CAA allows Heathrow to increase passenger charge from £22 to £31.19 from January – to be reviewed again
The UK Civil Aviation Authority (CAA) has allowed Heathrow to charge its airline customers more in the period from 1 January 2022, as an interim measure, for six months. Heathrow’s current price control expires on 31 December 2021 and the final decision and licence modifications for a new 5-year control period (H7) will not be made and take effect until the summer of 2022. At present the airport can charge up to £22 per passenger, and it wanted to increase that to £43 in January 2022. The CAA now says Heathrow can charge £30.19 per passenger. The CAA says: “Once we have set the final price control for the H7 period, any difference between it and the holding price cap will be trued up or down.” The rise to £31.19 is an increase of 37%, compared to the current inflation rate of 5.1%. Shareholders have received more than £4bn in dividends since 2012. Airlines are deeply opposed.
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UK Civil Aviation Authority statement on Heathrow Airport interim price cap
The UK Civil Aviation Authority (CAA) has today written to Heathrow Airport Limited (HAL) confirming the interim, holding price cap that the airport can charge its airline customers in the period from 1 January 2022.
16 December, 2021 (CAA)
The UK Civil Aviation Authority (CAA) has today written to Heathrow Airport Limited (HAL) confirming the interim, holding price cap that the airport can charge its airline customers in the period from 1 January 2022.
As HAL’s current price control expires on 31 December 2021 and the final decision and licence modifications for a new five-year control period (H7) will not be made and take effect until the summer of 2022, the CAA is introducing this interim measure to protect the interests of consumers in the period until the H7 licence modifications take effect.
The charge will be £29.50 per passenger in 2020 prices. This value is in line with our consultation and reflects the uncertainty of the recovery of passenger volumes at the airport from the pandemic, particularly following the emergence of new information about the omicron variant of Covid-19 since the end of the consultation period. This charge will be adjusted from 2020 prices to 2022 prices to adjust for inflation, which leads to a charge of £30.19. Once we have set the final price control for the H7 period, any difference between it and the holding price cap will be trued up or down.
We will publish our decision document setting out our rationale in further detail before Christmas. The licence condition that implements the holding cap constrains HAL’s prices from the start of January, but the formal licence modification will not take effect until the end of January 2022.
Notes to editors
Link to Civil Aviation Authority letter to Heathrow Airport Limited and airlines on the decision on HAL’s holding price cap for 2022. https://publicapps.caa.co.uk/docs/33/Heathrow%20airport%20holding%20price%20cap%20for%202022%20letter%20(CAP2307).pdf
For further details, contact:
press.office@caa.co.uk
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Response by the No 3rd Runway Coalition to the CAA decision:
Response of the No 3rd Runway Coalition to the CAA CAP2265 Economic Regulation of Heathrow Airport Limited: H7 initial proposals
December 2021
The Coalition raise a number of important issues about Heathrow’s expenditure and expenses, its anticipated future passenger numbers, the costs included in its regulated asset base and the impacts of the pandemic on its finances.
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Heathrow cleared to increase charges by seven times rate of inflation
The rise will apply for the first six months of next year as airlines bosses and the airport are arguing over a final deal
By Oliver Gill, (CHIEF BUSINESS CORRESPONDENT, the Telegraph)
16 December 2021
The cost of flying from Heathrow will increase next year after regulators signed off on a rise of more than seven times the rate of inflation.
In a decision that will enrage airlines, passengers will pay £30.19 each in 2022, up from £22 this year. The 37pc increase compares with the current inflation rate of 5.1pc.
But the decision will also disappoint Heathrow, which wanted to increase landing fees to £37 per passenger.
The Civil Aviation Authority (CAA) confirmed its decision on Thursday morning, having previously consulted on a figure of £29.50 per passenger. The £31.19 charge includes an inflationary increase based on April’s consumer prices index.
The rise will apply for the first six months of next year. It is an interim agreement as airlines and the airport argue over a deal that will cover the following five years.
Airline and airport bosses have clashed for more than a year as Heathrow has sought to recoup losses suffered during the pandemic as a result of travel restrictions and adjust its pricing to reflect a long-term slump in demand for flights.
Airlines have accused the airport of “gouging” customers to reward its shareholders – which have received more than £4bn in dividends since 2012.
Virgin Atlantic has said that Heathrow’s proposals would add £200 to the cost of a family trip to Florida.
Bitter rivals Willie Walsh, the former boss of British Airways, and Virgin Atlantic founder Sir Richard Branson have even set aside their differences and joined forces to attack the “greed” of Heathrow’s predominantly overseas shareholders.
But the airport says that its proposed price rises are equivalent to 4pc are “tremedous value” for airlines.
Next year’s price leaves airlines in limbo over a longer-term decision to change prices for the next five years.
Documents revealed by The Telegraph in September revealed Heathrow’s plans to increase landing charges by up 90pc from next year. The CAA rejected Heathrow’s demands but signalled it is willing to accept increases of up to 56pc. The CAA will wait until next year to come to a final decision.
British Airways’ owner IAG has threatened to divert some of its Heathrow services to the Continent if the airport gets its way.
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See also, Financial Times
https://www.ft.com/content/fac05e31-e4b3-4571-a46e-a614719e6149
“The airlines justifiably howl that the system is failing airlines and travellers: Heathrow’s charges, which were already expensive, will on the new rates be about two to three times higher than rival airports in places such as Paris, Madrid and Amsterdam.
“The gulf between the two sides is partly down to uncertainty over the recovery. Some of the more optimistic airline forecasts probably now need tempering. But Heathrow’s outlook has been unusually dour: its June forecasts for passenger numbers in 2022, on which its regulatory submissions were based, were so gloomy that it revised them up slightly last week to 45m passengers, or 45 per cent below 2019 levels. Only at LHR did Omicron make things more cheery.”
See earlier:
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.
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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.”
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