British Airways and other airlines attacks 40% Heathrow price rises to airlines
Willie Walsh, chief executive of International Airlines Group, the owners of British Airways, has attacked Heathrow for applying to the CAA to be allowed to charge airlines 40% more to use the airport over the next 5 years. The CAA is expected soon to announce the new regulated costs of using the UK’s airports for the next 5 years. Heathrow has said it needs the large increases to pay for more capital investment and improving the facilities for passengers. Willie Walsh is complaining about this and making out that BA cares about lower fares for its passengers: “In the interests of air travellers, we believe it is high time these charges started to come down.” British Airways has its hub at Heathrow and has the largest number of flights and passengers there. Mr Walsh said the airport had failed to get to grips with costs and that as the only hub airport in the UK it was acting as a monopoly provider. Virgin and IATA have also complained about the increase in charges. How will Heathrow manage to build another runway, or even two, when its airlines don’t want to pay for it?
Walsh attacks 40% Heathrow price rises
Willie Walsh, chief executive of International Airlines Group, the owners of British Airways, has attacked Heathrow Airport for applying to charge airlines 40pc more to use the airport over the next five years.
By Kamal Ahmed (Telegraph)
22 Jun 2013
Mr Walsh said Heathrow Airport Holdings, which operates the hub to the west of London, was seeking permission for the increases from the Civil Aviation Authority.
The CAA is expected to announce the new regulated costs of using the UK’s airports over the next five years imminently. Heathrow has said it needs the increases to pay for more capital investment and to continue improving the facilities for passengers.
“Heathrow wants a rise of about 40pc,” Mr Walsh said in an article forThe Sunday Telegraph. “In the interests of air travellers, we believe it is high time these charges started to come down.
“Heathrow charges have risen more than 300pc over the past 11 years, about eight times the rate of inflation. This level of increase is not only way ahead of rises at other UK airports, but also massively outstrips charges at other global hubs in Europe.”
Mr Walsh said the airport had failed to get to grips with costs and that as the only hub airport in the UK it was acting as a monopoly provider and was not “instinctively pro-customer”. “Savings, we calculate, could allow charges to be reduced by nearly 10pc below the rate of inflation without affecting planned investment,” Mr Walsh said.
One comment below the article says:
Flights don’t circle because of lack of runway capacity – unless you want to build spare capacity that can be used when there are delays, adverse weather etc. Then you have to pay for that.
And BA constantly looks at new long haul flights – there are none that it can operate profitably. Indeed, it already operates a tail of unprofitable long haul routes. If they could be profitable, BA could take out short haul capacity or change around slots.
Landing fees are around £18/pax. At other airports like Gatwick they are £12/pax. You really think it’s that extra £6 that makes a flight “expensive”? Airlines like BA charge a premium for Heathrow that is much more than that.
It’s time to tell Heathrow the party is over
Heathrow Airport Limited is a monopoly. For passengers and airlines alike, there is no alternative provider of hub airport services. Heathrow owns it and runs it. If you don’t like it, take the ferry to Amsterdam.
22 Jun 2013 (Telegraph)
Like all monopolies, Heathrow isn’t instinctively pro-customer. So its regulator, the Civil Aviation Authority (CAA), aims to ensure that Heathrow’s charges to airlines are justified and enable it to provide satisfactory facilities for operators and passengers.
The airlines pay the charge, but inevitably this cost can affect fares and the ability of airlines to afford their own investments in improved services for customers.
The CAA is deciding what Heathrow can charge airlines over the next five years. Heathrow wants a rise of about 40%. In the interests of air travellers, we believe it is high time these charges started to come down. [More likely to be in the interests of BA’s profits. AW].
Heathrow charges have risen more than 300% over the past 11 years, about eight times the rate of inflation. This level of increase is not only way ahead of rises at other UK airports, but also massively outstrips charges at other global hubs in Europe and elsewhere – as a study for the CAA has clearly demonstrated.
