shares were punished on Tuesday, dropping to the bottom of the FTSE 100, after having lost 5.8% of their value.

Fellow airlines Tui and EasyJet were among the biggest fallers on the the smaller FTSE 250 index.

“Airlines are on the back foot once again today, with sharp losses for IAG, Tui, and easyJet dragging down the wider FTSE index,” said Joshua Mahony, a senior market analyst at IG.

“Rising UK Covid cases and the recent emergence of the Delta-plus strain do provide a little cause for concern, although there remains hope that the successful vaccination drive should help protect the travel sector from any further disruptions.

“However, news that the Civil Aviation Authority has approved a whopping 53% rise in Heathrow airport fees makes the airport the most expensive in the world.

“That is a particularly difficult pill to swallow for airlines that have been hoping to raise prices in a bid to improve margins and regain lost lockdown earnings.”

But the fall in IAG’s shares were not enough to push the FTSE into the red. After trading down for part of the day it closed 0.2% in the green.

The index rose by 13.7 points to reach 7,217.53.

In New York, US markets were also in the green, with the S&P 500 gaining 0.6%, and the Dow Jones up 0.5% as traders prepared to go home in London.

In Germany, the Dax index gained 0.3% while France’s Cac 40 dipped 0.1%.

By the end of trading in London, one pound would buy 1.3802 dollars, a small rise, while it was up 0.1% against the euro, buying 1.1864.

In company news, Newcastle-based housebuilder Bellway revealed to its shareholders that profits had more than doubled to £479 million in the last financial year.

But the company cautioned that the cost of building was being pushed up by disruptions to the supply chain and rises in the price of steel and timber.

As a result, its construction levels are likely to be similar in the six months to January 2022 as they were in the same period a year earlier, Bellway said. Investors sent the company’s shares up by 1.6%.

Entain, the company behind Coral and Ladbrokes, saw its shares rise as its suitor DraftKings was given another four weeks to make a formal bid for the company or walk away.

The Takeover Panel had approved an extension to the US company’s bidding deadline, which would otherwise have come to a close on Tuesday.

The two companies are in talks to see if a deal is feasible, Entain said on Tuesday, but stressed that a deal is not a given.

Shares in the company had been trading down slightly earlier in the day, but jumped following the news on Tuesday afternoon and closed up 2.2%.

The biggest risers on the FTSE 100 were Fresnillo, up 24.6p to 887.6p; Hikma, up 65p to 2,413p; Pearson, up 15.6p to 630.8p; Hargreaves Lansdown, up 37.5p to 1,546p; and Entain, up 47p to 2,171p.

The biggest fallers on the FTSE 100 were IAG, down 10p to 165.56p; United Utilities, down 12p to 380.7p; Rolls-Royce, down 3p to 139.44p; Reckitt, down 109p to 5,391p; and Unilever, down 52p to 3,787p.

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