Heathrow Airport’s passenger charges could fall every year until 2026 — is that actually as good as it sounds?
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Heathrow (LHR) is to be ordered to dramatically reduce its hefty passenger charges every year until 2026 despite bosses at the London airport asking for it to be raised.
Britain’s biggest airport currently charges airlines £30.19 per passenger, which is one of the highest airport tariffs in the world.
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But the Civil Aviation Authority (CAA) has told the airport to bring that fee down to £26.31 over the next four years, ignoring airport bosses who were demanding the fee to be raised to £41.95.
Hailing its proposals as being “in the best interest of consumers”, the CAA is undertaking a consultation and will announce its final decision later this year.
On the face of it, the move sounds like a blessing for passengers for whom the rising cost of living is driving post-pandemic holiday costs to record levels.
But is it really good news for travellers, or just a smoke-and-mirrors numbers game that’ll benefit airlines at the expense of consumers?
What are airport charges?
Airport charges, or landing fees, are essentially taxes dished out by airports onto airlines to use their runways. They help pay for a range of services, including operating terminals, runways, baggage systems, security and general upkeep.
They vary from airport to airport and are usually calculated based on a range of factors such as an aircraft’s weight.
To cover these costs the airlines then break down the landing fee into a per passenger basis based on the number of seats on that aircraft.
This cost is then passed onto passengers via airfares.
Why is the CAA doing this?
During the pandemic, when air travel was on its knees, Heathrow was given permission to raise the passenger charge from £19.60 to £30.19.
Airlines reacted furiously to the hike, saying they had no choice but to pass it on to customers, sparking a bitter feud between Britain’s biggest travel hub and the airlines that use it.
But now with travel numbers almost returned to pre-pandemic levels, the CAA says it is time to pull back the charge to a rate that better reflects the current demand.
Richard Moriarty, chief executive of the CAA, said the cut in charges was “about doing the right thing for consumers”.
“We have listened very carefully to both Heathrow Airport and the airlines who have differing views to each other about the future level of charges,” he said.
“Our independent and impartial analysis balances affordable charges for consumers while allowing Heathrow to make the investments needed for the future.”
Is Heathrow happy about this?
Unsurprisingly, no. Heathrow says it needs the money now more than ever, and that the services they offer will suffer as a result of the cut.
Heathrow chief executive John Holland-Kaye said the regulator “continues to underestimate what it takes to deliver a good passenger service, both in terms of the level of investment and operating costs required and the fair incentive needed for private investors to finance it”. Adding, “Uncorrected, these elements of the CAA’s proposal will only result in passengers getting a worse experience at Heathrow as investment in service dries up.”
What are the airlines saying?
In short, they’re delighted. Airlines — including British Airways and Virgin Atlantic — have been lobbying the CAA to implement this change for months.
They’ve claimed it’s put an unfair strain on their operational capacity at a time when a chronic staff crisis (among other issues such as strikes) has left many airlines struggling to deliver their services.
Some airlines even say it doesn’t go far enough.
Virgin Atlantic CEO Shai Weiss said the regulator “can and must go further to lower the cap” from its proposals.
“With travel recovery underway, our collective focus should be on upholding the best possible experience for customers with fair charges, especially with consumers facing cost of living pressures and our global Britain aspirations at stake.”
Luis Gallego, chief executive of IAG, which owns British Airways, said: “The CAA has recognised that Heathrow needs to be more efficient for the benefit of consumers. In 2022 airport charges at Heathrow will still be three times more expensive than its EU rivals and 56% higher than last year. Global Britain needs a competitive hub and we look forward to continue working with the CAA to make this happen”.
Bottom line: what does all this mean for passengers?
It remains to be seen how this will trickle down to passengers.
CAA chief Richard Moriarty said the move would bring down the cost of a ticket by £4 per person but, crucially, airlines, are under no obligation to pass the saving on to customers.
As airlines continue to hunt for ways to recover their massive pandemic losses, not helped by rocketing fuel prices, it could easily mean that airlines simply absorb the savings into their own operational costs while airfares stay the same.
That said, Moriarty told the BBC’s Today Programme that the cap would still allow Heathrow to invest £3.6 billion in its infrastructure.
This would include new baggage systems for terminal 2, where a technical failure earlier this month saw a “baggage mountain” grow leaving some passengers waiting days to be reunited with their bags.
He said that investment would help the airport “raise its game” and smooth out some of the staffing issues that have led to disruption in recent months.
Heathrow, on the other hand, says the opposite and claims the cut will inevitably damage the travelling experience for customers.
Holland-Kaye said that 3.6 billion investment will not be enough to sufficiently meet customer needs and that ultimately it will lead to a “worse experience at Heathrow as investment in service dries up.”
Featured image by AmandaLewis / Getty Images.
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