Heathrow hopes to charge cars £5 and increase passenger charge by £1.20 (then pay dividend again in 2022)

It seems Heathrow will lose around £1.5 billion this year, due to Covid and a drop of around 80% in passenger numbers.  The airport is hoping to impose a £5 “drop off” charge on any car coming into the airport to deposit or collect passengers, from the end of 2021 (blue badges and emergency vehicles excluded). There is a consultation about this.  Heathrow says it will “save jobs in the short term” while allowing the airport to hit its “long-term goals of providing safe, sustainable and affordable transport options”. (!) A much more effective way to boost its income is to increase its passenger charge, which is currently £21 per person. The intention is to increase it by £1.20, which could add £2.7bn to the airport’s regulated asset base (RAB), allowing it to increase charges (already, at £21 per head, among the highest in Europe). The airlines are vociferously opposed to this, understandably.  Heathrow is leveraged, with its consolidated net debt at £15.2bn in September 2020. But a key reason for all the borrowing is it has paid out £4 billion of dividends to its investors since 2012. There was a £500 payment announced in February 2020, and a £100m payment in April. Heathrow has now said it will not pay dividends for the rest of 2020, or 2021 but hopes to pay out £400 million in 2022.


Heathrow’s running out of runway

By Jonathan Ford (Financial Times)

8th December  2020

There seems no end to the inventiveness of Heathrow when it comes to devising new charges to slap on customers, writes Jonathan Ford.

Take the latest moneymaking wheeze from London’s main airport — facing £1.5bn of losses this year because of an 80 per cent drop in passengers. That is to impose a £5 “drop off” charge on any car coming into the airport to deposit or collect passengers.

It might seem a bit steep to those who have no option but to enter the seventh circle of hell that connects the airport’s various terminals. But no matter; it’s all in a good cause. Heathrow’s head of surface access, Tony Caccavone, thinks the levy will “save jobs in the short term” while allowing the airport to hit its “long-term goals of providing safe, sustainable and affordable transport options”.

Of course, the car charge is a mere amuse bouche compared with the main course — a proposed big increase in the charges Heathrow levies on passengers to offset the losses it faces from Covid-19. This would add £2.7bn to the airport’s regulated asset base, allowing it to increase charges (already, at £21 per head, among the highest in Europe) by another 10%.

It is fair to say that the airlines, which have been frantically deleveraging this year, are less than impressed with Heathrow’s planned whip round. The airport is not only eye-wateringly leveraged — consolidated net debt was £15.2bn in September 2020, despite a capital raise of £750m. One reason for all that borrowing is the payment of £4bn of dividends since 2012 — including a £100m payment in April.

To get a flavour of the indignation, check out the response from Etihad of the UAE to the consultation, published last Friday. Amazingly, Heathrow is still charging the carrier rent for its facilities in Terminal 4, despite the whole facility being closed since May. “We firmly believe that Heathrow has no basis for charging rent for leased space in which we are deriving no benefit,” the airline notes tartly.

Whether the passenger charges are increased now depends on the CAA.

Despite the imminence of vaccination, there is no certainty of a quick and strong recovery. According to the aviation consultant Chris Tarry, business travel next year might be little more than 30% of the 2019 total. Heathrow’s owners should recognise that its stretched finances are mainly of its own making. Instead of dreaming up schemes designed to extract money for nothing from users, they might think of putting more of their own cash back into the slot.

IMImobile: bryce.elder@ft.com
Heathrow: jonathan.ford@ft.com

This is rich, from Heathrow owners

By Alistair Osborne (The Times)
Tuesday December 08 2020,

Christmas is a time for charity. And what better cause than the billionaire owners of Heathrow? Just like the planes, their soaraway dividends have been grounded by coronavirus. So, little wonder the airport’s boss John Holland-Kaye is demanding the passengers dig deep and cough up £1.7 billion.

He’s calling for the Civil Aviation Authority to add the sum to Heathrow’s regulated asset base (RAB), a proxy for the airport’s value. It would lift charges by £1.20 per passenger in 2022, a 5% jump. But, because future financial returns allowed by the regulator are based on the RAB, the airlines reckon it would bake in an extra £2.21 per passenger per year for the next two decades: far more than any sum lost to Covid.

