Airlines and Iata warning over Heathrow charges hike

Airlines and Iata warning over Heathrow charges hike

Airlines have warned that passengers will suffer under plans to raise charges at Heathrow by £600 million.

British Airways, Virgin Atlantic and Iata united together to call on the Civil Aviation Authority to be tougher in capping charges at the airport over the next five years.

They claim the regulator’s initial price proposals would add £600 million to airlines’ costs and undermine the services they could provide for customers.

The CAA has suggested an annual rise of inflation (RPI) minus 1.3% for the 2014-19 period.

Heathrow’s airlines calculate that, after a rise of 300% in the last 11 years, charges could be capped as low as RPI minus 9.8% without affecting the airport operator’s own investment plans.

The airlines said independent analysis had shown that Heathrow was more expensive than other hub airports such as Paris, Amsterdam and Frankfurt.

They said Heathrow must tackle its own inefficiencies rather than be allowed to exploit its monopoly position at the expense of airlines and their passengers.

In a statement ahead of tomorrow’s closing date for responses to the CAA’s initial proposals, Virgin Atlantic chief executive Craig Kreeger said: “These price proposals from the CAA have been wrongly greeted by some as good news for airport users, but in reality RPI –1.3% is far from a reduction in charges – in fact it would raise costs for airlines by an additional £600 million.

“In the current economic climate, businesses across the public and private sector are making tough choices and delivering on reduced resource.

“Rather than protect airports from this, it is the CAA’s responsibility to ensure Heathrow’s behaviour reflects the commercial reality of the sector and wider economy.”

BA chief executive Keith Williams added: “Heathrow airport’s charges have risen more than 300% in the last 11 years, making it the most expensive hub airport in the world.

“As they stand the CAA’s proposals take an airport that is currently over-priced, over-rewarded and inefficient and allow it to remain that way for the next five years with ever increasing fees.

“The CAA has a new primary duty to further the interests of customers and a secondary duty to promote economy and efficiency on the part of the airport operator.

“We hope the CAA will meet these statutory obligations and reconsider its initial proposals as a matter of urgency.”

Iata director general and chief executive Tony Tyler described the CAA’s proposal to cap the level of charges at slightly below inflation as a “weak medicine for a major illness”.

He said: “Connectivity is critical but the inefficiencies of the airport operator do it damage. With some determination, prices could be reduced each year at a rate substantially below inflation. That would be good news for UK businesses, travellers and shippers.

“Sadly, the management of the UK’s only hub airport is using its substantial market power to protect their comfortable monopoly business. Instead of pursuing greater efficiency, they propose to enhance shareholder value by cutting critical planned capital expenditure necessary to improve the passenger experience and the operational resilience of the airport.

“The CAA has a mandate to protect the passenger. It needs to stay that course and continue to demand that the operator of Heathrow airport does what every other business has to—control operating costs, constantly improve efficiency and deliver good service."

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