The truth is that Heathrow has failed to get to grips with its costs, which is why it wants the CAA to bail it out by sanctioning further over-the-top charges. British Airways has very deep knowledge of how Heathrow works, and — as we have outlined to the airport — there is considerable scope for operating it more efficiently.
Such savings, we calculate, could allow charges to be reduced by nearly 10pc below the rate of inflation without affecting planned investment in better facilities for customers.
The CAA’s initial proposal is that Heathrow’s charges should continue to rise over the next five years, albeit by 1.3pc less than inflation. While we are convinced this outcome would be far too generous to Heathrow, the airport has reacted by claiming it would be forced to slash investment by a third.
Its response has drawn criticism from airlines around the world. The International Air Transport Association, representing more than 200 carriers, said: “In a way only possible for a monopoly, it is threatening to cut capital expenditure to the detriment of service levels and operational resilience – instead of getting serious about efficiencies.”
Heathrow says that it needs big returns or its investors will pull out. The reality is that Heathrow’s shareholders have been amply rewarded during hard economic times, while many airlines have had to endure heavy financial losses and painful restructuring.
Heathrow was barely touched by the global financial crisis, and over the past five years has outstripped the profits performance of most FTSE 100 companies. Even with lower charges, the potential for good returns remains very strong. Heathrow will continue to be the monopoly owner of what is still (just) the busiest international airport in the world. It’s not obvious why the pool of investors would suddenly dry up.
The CAA faces a huge decision. Under new legislation, it has a primary duty to promote the interests of passengers and a secondary duty to promote economy and efficiency on the part of the airport operator.
How can it be in passengers’ interests to approve another five years of rising charges after a 300pc rise in the past decade? How can it be in their interests to make Heathrow so expensive that airlines have to drop routes and scale back plans for customer benefits?
There are obvious efficiencies to be made at Heathrow, but guaranteeing the airport another five years of easy earnings will do nothing to promote them.
Monopolies need tough regulation. The CAA has no duty to protect Heathrow from the consequences of its own weak cost control, or to be over-generous to the airport’s shareholders.
In its final decisions in September, the CAA should focus on its new pro-passenger, pro-efficiency obligations and tell Heathrow the party is over.
Willie Walsh is chief executive of International Airlines Group
British Airways and Virgin Atlantic warn that price proposals for Heathrow would add £600m to airlines’ costs at the hub and undermine their services.
The airlines have teamed with the International Air Transport Association – whose members include the vast majority of the 90 Heathrow carriers – to warn that ‘passengers’ interests will suffer’ unless the Civil Aviation Authority is ‘much tougher’ in capping charges at the airport over the next five years.
The CAA has suggested an annual rise of inflation (RPI) minus 1.3% for the 2014/19 period.
Heathrow’s airlines calculate that, after a rise of 300% in the last 11 years, charges could be capped as low as RPI minus 9.8% without affecting the airport operator’s own investment plans.
The airlines claim independent analysis shows Heathrow was far more expensive than other hub airports such as Paris, Amsterdam and Frankfurt.
They said in a statement that Heathrow must ‘tackle its own inefficiencies rather than be allowed to exploit its monopoly position at the expense of airlines and their passengers’.
Craig Kreeger, Virgin Atlantic chief executive, said: ‘These price proposals from the CAA have been wrongly greeted by some as good news for airport users, but in reality RPI – 1.3% is far from a reduction in charges – in fact it would raise costs for airlines by an additional £600m.’
Keith Williams, British Airways’ chief executive, commented: ‘As they stand the CAA’s proposals take an airport that is currently over-priced, over-rewarded and inefficient and allow it to remain that way for the next five years with ever increasing fees.’
Tony Tyler, IATA’s director general and chief executive, added: ‘The CAA’s proposal to cap the level of charges at slightly below inflation is weak medicine for a major illness.
‘Sadly, the management of the UK’s only hub airport is using its substantial market power to protect their comfortable monopoly business.’
To see the joint statement from the airlnes and IATA, click here.