CAA new 2-week consultation about keeping Heathrow charge at £31.57

The CAA sets the maximum level of passenger charges that Heathrow can charge, generally for a 5 year period. Heathrow had few passenger for two years, due to Covid and the CAA allowed them to raise their passenger charges, while passenger numbers remained low. However, the numbers are now rising, and may be high next year. Back in June, the CAA said the cap would fall from £30.19 then to £26.31 in 2026. When the effects of inflation are removed, that is a 6% reduction every year. Now the CAA has published an interim cap consultation (8th December – for 2 weeks), which raises the cap from £30.19 this year to £31.57.  By contrast, the charge was £19.36 pre-pandemic. Airlines believe the higher level of cap is unjustifiable, as based on 2023 traffic forecasts that are too low.  Heathrow wants the high charges, in order to recoup its vast debts, pay its shareholders their dividends, and also perhaps for future expansion.

Virgin Atlantic boss blasts CAA over Heathrow price cap

By Robin Searle (Travel Weekly)

December 08, 2022

Virgin Atlantic chief executive Shai Weiss has blasted the CAA’s published price cap for Heathrow airport, insisting the £31.57 cap is based on “undercooked and self-serving passenger forecasts”.

The authority published an interim cap consultation on Thursday 8th, which raises the cap from £30.19 this year. The consultation will run for two weeks, to December 22.

Earlier this year, the CAA published a five-year plan to lower the average charge per passenger at Heathrow to £26.31 by 2026

Virgin Atlantic argued the 2023 cap, which sets limits on fees the airport can charge airlines, is based on flawed projections which downplay a likely recovery.

Weiss said: “It is unacceptable that the CAA has published a price cap for 2023 charges based on Heathrow’s undercooked and self-serving passenger forecasts, using airport projections that have proven to be completely flawed this year and are designed to achieve excess returns for its shareholders.

“The regulator, whose primary duty is to protect consumers, is putting the interests of a monopolistic airport and its shareholders ahead of passengers, who have only recently been able to return to the skies freely and face significant cost-of-living pressures.”

He added: “Strong and growing demand for travel means that the UK’s only hub airport, which is already Europe’s most expensive, is materially outperforming its own forecasts.

“By maintaining a pessimistic outlook for 2023 passenger forecasts, not only do customers face excessive charges but potentially also a poorer airport experience. We expect the CAA to use its powers to course correct, so that accurate and realistic forecasts inform both the 2023 cap and the final determination for the regulatory control period ending December 2026.”

A Heathrow spokesperson said: “We will review the CAA’s proposed interim charge for 2023 and provide feedback as requested. We continue to believe in the strong plan we have put forward for investing in passenger services over the coming years. We await the regulator’s final decision on both this interim charge and the rest of the settlement period.”

A spokesperson for Heathrow owner Ferrovial, which holds a 25% stake in the airport, added: “Ferrovial is disappointed that the UK Civil Aviation Authority has yet again delayed its final proposals for the allowed charges at Heathrow Airport over the next five years.

“The uncertainty caused by this delay is undermining our ability to commit capital to fund crucial investments to improve Heathrow’s experience for airlines and passengers. As a long-time investor in the UK, Ferrovial calls on the CAA to finalise its proposals as soon as possible.”

Speaking at the Airlines 2022 conference in London last month, Weiss said Virgin Atlantic had withdrawn “unequivocal support” for a third runway at Heathrow over its stance on charges.

High price of CAA’s flights of fantasy

December 13 2022

Flights to nowhere can keep airlines and airports busy. But who thought they’d become a speciality of the Civil Aviation Authority: a body hellbent on going round in circles, at least when it comes to the regulation of Heathrow?

The CAA is meant to set the maximum price Britain’s premier airport can charge passengers over five-year periods: a timeframe that allows both Heathrow and its airline customers to plan. Instead, late last week it squirrelled out its second successive one-year “holding price control”, justifying it with a plane-load of excuses. Worse, its latest interim regime keeps charges higher than it had suggested with June’s laughably titled “final proposals”: ones that were meant to take effect from January. So passengers must now pay more during a recession.

Yes, a one-year interim settlement post-Covid was justifiable. But, notably, this time round the CAA, whose boss Richard Moriarty steps down next spring, has incensed both the airlines and Heathrow investors. The latest stopgap will raise charges to £31.57, up from £30.19 this year and £19.36 pre-pandemic — even if comparisons are tricky due to the CAA’s infuriating habit of quoting figures in different year prices.

Airlines had been expecting a 6% a year cut en route to £26.31 in 2026. So no surprise Virgin Atlantic’s boss Shai Weiss finds it “unacceptable” that the CAA’s 2023 price cap is “based on Heathrow’s undercooked and self-serving passenger forecasts”. Or that IAG’s chief Luis Gallego is complaining that charges will be “56% higher than in 2021 and three times more expensive” than EU rivals’.

Yet even Heathrow’s biggest investor — Spain’s Ferrovial, with 25% — was “disappointed”. As it put it: “The uncertainty caused by this delay is undermining our ability to commit capital to fund crucial investments to improve Heathrow’s experience for airlines and passengers.” True, it also makes it harder for Ferrovial to sell its stake, what with the rumours it’s been hawking it around. But its point still stands: who would invest in such key UK infrastructure when it’s overseen by an economic regulator incapable of doing its job?

The CAA says it’s “seen a larger increase in passenger numbers” than it expected since June. But so what. It shouldn’t have fallen for the game-playing of Heathrow boss John Holland-Kaye, who forecast lower figures in the hope he’d get higher charges but has now raised his traffic estimates three times this year from 45 million to 62 million.

Similarly, it’s the regulator’s role to assess the economic data, not whinge about the “release date” for forecasts from the Office for Budget Responsibility — re-crunched after the mini-budget fiasco. Neither is it the regulator’s problem that Heathrow has geared itself up to the hilt and that higher interest rates could hurt its credit rating.

No, it’s the CAA’s job to make a decision. Indeed, even Heathrow is now floating the idea of a supra-economic regulator: a body that assumes that role from the likes of the CAA, Ofgem and Ofwat to bring consistency to economic analysis and regulatory verdicts. Expect to hear a lot more about that if all the aviation regulator can come up with is a holding pattern.

See earlier:

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.

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