Heathrow says its investment plans are at risk if CAA limits its charges to airlines

Heathrow wants to put up its charges to airlines significantly. The CAA controls how much the airport can charge, and it has indicated that it will limit the rise in the amount Heathrow can charge to the rate of inflation plus 4.6% per year. However, Heathrow says its shareholders would not be willing to proceed with plans to invest £3bn in the airport over the next  5 years if  the CAA imposes stricter controls on price rises.  Colin Matthews, chief executive of Heathrow. said they would not proceed with capital spending of no more than £2bn if the CAA does not let them charge the amount they consider acceptable as a return for investors.  There is a long term battle between Heathrow and the airlines, and Heathrow has some of the highest charges of any global airport.  Heathrow has just reported a pre-tax profit of £186 million for the half year up to June 2013, though they made a loss of £51 million in the same period in 2012. This is largely due to the sale of Stansted. Heathrow’s passenger traffic rose 2.4% in the 6 months to June 2013, compared to 2012, to 34.4 million. Most of the growth was European traffic, which rose 4.9% to 14.3 million passengers.


Heathrow warns that CAA is putting £3bn investment plans at risk

By Andrew Parker

Heathrow warned on Wednesday that its shareholders would not be willing to proceed with plans to invest £3bn in the airport over the next five years if the industry regulator sticks to a tough financial settlement for the hub.

 Full FT article at





Telegraph article

Heathrow passengers ‘would pay’ for airport improvements

Passengers are willing to bear the cost of significantly increased airport charges to ensure improvements are made to Heathrow airport, a survey has shown.


by Oliver Smith





Taking off – Heathrow soars back into profit

24 July 2013  (Evening Standard)


Selling Stansted airport and hitting airlines with higher take-off and landing charges helped Heathrow Airport swing into profit in the first half of the year.

The world’s busiest international airport sold Stansted in February for £1.5 billion, under the orders of the Competition Commission. But even stripping out the impact of the sale, Heathrow managed to turn last year’s £70 million loss into a £44 million pre-tax profit for the six months to end of June.

Revenues at the airport operator formerly known as BAA rose 9.2% to £1.15 billion, mainly thanks to income from airline tariffs jumping 15.7% in the six months.

Heathrow’s two runways already operate at full capacity but the airport can squeeze in more passengers as airlines fly fuller, larger planes, and it did: passenger traffic rose 2.4% in the six months, to 34.4 million. Most of the growth was driven by European traffic, which rose 4.9% to 14.3 million passengers. British Airways’ acquisition of bmi saw it axe some of the carrier’s routes to Africa, which hit flier numbers to the continent, but traffic to the Middle East, North America, Latin America and Asia Pacific all rose.

Heathrow chief executive Colin Matthews. Pic: Bloomberg Finance  Chief executive Colin Matthews said: “we want to continue that progress over the next five years, which is why we’ve submitted fresh plans to the Civil Aviation Authority for a further £3 billion of investment.” Those plans have faced controversy from airlines, however. As the CAA determines levies for the next five years, Heathrow wants aeronautical charges to rise by inflation plus 4.6% each year between April 2014 and 2019.

That’s lower than the 5.9% the airport put forward in February, but carriers including British Airways and Virgin Atlantic say it is too high. Heathrow has some of the highest aeronautical charges in the world; this year the CAA suggested they were cut in real terms.

But Matthews said: “Of course airlines want the lowest possible charges, and as part of their duty to shareholders we expect them to argue as much as they can. But we are a company, we need debt and equity from international sources and they have choices. If the rate of return is below market rate, they will go elsewhere.”






Heathrow condemns ‘extreme’ CAA plan to limit landing charges

Airport boss Colin Matthews calls demand ‘over the top’ as he reports £185m first-half pre-t

  • , transport correspondent (Guardian)

The demands of airlines and the industry regulator to cut Heathrow‘s costs and landing charges are “extreme”, and would inconvenience passengers, Britain’s biggest airport has warned.

The airport’s boss, Colin Matthews, gave the warning after pre-tax profits for the first half of 2013 rose to £186m, from a £51m loss in the same period last year.

Matthews said Heathrow was on a “positive” track. He said: “Record passenger service scores, together with strong passenger numbers, is an encouraging basis for our financial results.”

Aeronautical income, or landing charges, rose 15.7%, a figure announced a day after Heathrow submitted new proposals to the Civil Aviation Authority (CAA) with almost £200m of extra cost savings in negotiations over the level of charges for the next five years.

Matthews said current proposals from the CAA to limit charges to below-inflation rises offered shareholders less than the market rate of return and involved “cost efficiency demands which are extreme”.

He said it was “unsurprising” airlines were pushing even harder for landing fee reductions. Describing Heathrow’s own cost-saving plans as “bold”, he said: “We need to be in the realm of what’s deliverable and realistic. We think the demands of the CAA and the airlines are beyond bold.”

Airlines have suggested Heathrow outsource jobs and slash pensions. Matthews said: “We need to look at every line item of cost, and employment is an important element. That’s what the regulator and airlines are challenging. Every business needs to look at every line item. But we think the demands of the airlines are over the top.”

Last week, Heathrow revealed plans for a third runway as part of its submission to the Davies commission. Matthews criticised Gatwick’s vision, announced on Tuesday, of a “constellation” of three two-runway airports around London.

The Heathrow boss said that if Gatwick’s case were correct, “you’d expect to see Stansted full today – but it’s not: it’s half empty”. In reference to Gatwick’s demands for genuine competition between the airports, he added: “It’s a funny sort of competition that you get by preventing your competitor from growing. If they’re really interested in competition, they would say [to] let Heathrow build a third runway.”





Heathrow proposes cutting airline landing charge rise to 4.6% above RPI for 5 years

Date added: July 23, 2013

In February Heathrow announced it was intending to increase its airline landing charges, from the current level of £17 per passenger to perhaps up to £25. This caused very negative responses from airlines that use the airport. Now Heathrow has moved to appease airlines by offering to reduce the rise it is seeking to charge between 2014 and 2019. Heathrow has submitted a plan to the CAA seeking approval to raise tariffs by 4.6% above inflation, as measured by the retail prices index (RPI), for the 5 years from April 2014. That is 1.3% lower than their earlier offer of a rise of 5.9%. It means a rise of £1 per year, so a £5 rise by 2019.Gatwick has also agreed to scale back their planned fee increases. Earlier this year Willie Walsh called the airport “over-priced, over-rewarded and inefficient”. However, the investors, including Ferrovial and the sovereign wealth funds of Qatar, China and Singapore, who have spent more than £10 billion on the airport over the last decade, expect to see a good return on their investment ie. they want high fees to airlines.

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