The UK Civil Aviation Authority (CAA) is seeking to place a new
cap on proposed increases to passenger charges at Heathrow airport, saying the
move could “support consumer demand” as the global aviation industry recovers
from the pandemic.
According to the CAA, Heathrow requested to increase the cap
on its airport charges to between £32 and £43 – a huge increase from the £22
fee set in 2020. However, the regulator is launching a consultation to seek a lower increase of between £24.50 and £34.40, as well as an interim price cap to “protect consumers from any undue increase in airport charges”. A cap of £30 had already been set for 2022, according to the BBC.
The CAA wants to implement a five-year control
period starting in summer 2022 that will allow the airport to “smooth charges
for consumers and provide investors with medium-term certainty”.
It is also seeking the introduction of a new traffic risk
sharing mechanism to prevent either passengers or Heathrow from bearing all the
risk of uncertainty caused by the industry’s continuing recovery.
In addition, the regulator has reconfirmed its decision earlier this year to set a £300 million rise on Heathrow's regulated asset base, which determines how much money it can recover as compensation from consumers through charges. Last year, the airport requested an adjustment of £2.3 billion.
CAA chief executive Richard Moriarty commented: “While
international air travel is still recovering, setting a price control for
Heathrow airport against the backdrop of so much uncertainty means we have had
to adapt our approach. Our principal objective is to further the interests of
consumers while recognising the challenges the industry has faced throughout
the Covid-19 pandemic. These initial proposals seek to protect consumers
against unfair charges and will allow Heathrow to continue to appropriately
invest in keeping the airport resilient, efficient and one that provides a good
experience for passengers.”
Moriarty said the CAA plans to set out its final proposals
next year.
The proposed increase comes after Heathrow introduced an “Airport
Cost Recovery Charge” of £8.90 per passenger on all outbound flights, as well
as a £5 fee for vehicles using the forecourts of its terminals.
Heathrow said in April this year that it had lost £2.4
billion during the course of the pandemic.
A spokesperson for Heathrow commented: “Our aim is to reach
a settlement that enables us to give passengers a great service while operating
a safe, resilient and competitive hub airport for Britain.
“While it is right the CAA protect[s] consumers against
excessive profits and waste, the settlement is not designed to shield airlines
from legitimate cost increases or the impacts of fewer people travelling. We
look forward to discussing the CAA’s proposals in detail with the regulator and
our airline partners as we work towards a new settlement.”
The proposal has been slammed by Virgin Atlantic, one of
Heathrow’s largest customers, with CEO Shai Weiss saying the CAA has failed to
protect passengers. The airline said the regulator’s proposal is based on a “pessimistic”
forecast of 45 million Heathrow passengers in 2022, a decrease of 44 per cent
on 2019, compared to the International Air Transport Association’s estimate of
a 9 per cent reduction in global demand.
“The world’s most expensive airport risks becoming over 50
per cent more expensive as Heathrow and its owners seek to recoup their
pandemic losses and secure hundreds of millions in dividends to shareholders," Weiss said in a statement. "It is concerning that the regulator has failed in its opportunity to step in,
and together with industry partners we will oppose these proposals in the
strongest terms to protect passengers.
“Abusing its unique position as the UK’s only hub airport,
Heathrow’s proposed increase of charges will hurt the UK’s economic recovery
and unfairly hit the pockets of families and businesses around the nation. No
other airport in the world is proposing increases on this scale and by becoming
unaffordable, competing EU hubs and airlines will benefit.”
Virgin Atlantic also pointed out that Heathrow Airport
Limited paid out a dividend of £106 million to shareholders in 2020 and said it
is “only right” that the airport turns to its equity owners first in its
recovery efforts rather than airlines and consumers.
Tim Alderslade, CEO of trade body Airlines UK, said: “The CAA is our last line of defence against a monopoly-abusing hub airport. Monopolies will always try it on and that’s why we need a strong regulator to clamp down on what is blatant gouging. How on earth can it be in the interests of consumers to ramp up charges by as much as 50 per cent?
“Passengers need to be front and centre here – it’s Heathrow’s shareholders and not our customers who should be asked to foot the bill. We will oppose this in the strongest terms.”