Virgin Atlantic withdraws support for Heathrow 3rd runway, due to its high landing costs
The CEO of Virgin Atlantic, Shai Weiss, has said he does not support the expansion of Heathrow if it continues with its very high landing charges for passengers. Heathrow will be allowed, by the regulator, the CAA, to raise charges by 56% next year, to £30.19 a passenger, but will have to reduce them to 26.31 in 2026. Heathrow claims this will not provide them enough money to invest in a 3rd runway. But the airlines using Heathrow consider the charges too high, and a disincentive to passengers. Weiss said Heathrow’s plan to raise charges was “great for the airport and its mostly foreign shareholders” – including Qatar and China’s sovereign wealth fund – but “a bad deal for consumers, airlines, and the UK economy”. He wants the CAA to reform a “broken” system and “pay closer attention to the abuse of power by a de facto monopolistic airport”. …”Until that happens, it is difficult to see how expansion at Heathrow can be supported.” He ruled out a return to Gatwick, which Virgin left during Covid, saying there was “no connectivity”. Virgin Atlantic had become more efficient since focusing all its operations on one London airport.
Virgin Atlantic withdraws support for Heathrow third runway
Airline chief Shai Weiss attacks airport’s proposal to increase landing charges by 120%
By Gwyn Topham, Transport correspondent (The Guardian) @GwynTopham
Mon 21 Nov 2022
Virgin Atlantic has withdrawn its support for Heathrow’s third runway plans amid an ongoing row over the cost of flying from Britain’s biggest airport.
The carrier had been one of the most prominent airline backers of expansion before the pandemic. But on Monday its chief executive, Shai Weiss, hit out at Heathrow’s proposal to increase landing charges by 120% and called on the aviation regulator, the CAA, to reform a “broken” system and “pay closer attention to the abuse of power by a de facto monopolistic airport”.
He added: “Until that happens, it is difficult to see how expansion at Heathrow can be supported.”
The CAA said this summer Heathrow would be allowed to raise charges by 56% next year, to more than £30 a passenger, but would have to trim them by 2026 – a proposal that Heathrow said “underestimated” the need for investment.
Weiss said Heathrow’s plan to raise charges was “great for the airport and its mostly foreign shareholders” – including Qatar and China’s sovereign wealth fund – but “a bad deal for consumers, airlines, and the UK economy”.
Speaking at the Airlines 2022 conference in central London on Monday, Weiss said that, along with other carriers, “we have fought long and hard to ensure the CAA uses its powers to ensure this would not happen and encouraged the UK government to pay closer attention to the abuse of power by a de facto monopolistic airport”.
The row has festered during a difficult summer in which Heathrow forecast lower demand and then blamed airlines for not staffing up sufficiently to accommodate all flights, imposing a 100,000 passengers a day cap.
Weiss added: “This is not just about the next price control period in four years’ time. Everyone in this room will recognise the damage to consumer confidence that summer disruption caused.
“A repeat of this in summer 2023 is completely avoidable if honest and accurate passenger forecasts are used now for resource planning and building resilience.”
Appealing to the CAA and British government, he said: “The regulatory framework and process is simply not working. It is broken and must be reformed.”
Questioned afterwards, Weiss told the Guardian he would still back expansion at the airport, including the controversial third runway, if conditions were met, including lower charges so it “remains competitive consumers are protected”, as well as “massive renovation” of Heathrow’s Terminal 3 where Virgin is based.
While the airline had been one of the runway’s biggest airline cheerleaders, Weiss said there was “no longer unequivocal support”.
He ruled out a return to Gatwick, which Virgin left during Covid, however, saying there was “no connectivity”. Weiss said the carrier had become more efficient since focusing all its operations on one London airport.
John Holland-Kaye, the Heathrow chief executive, told the Guardian he expected to continue to “have a constructive relationship and conversations” with Virgin, and that redevelopment of Terminal 3 or a move to the new Terminal 2 was in the airport’s medium-term plans.
A Heathrow spokesperson said: “To deliver the airport service passengers expect, two things are needed: for our regulator to give us the ability to invest in the airport; and for all the operators at the airport to work together building back capacity. These are our focus right now.”
AirportWatch member comment:
If Heathrow does not go ahead – which seems unlikely at present – Gatwick Airport will use that as an argument to provide more south east capacity.
However this article gives an argument to challenge the ’need’ aspect of GAL’s plans. Weiss said Virgin ruled out a return to Gatwick partly on improved efficiency but partly due to the lack of connectivity. So that is bad news for the growth aspirations of Gatwick.
CAA confirms it wants Heathrow landing charges to fall from £30.19 to £26.31 for next 5 years
The CAA, as expected, has released its Final Proposals for the “H7” price control (5 year) period which runs from January 2022 – December 2026. The CAA is now undertaking a consultation on the proposal to which Heathrow, the airlines that use it, and others will respond. The CAA will consider the feedback it receives during this consultation before making a final decision on the H7 price control, which is expected later this year. The CAA has said that the average maximum price per passenger that airlines will pay Heathrow will fall from £30.19 today to £26.31 in 2026. (Heathrow was allowed an interim increase earlier this year, due to Covid issues). When the effects of inflation are removed, this is equivalent to nearly a 6% reduction every year (ie. down £1.87 in the first year, etc) from today’s level up to 2026. Heathrow has claimed huge losses due to the pandemic, and that it wanted the higher landing charge, to help recovery. But the CAA considers the return of high passenger numbers – that has been faster than anticipated – will bring in sufficient money into Heathrow, for its spending and investment requirements. The higher landing charge is not needed.
Heathrow’s financial problems deepen, especially if it has 15% less passengers in 2022 than forecast
Heathrow has been allowed, by its regulator the CAA, to increase its passenger charge from £19.36 to £30.19 this year until the summer. After that the CAA will probably rule on charges for the next 5 years. Heathrow wanted a larger increase, to £43 per passenger, and based some of its profit forecasts on that – and is peeved with the CAA for limiting its charges. Heathrow has net debts of £15.4 billion of net debt. It says that if its number of passengers in 2022 is more than 15% below its forecast of 45.5 million, it will have financial problems – though “no covenant breaches are forecast in 2022” but that is possible. Its forecast aeronautical revenue for 2022 has been revised down to £2.19 billion, and its underlying earnings down to £1.04 billion. If Heathrow has to breach its covenant terms with its lenders, it becomes a less attractive (aka lucrative) investment, and its credit rating eg. by Standard & Poor’s and Fitch. The airlines using Heathrow are, predictably, deeply opposed to yet higher Heathrow charges.