The UK Civil Aviation Authority (CAA) has published a consultation on its initial proposals for the next price control at Heathrow Airport Limited (HAL). This will ultimately set the maximum charges the airport operator can charge its airline customers for using the airport for the next five years.
The CAA states that it recognises that there is still significant uncertainty in the shape of the aviation industry's recovery from the COVID-19 pandemic, and that these proposals will “deliver affordable charges for consumers and allow the airport to continue to invest in service quality, while also supporting consumer demand as the industry recovers”.
The package of measures set out in the consultation include a five-year control period, which will allow the airport to smooth charges for consumers and provide investors with medium-term certainty. The control period will come into force in summer 2022. They also include a potential range of airport charges per passenger from £24.50 to £34.40, an increase from £22 per passenger in 2020. CAA says that it will work closely with Heathrow, airlines and other stakeholders to narrow this range over the next few months. Heathrow Airport had requested the CAA increase the cap on its charges per passenger to between £32 and £43.
CAA will allow “no additional adjustment to Heathrow's regulatory asset base to account for losses caused by the pandemic on top of the £300 million the CAA allowed earlier this year in response to HAL's request for an adjustment of £2.3bn last year”. The regulator has also introduced an interim price cap for 2022 to “protect consumers from any undue increase in airport charges while the full proposals for the H7 period are finalised”.
“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,” said Richard Moriarty, Chief Executive at the UK CAA. “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.”
The consultations on the interim price cap and the wider initial proposals will run until 17 November and 17 December 2021 respectively.
Commenting on the proposals, Shai Weiss, CEO, Virgin Atlantic said: “Today’s initial proposals from the Civil Aviation Authority fail to protect the British consumer, paving the way for Heathrow Airport to introduce unacceptable charges, just as international travel resumes at scale. The world’s most expensive airport risks becoming over 50% more expensive, as Heathrow and its owners seek to recoup their pandemic losses and secure hundreds of millions in dividends to shareholders. It is concerning that the regulator has failed in its first 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.”