Heathrow charges

Willie Walsh said that with today’s final price proposal for Heathrow, the Civil Aviation Authority has left the airport’s customers with the burden of forking out almost an extra £1bn over the next five years.

Mr. Walsh said the CAA had neglected its new primary statutory duty to further the interests of passengers by endorsing a settlement that allows the UK’s monopoly hub to ignore its inefficiencies and over-reward investors by imposing excessive charges on users.

Willie Walsh

Willie Walsh

Willie Walsh, head of British Airways’ parent group IAG, said: “It is a bad day for our customers who have been let down by the CAA. With this settlement, Heathrow will continue to levy charges well above other major hub airports.

“As the only hub airport in the UK, Heathrow exerts monopoly power over its users. Like other airlines at Heathrow, we cannot move to a better-run UK hub that offers customers real value for money. No such alternative exists today but these excessive charges combined with a complacent management team at Heathrow make an alternative hub look more attractive and more realistic.”

“We want a Heathrow that is efficiently run, fairly rewarded and priced comparably with other airports. We will carefully consider our next steps.” What those steps will be is anyone’s guess, but in 2010 pre the merger with IAG Willie Walsh threatened to favour Madrid over Heathrow.

Heathrow Airport has submitted new proposals for slightly lower charges at the UK’s busiest airport.

Due to its near monopoly position, the fees that Heathrow can charge airlines are capped by the CAA (Civil Aviation Authority) and set over 5 year periods. The currrent pricing regime ends in March 2014 and, earlier this year, Heathrow set out proposals that would have seen it raise its prices by RPI plus 5.9% over the 5 year period from 2014-2019.

A poll tax on flying

Willie

Not surprisingly, these proposals were met by howls of derision from airline groups, most vocally British Airways, who claim that Heathrow is already too expensive. Willie Walsh, CEO of British Airways parent company IAG, submitted a counter proposal that charges at Heathrow should actually grow by RPI minus 9.8%.

Although Heathrow could easily brush off such a stark proposal from British Airways, it was unable to hide its dismay when, in April of this year, the CAA published its initial findings which suggested a cap in charges of RPI minus 1.3%. Only now, some 3 months later, has the airport responded with a counter-offer, this time of RPI plus 4.6%.

British Airways Terminal 5 Check-InAnnouncing their new proposal, the airport published the results of a survey of some 1,178 Heathrow passengers. In this survey, it is claimed, passengers said that they would rather see improved services and investment than lower fares. At the same time, Colin Matthews, CEO of Heathrow Airport Holdings warned that global investors would no longer be prepared to invest in Heathrow, or other UK infrastructure projects, if they were unable to make a fair return on their capital.

On Monday, British Airways, Virgin Atlantic and other airlines operating to Heathrow again rejected Heathrow’s proposals for a rise in fees and reiterated their call for an overall reduction.

Ironically, this heated disagreement about airport charges, which net Heathrow some £1.3 billion a year, comes at the very same time that Heathrow and its major customers are in full agreement over the need for a 3rd runway at the airport.

The CAA will publish its next report in October.

Heathrow Terminal 5

Heathrow Terminal 5