CAA may very soon announce its decision on whether Heathrow can charge £1.7 bn more
The Telegraph believes the CAA may announce this week that it will reject Heathrow’s demand to be allowed to raise £1.7bn in increased future passenger and airline levies. The airport wants to be get back some of its losses caused by the pandemic. But the CAA is expected to confirm the rejection that it consulted on in October – the consultation ended on 5th November. The CAA said in October that Heathrow had not “demonstrated its request is a proportionate measure” and was seeking further evidence. Heathrow finance chief Javier Echave threatened legal action unless the CAA backed down and accused the regulator of sending a “terrible” message to foreign investors (who have made immense profits out of Heathrow in recent years). Industry insiders cautioned that the CAA is “playing its cards very close to its chest” over its decision and “could offer concessions to break the deadlock.” Heathrow claims it will have to raise consumer prices, after the immense losses caused by having very few passengers over the past year.
Ruling due in Heathrow’s dispute with watchdog over landing fees
The Civil Aviation Authority is set to reject Heathrow’s demand for a £1.7bn hike on passenger and airline levies
By Oliver Gill (Telegraph)
31 January 2021
A row between Heathrow and Britain’s aviation regulator is set to reignite this week over the airport’s demand to hike charges levied on airlines and passengers by £1.7bn.
The Civil Aviation Authority is expected to rubber-stamp its rejection in October of the price increase, which Heathrow has said it is entitled to charge for losses suffered during the pandemic.
But industry insiders cautioned that the regulator is “playing its cards very close to its chest” over its decision and could offer concessions to break the deadlock.
The watchdog has provisionally pencilled in Thursday to make a formal announcement, The Daily Telegraph has learnt.
A spat between Heathrow and the CAA erupted in late October after the regulator provisionally blocked Heathrow’s request to recoup losses.
The CAA said that Heathrow had not “demonstrated its request is a proportionate measure” and was seeking further evidence.
Heathrow finance chief Javier Echave threatened legal action unless the CAA backed down and accused the regulator of sending a “terrible” message to foreign investors.
The airport is owned by a consortium of primarily overseas, infrastructure, pension and sovereign wealth funds.
Heathrow insists that it is entitled to recoup losses for a sharp deterioration in passenger numbers in 2020 under its agreement. It welcomed just 22m people in 2020 compared with almost 81m passengers in 2019. The airport also lost its crown as Europe’s busiest airport to France’s Charles de Gaulle.
Andrew Macmillan, the CAA chief strategy officer, responded by expressing his “significant disappointment”, at Mr Echave’s remarks. He said that there are no conditions under the current agreement to acquiesce to Heathrow’s demands and that “obligations do not exist” to renegotiate the current pricing agreement.
A spokesman for Heathrow said: “The settlement was never intended to resolve these, which is why the regulator has the ability to adjust it. If it [the CAA] doesn’t correct for this now, the regulator will be forcing an increase in consumer prices, undermining RAB-based regulation and making it harder for the Government to secure the private investment that is so critical to its infrastructure agenda.”
The CAA did not comment.
The decision comes as Grant Shapps, the Transport Secretary, prepares to face questions from the House of Commons Transport Committee over potential Government support for Eurostar.
The Channel Tunnel operator is at risk of collapse unless the UK and France, its biggest controlling shareholder, steps in with rescue funding.
Such an eventuality could impact the financial returns of a group of pension and infrastructure investors that own a 30-year concession to charge fees to operators on the 67-mile HS1 line between London and the English Channel.
CAA likely to prevent Heathrow increasing its airport charges to cover Covid losses of £1.7bn
Heathrow wanted to increase charges to compensate for the economic fallout of the coronavirus pandemic. But its regulators, the CAA, have rejected its request to increase airport charges by £1.7bn to Covid losses. The CAA said Heathrow’s demands were not “proportionate”. Heathrow operates under a regulatory mechanism that allows it to increase airport charges based on the costs it incurs, but this has to be agreed by the CAA. Separately, Heathrow is waiting on a final decision from the CAA on whether it can recharge airlines £500m for costs it has built up, prematurely, in (unwise)preparation for the building of a 3rd runway – even before all legal and planning hurdles were overcome. Heathrow said revenue losses in 2020 and 2021 would be more than £2.2bn – ie. the £1.7billion + the £500 million. The CAA now has a consultation (ends 5th Nov) on Heathrow’s request for RAB adjustment. IAG, said “Heathrow is a wealthy, privately owned company which should seek funds from its shareholders as many other businesses in our industry have done to weather this pandemic. We look forward to participating in the CAA’s consultation process.”
CAA review finds Heathrow ‘wasted’ money and was “inefficient” as costs of 2 tunnel refurb projects costs spiral
The CAA’s economic performance review concludes that Heathrow has “wasted” money on two ongoing tunnel refurbishment schemes and acted inefficiently. The cost overrun of both schemes combined is estimated at £212.4M, although the CAA suggests that those costs could be inflated further by the time work is completed. Costs on the cargo tunnel job between Terminal 4 and the Central Terminal Area have soared by £152M, from its approved £44.9M budget to the current final cost of £197M, the report reveals. The cost of upgrading the main vehicular tunnel to Terminals 1, 2 & 3 has risen by £60.3M from an approved budget of £86M to £146.3M. On the cargo tunnel, the CAA states that “there is clear evidence that the actions of HAL may have directly contributed to wasted spending or lost benefits”. The delays have lead to a loss of benefits to consumers. Heathrow could have been more efficient in managing its work contractors. The CAA will now assess whether to remove costs associated with the tunnel refurbishments from HAL’s Regulated Asset Base (RAB) – which effectively means HAL would have to pay for cost overruns, rather than charging airlines.
BA hits out over £500m bill for Heathrow failed 3rd runway plans that it wants to pass on to airlines
A row has erupted between Heathrow and British Airways, its largest airline, over the plans to get airlines to pay the £500m bill relating to the airport’s third runway expenses so far. A regulatory consultation by the CAA recommends allowing Heathrow to charge carriers for expansion costs incurred until February this year. These are called “Category B” (£500m) and early “Category C” costs, associated with getting planning consent. CAA regulations allow Heathrow to increase charges in line with costs incurred. Willie Walsh, the outgoing boss of IAG, that owns BA, has repeatedly clashed with Heathrow over the framework, which he has said encourages the airport to “spend recklessly.” IAG has never wanted to pay for Heathrow’s costs in developing the runway (partly as the extra capacity at Heathrow would increase competition with BA by other airlines). CAA director Richard Stephenson said it was reviewing responses to the consultation (held in summer 2019) and had yet to make a decision. Heathrow has pressed ahead, spending a great deal on its runway plans, even before legal obstacles had been cleared. The restriction of early spending by the CAA meant a delay in the runway timetable of 2-3 years.