Heathrow has signed a new deal on airport charges with major carriers operating at the London hub.
The airport said that the agreement – which subject to final approval from the CAA will extend current regulatory settlement to the end of 2021 – is worth “hundreds of millions of pounds” in potential rebates.
It will include a new growth incentive, encouraging airlines to increase passenger numbers by filling existing aircraft.
In a statement Heathrow said:
“Airlines at Heathrow currently operate with average load factors below the IATA global average. If airlines at Heathrow reached global averages for filling aircraft there is an opportunity to reduce passenger charges by 10-20 per cent against what they might otherwise be, in addition to helping Heathrow meet the Government’s affordability target for expansion.
“With more passengers on each existing flight, Heathrow would be able to spread the development costs of expansion across a larger passenger base – helping to keep airport charges close to 2016 levels in real terms throughout the expansion project.”
The airport said that “airlines representing each of the alliances have already signed the agreement, with others due to sign in the coming weeks”.
Heathrow said that the CAA “has supported the negotiation of the commercial arrangement”, although a report in today’s Financial Times quotes BA’s parent company IAG as claiming that the CAA was effectively “cut out of the loop” during negotiations, and questions the regulator’s ability to control Heathrow’s expansion costs.
The airport said that the new agreement “would allow all parties – from the regulator to airlines and the airport – to focus their resources on agreeing the regulatory settlement that will be in place during the main expansion works from 2022 (subject to the airport being successful in its development consent order application)”.
A public consultation on the solution is set to be launched by the CAA in the coming weeks.
Commenting on the news Heathrow’s CEO John Holland-Kaye said:
“Over the past several months we’ve been working hard with our airline partners to agree a deal on airport charges to 2021. We are delighted that the result is the first-ever commercial agreement at Heathrow which will unlock hundreds of millions of pounds of potential investment for our passengers.
“We’ve shown that we can achieve more by working together and we will continue working to build on this momentum as we expand.”
Heathrow regulator, the CAA, demands answers urgently on Heathrow’s 3rd runway plan
The CEO, Richard Moriarty, of aviation watchdog body, the CAA, have written to the Department for Transport (DfT) asking that they should “decisively and urgently” address major concerns about the funding for the 3rd runway scheme – at least £14 billion, and doubtless more with cost over-runs and things not going to plan. They say Heathrow must “provide assurance that its revised timetable is realistic” and would “ensure timely delivery” of the expansion. The CAA threatens enforcement action against Heathrow to force it to provide clear evidence about how it would finance the scheme, while avoiding pushing up costs for airlines and passengers. The CAA says the project had been hit by a further delay, with a public consultation on detailed plans for the new runway now scheduled for June rather than in the first three months of next year. Heathrow is already the most expensive airport in the world, with landing charges of over £20 per ticket, and that is likely to rise – regardless of flimsy Heathrow assurances. Mr Moriarty said there is a “lack of high quality and comprehensive information” about how Heathrow would keep costs down, while being commercially viable, and these concerns had “not been adequately addressed, despite repeated requests”.
How Heathrow’s new runway would be funded, (higher landing costs, more costs to taxpayer) – all unclear
Heathrow’s plans for a 3rd runway, and associated building, are due to cost the airport at least £18 billion (not including unexpected over-runs and engineering problems etc). Heathrow now wants the right to make airlines and passengers contribute to any unexpected higher costs. The CAA controls the amount Heathrow can charge airlines. Heathrow has asked the CAA to factor in a huge array of risks from building the 3,500 metre runway across the M25 into the charges it is allowed to claw back from carriers. Heathrow keeps insisting its landing charges would remain close to current levels, aviation experts said there are few credible alternatives to charging users more. IAG believes the huge construction costs will lead to charges doubling to landing charges per passenger, from about £40 now to £80 for a return ticket. Heathrow is mainly owned by overseas investors. As well as higher than expected costs of construction, there are risks such as lack of interest from airlines in taking up the new landing slots; financial markets turning against the airport, leading to a downgrade of its credit rating; higher debt costs; and politics. There is real fear that if the Heathrow expansion project was allowed, the costs – many £ billion – might fall on the taxpayer – if the enterprise becomes a bit of a white elephant. The Airports Commission and DfT have said little about this massive risk to the public finances.