The CAA has launched a consultation after initially rejecting a request from Heathrow to allow it to increase charges for airlines from 2022 to offset the financial impact of the Covid crisis.
In July, Heathrow Airport Limited requested a change in the calculation of its regulatory asset base (RAB) to take account of the projected impact of the pandemic on its 2020 and 2021 revenues.
HAL’s RAB is used to calculate a price control that sets the maximum revenue the airport can recover from the passenger charges it levies on airlines
The CAA said the airport argued that the change from 2022 would help protect it from losses in 2020 and 2021 and would benefit consumers in the long term by reducing its cost of capital and lowering future charges.
However, airlines objected to the request, arguing that Heathrow has been too slow to implement cost-cutting measures, that it should request further support from shareholders, and that no other UK airport had made a similar request.
Publishing its initial assessment, the CAA said it did not consider that HAL had demonstrated that its request was a proportionate response, and said there were “significant issues” that would need to be considered as part of a review already scheduled for 2021.
The regulator said: “The Civil Aviation Authority recognises that Covid-19 has had a severe and unprecedented effect on air traffic levels. This has resulted in revenue reductions for many organisations in the aviation industry.
“In addition to the steps HAL has taken to improve its financial position in response to Covid-19, it has also made a request to the Civil Aviation Authority to adjust its RAB and future regulated aeronautical changes to help protect it from such revenue losses.
“In this report, we have set out our initial assessment of HAL’s request considering our duties to current and future consumers. While HAL has raised important issues that result from the Covid-19 pandemic, we do not currently consider that HAL has demonstrated that its request is a proportionate response.
“More broadly, we recognise that there are significant issues that we will need to consider and take account of as part of the next price control review during 2021.”
A spokesman for Heathrow said: “We are disappointed with the CAA’s initial assessment and believe that it is not the right outcome for passengers. It risks further job losses at Heathrow and will make future improvements for passengers much more expensive. We intend to respond robustly to the CAA.”
A spokesman for British Airways owner IAG said: “We welcome the CAA’s decision not to allow Heathrow to recharge its losses for this year and next onto airlines and their customers.
“Heathrow is a wealthy, privately owned company which should seek funds from its shareholders as many other businesses in our industry have done to weather this pandemic. We look forward to participating in the CAA’s consultation process.”
The CAA has invited stakeholders to share their views before a final decision is made, with a consultation due to run until November 5.
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