London Heathrow (LHR) CEO John Holland-Kaye accused the UK Civil Aviation Authority (CAA) of failing to understand how much funding is required to operate a major airport.
Holland-Kaye’s comments this week came after the CAA released its final proposals for the maximum charges Heathrow would be allowed to assess airlines over the next five years.
Under the proposals, the average maximum price per passenger that airlines would pay LHR would fall from £30.19 ($36.67) currently to £26.31 in 2026. When the effects of inflation are removed, this is equivalent to nearly a 6% reduction every year from 2022 to 2026, the CAA said.
The move to reduce charges is seen as a response to airline protests at the scale of Heathrow’s own proposed increase in charges. The hub had wanted to double the fee it charged airlines in order to provide improved services to customers while retaining the support of its shareholders.
This sparked fury from user airlines, notably British Airways, which have frequently complained that LHR is one of the world’s most expensive airports for airlines.
The regulator said its proposed LHR pricing reflected expected increases in passenger numbers as the recovery from the COVID-19 pandemic continued and the higher level of the price cap in 2022, which was put in place in 2021 to reflect the challenges from the pandemic.
The CAA said its proposals included what it described as “affordable charges for consumers” that would also support the recovery in passenger numbers, while allowing Heathrow to invest appropriately to keep the airport safe, secure and resilient, while at the same time providing a good experience for passengers.
“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,” CAA CEO Richard Moriarty said. “Our independent and impartial analysis balances affordable charges for consumers, while allowing Heathrow to make the investment needed for the future.”
The airport’s management was unconvinced. “The CAA 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,” Holland-Kaye said. “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.”
He added: “Economic regulation should drive affordable private investment in Britain’s infrastructure to the benefit of users, not hamper it. The CAA’s proposal will undermine the delivery of key improvements for passengers, while also raising serious questions about Britain’s attractiveness to private investors. We will take time to assess the CAA’s proposal in more detail and will provide a further evidence-based response to this latest consultation.”
The next stage in the process involves interested parties putting forward official responses to the CAA’s final proposals. After consideration, the regulator will publish a final decision, expected sometime in the autumn.
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