On Wednesday March 8th, Britain’s aviation regulator told Heathrow Airport that it will have to reduce the fees it charges airlines between 2024 and 2026, bowing to pressure from airlines that have long said fares are too high. The Civil Aviation Authority (CAA) announced that Heathrow, Britain’s largest airport, could charge a maximum average price per passenger of £27.49 (31 euros) in nominal prices over the period 2022-2026.
“Our priority in making this decision today is to ensure the traveling public can expect great value for money from using Heathrow in terms of having a consistently good quality of service, whilst paying no more than is needed for it,” said CAA chief executive Richard Moriarty. “We have carefully considered the sharply differing views from Heathrow Airport Limited and the airlines about the future level of charges.”
After two years of higher intermediate prices during 2022 and 2023, including a charge of £31.57 (35.6 euros) per passenger for this year, Heathrow’s charges would fall to around £25.43 (28.7 euros) per passenger in nominal terms during the 2024-2026 period.
Our job is to reach an independent decision and focus on what is in the best interest of those who will use Heathrow in the years to come.
Richard Moriarty, CAA chief executive
The lower fares would boost airlines such as IAG’s British Airways and Virgin Atlantic, two of Heathrow’s largest. The change would make using the airport cheaper for them. They have long complained that fares at Heathrow, the busiest airport in Western Europe, are the highest in the world.
The CAA’s decision will deal a blow to Heathrow, owned by Spain’s Ferrovial Group, Qatar Investment Authority and other financial investors, which wanted charges to rise to around £40. “This makes no sense and will do nothing for consumers at a time when the CAA should be incentivizing investment to rebuild the service,” Heathrow said, noting that it was still making a loss while the airlines were profitable.
Heathrow management said it would consider its next steps. It has six weeks to lodge an appeal with Britain’s competition regulator over the charges. The airport has argued that it needs higher fares to provide good service, pay returns to its shareholders and fund investments such as new security scanners.
IATA, the global airline industry body, said Heathrow had won a “generous settlement,” adding that the current model for deciding charges needs a fundamental overhaul. IAG and Virgin Atlantic said the CAA had not gone far enough in reducing charges.
In late January, the CAA issued a decision to set an interim price cap on what Heathrow Airport can charge its airline customers for 2023. The decision was taken in light of the economic crisis which, which has made it difficult to forecast inflation and interest rates. The CAA said it was in the interests of consumers, to take further time and conduct additional analysis before reaching a final decision on a five-year price control (H7) which is now due to be announced in March 2023.
The decision, announced on 31 January, set the interim price cap at £31.57 per passenger in nominal prices. “This value is in line with our H7 Final Proposals (FPs) issued in June 2022”, CAA clarified. This interim price cap replaces the current cap that applies to Heathrow Airport’s charges in 2022, which expired on 1 January this year.
Similarly with the interim price cap set at the beginning of 2022, once a final price control for the five-year period is set, any difference between it and this interim price cap for 2023 will be automatically adjusted up or down.