Still, who cares about that? Think of the seven cash-strapped owners. There’s the impoverished sovereign wealth funds from China and Qatar, managing $1 trillion-plus between them; Caisse de dépôt et placement du Québec, overseeing $333 billion of net assets; Singapore’s GIC, sitting on more than $100 billion; the Universities Superannuation Scheme with £67 billion; US infrastructure outfit Alinda with more than $5 billion; and Spain’s Ferrovial, valued at €17.5 billion.

In short, a properly skint septet. Happily, Mr Holland-Kaye’s lobbying has so far failed to persuade the CAA. But it’s yet to make its final ruling. So, a jumbo-load of submissions from irate airlines should help.

The regulator’s just published the views of 17 carriers, plus aviation alliances, airports and third parties, with everyone from Kazakhstan’s Air Astana to Aeromexico chipping in. And as American Airlines puts it, if the CAA rolls over here, it would “provide new capital to an entity that has ready access to capital, has made a conscious decision to leverage higher and is in much better financial shape than airlines or consumers”.

Yes, you’d expect the airlines to say that. But there’s no disguising their anger at the airport’s try-on. As they point out, since Ferrovial led the deal to buy Heathrow-owner BAA in 2006, the owners have taken out £4 billion in dividends, while loading the business with debt to juice up returns.

Between 2014 and 2019, they lifted debt from £12.9 billion to £16.1 billion — nearly as much as the airport’s £16.5 billion RAB — and used the money to fund shareholder payouts. To boot, as BA-owner IAG notes, passengers already pay “to cover the risk of lower traffic”, so are now being asked “to pay twice”.

Mr Holland-Kaye’s response? That if the CAA doesn’t play ball, “it has the potential to severely undermine investors’ confidence in the RAB as a way of ensuring they recover their investments appropriately”.

But that’s not how risk capital is supposed to work. As BA’s submission puts it: “It seems that Heathrow may have embraced modern monetary theory in assuming the RAB represents a magic money tree.”

Like other airlines, it reckons it should “seek funds” from its “wealthy” owners “rather than asking consumers to bail it out”. Quite right too. There’s only so much charity they can take.




Heathrow Airport considering charging drivers for drop-offs

4th December 2020 (BBC)

Most drivers will have to pay about £5 under plans the which could be introduced late next year.

London’s Heathrow Airport is considering charging drivers to drop passengers off at departure terminals due to losses from the pandemic.

Under the proposals a fee of about £5 will be charged for nearly all vehicles which enter terminal departure forecourts from the end of 2021.

The airport has lost £1.5bn this year due to an 80% fall in passengers.

Heathrow’s director of surface access Tony Caccavone said the move would “protect the business financially”.

He added that the charge would “save jobs in the short term, whilst also allowing us to stay on track for our long-term goals of providing safe, sustainable and affordable transport options”.

Heathrow had been planning to introduce an Ultra Low Emissions Zone but said the Forecourt Access Charge would replace it in the short term to “prevent a car led airport recovery from the Covid-19 pandemic”.

Drivers such as blue badge holders and emergency vehicles would be exempt.

A consultation about the fee has begun, with final details to be announced next year.



Heathrow says it will cut dividend payouts – and pay them in 2022, after getting public funds in Covid

By John Collingridge (The Sunday Times)
Sunday December 6 2020,

Heathrow has suggested that it could resume paying dividends of about £400m a year from 2022 — while also increasing its demand for a Covid bailout to £2.7bn. …The Civil Aviation Authority (CAA) rejected its request for a bailout. Airlines have also balked at the request to hike charges, which have risen from £1.7bn in the summer. British Airways insisted that Heathrow’s shareholders, which include the sovereign wealth funds of China, Qatar and Singapore, should pump in cash instead of trying to charge passengers extra.  Heathrow has paid out about £4bn of dividends since 2012, while piling up debt. In a submission to the CAA, Heathrow said it would not pay dividends this year or next in return for leniency from its lenders. But it said after that, “the airport should no longer be in a crisis mode and a normal business would expect dividends to resume during this period”. It suggested these could be about £400m a year, down from an expected £600m a year. It insisted this would be “aggressive forbearance”, depriving shareholders of a cumulative £1bn of dividends. Heathrow claimed that without the bailout it would have to curtail investment and would face an increase in the cost of its borrowing.