Heathrow narrows losses but blames CAA price cap for staying in the red
Heathrow Airport said on Wednesday it remained loss making in the first half of 2023 despite soaring passenger figures, blaming a cap on the amount it can charge airlines for using the hub.
For the six months to June, the west-London hub saw adjusted pre-tax losses halve to £139m but said that the airport “remains loss making” due to the Civil Aviation Authority (CAA)’s price cap.
Heathrow said that it did not forecast paying any dividends in 2023 to its consortium of investors – which include the Qatar Investment Authority and Madrid-based construction group Ferrovial.
The airport has been locked in a bitter feud with the CAA and major airlines British Airways and Virgin Atlantic over how much it can charge for landing fees.
The CAA ruled in March that the fees paid by airlines to fly into the airport should drop from £31.57 per passenger to £25.43 from next year.
However, both BA, Virgin and Heathrow have appealed against the ruling and are now awaiting a decision from the Competition and Markets Authority (CMA) later in the year.
Speaking to Morning Wire following the announcement, CEO John Holland-Kaye said that the airport swinging to profit in future would be “completely” dependent on the decision.
He insisted that Heathrow has “fantastic relationships” with its airlines but argued that it was “in their economic interests to fight over this, of course it is, because every pound they can get off our charges is a pound on off of mine.”
Chief Financial Officer Javier Echave told Morning Wire that the regulator had got its math “catastrophically wrong.”
Despite its concerns over the impacts of the price cap, passenger numbers soared from 26 million to 37.1 million year-on-year as the airport benefitted from the recent boom in summer travel demand.
This helped boost revenues by 36 per to £1.74bn, with the airport also reporting an operating profit of £843m, up from £590m in 2022.
The surge in cash flow, however, will fail to offset a growing £14 billion debt pile, which many argue has weighed Heathrow down to a greater degree than the limits imposed by the CAA
Following a chequered pandemic recovery, long time chief Holland-Kaye announced in February that he would step down from the top job. He will be replaced by Copenhagen Airport boss Thomas Woldbye later in the year.
Danni Hewson, head of financial analysis at AJ Bell, said: “a post-Covid travel boom has helped Heathrow pare back its losses, but it continues to blame a cap on charges for the fact it remains loss making despite a surge in passenger numbers.
“Whilst airlines have been able to hike ticket prices to help them mitigate rising prices, the airport has been locked in a dispute with the CAA over how much it can charge for landing fees.
“And with some inflation weary consumers being battered by increased mortgage payments there’s a real concern that this winter could prove a difficult one for businesses that rely on discretionary spend.”