Heathrow is facing the spectre of a divided boardroom over its plan to raise billions of pounds from airlines and customers by increasing airport prices.
State-backed Qatar Airways, whose owner is also Heathrow’s second-biggest shareholder, said Heathrow’s plans to recoup £2.8bn is “unreasonable, not in the consumer interest and should be rejected”.
The airline’s boss, Akbar Al Baker, is a representative for the state of Qatar on Heathrow’s board of directors. Heathrow said that the airline itself is not one of its shareholders.
The airport has been hit hard by the pandemic with travel restrictions crippling its finances. However, its bosses have insisted that it holds sufficient cash reserves to see it through the rest of the year despite passenger numbers falling to levels last seen in the 1960s.
Nonetheless, Heathrow claims it is entitled to recoup losses suffered because of the pandemic, and wants to adjust a complex regulatory framework accordingly. The demands have been rejected by the aviation regulator, the Civil Aviation Authority, but are subject to an industry consultation. Heathrow has threatened legal action if the watchdog does not back down.
Qatar Airways said: “Granting an increase now, will create the perception that the CAA is allowing HAL [Heathrow] to unfairly shift the risk created by the pandemic on to the consumer.”
A spokesman for Heathrow said: “The [regulatory] adjustment that we’ve proposed lowers prices for consumers – without it, passengers will pay more and get less when travelling through the airport.
“The devastating impacts of Covid-19 could never have been imagined. We’re simply asking the CAA to fulfil its duties and do the same. As evidenced by the submission, Qatar Airways is not a Heathrow shareholder.”
https://www.telegraph.co.uk/business/2021/04/10/heathrow-risks-boardroom-split-plan-raise-28bn/
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See earlier:
Heathrow adding a new £8.90 per passenger pandemic tax from April
March 1, 2021
Heathrow has added a new charge on all outbound flights from April. It will charge £8.90 extra in what the airport is calling a United Kingdom Exceptional Regulatory Charge. It may only last for a year, and Heathrow says the CAA has approved it. Other major UK airports have said they will not be implementing a similar fee. Paul McGuinness, chair of the No Third Runway Coalition, criticised the airport for adding on the extra charge. “Yes, aviation has dipped during the pandemic, but it’s the shambolic financial management of Heathrow – the massive borrowing, the large dividends payments to its foreign owners and the total lack of reserves – that is forcing the airport’s management into trying, by stealth, to raise these passenger tariffs.” A Heathrow spokesperson said: “Heathrow makes absolutely zero profit from these services [sic]. The price is calculated purely to cover the cost of operating and maintaining the infrastructure that supports them.” Airlines say the reason for the increase is the amount it charges them for baggage handling, water, electricity and other services. It is possible the tiny extra charge will make some people choose another airport to fly from (but it is probably too low to do that).
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Heathrow makes £2bn loss in 2020 due to the pandemic – warning on continuing to be a “going concern”
February 24, 2021
Heathrow lost £2 billion in 2020 because of the fall in passenger numbers due to the Covid pandemic. The numbers are lower than for perhaps 50 years, and the airport is issuing a warning about its future. Its pre-tax loss was £2.01bn for its full-year compared to a £546m profit in 2019. Revenues fell 62% £1.18bn, with passenger were at 22.1 million, 73% less than in 2019. This led the airport to issue a warning, that the “existence of a material uncertainty… could cast significant doubt upon the group and the company’s ability to continue as a going concern”. Nobody knows how much air travel will happen this year. Heathrow desperately wants relief on all its business rates, an extended furlough scheme for its staff, and a revival of VAT-free airport shopping for tourists to the UK. John Holland-Kaye makes his usual statements about how vital Heathrow is to Britain … Since the start of the pandemic, the airport has cut operating costs by nearly £400m, reduced capital expenditure by £700m and raised £2.5bn in funding. And it says it ended 2020 with £3.9bn of liquidity, which it says is enough to last until April 2033 even if there is no recovery in passenger numbers. Which begs the question of why it needs more government support now.
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Heathrow may be able to persuade the CAA to let it get back some money, in higher charges, due to huge Covid losses
February 7, 2021
The Civil Aviation Authority has been considering whether to allow Heathrow to increase its airport charges, in order to recoup the £2.8 billion that it says it had lost due to Covid (a few months ago). The CAA had rejected Heathrow’s revised request to hike charges by £2.8bn, labelling it “disproportionate”. But it now concedes that there has been “a further material deterioration in the outlook for the aviation industry” – due to further Covid travel restrictions – since it launched a consultation on the rises in October 2020. CAA director Paul Smith said: “In these exceptional circumstances we are persuaded that there are real issues we need to address to protect Heathrow’s consumers. However, in our view Heathrow’s proposals are not in the best interests of consumers.” Heathrow has been threatening legal action against the CAA. The airport already has over £15bn of debts. The CAA has added two new options, for the H7 period, which starts on 1 January 2022, and will consult on them until 5th March. They are: Package 1 No intervention before H7, but consider interventions at H7 and Package 2 Targeted intervention now and consider further intervention at H7. The largest airline at Heathrow, IAG, has always opposed the CAA allowing higher charges.
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CAA website on this:
https://publicapps.caa.co.uk/modalapplication.aspx?appid=11&mode=detail&id=10142
CAA consultation:
https://consultations.caa.co.uk/economic-regulation/hal-covid-related-rab-adjustment-update/
In October 2020, we published a consultation document in response to the request made by Heathrow Airport Limited (HAL) in July 2020 for the CAA to change its approach to the calculation of HAL’s regulatory asset base (RAB) to take account of the impact of the covid-19 pandemic.
CAA may very soon announce its decision on whether Heathrow can charge £1.7 bn more
February 1, 2021
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.
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