Heathrow airfares to rise as CAA confirms interim price cap
The UK Civil Aviation Authority (CAA) has written to Heathrow, confirming the £30.19 interim price cap the airport can charge its airline customers will take effect from 1 January.
According to the CAA, the charge will be £29.50 in 2020 prices, going up to £30.19 – a 50 per cent increase compared with the current £19.60 – because of the surge in inflation rates.
The authority stated to have introduced the interim cap to protect consumers, given that the new measures for the next five years won’t be made and take effect until next summer.
Commenting on the news, George Georgiou, lecturer in aviation at Buckinghamshire New University, such an increase cannot be justified because of Heathrow’s monopoly in the market.
” If anything, additional financial support for the whole industry, including airports, should be linked to emergency government measures that have a dampening effect on demand, instead of placing an additional financial burden on the passenger.”
The CAA’s decision received negative feedback from Heathrow, as a spokesperson said the hub was “extremely disappointed” by the figure.
“There are material and basic errors in many aspects of the CAA’s assessment,” they told PA news agency. “Uncorrected, this risks leaving Heathrow without sufficient cash flow to support investment in improving passenger service and resilience.”
Heathrow was not the only one to condemn the CAA’s decision. Luis Gallego, chief executive of British Airways’ (BA) owner IAG, said: “We’re disappointed that Heathrow charges will increase further.
“The UK’s economic recovery depends on its ability to compete on the global stage.
“A cost-efficient Heathrow would benefit UK consumers, businesses and trade. Global Britain needs a global and competitive hub”.
According to Virgin Atlantic’s boss Shai Weiss, the CAA’s decision “defies belief and fails to protect consumers.”
“The CAA has failed in its duty to protect the British consumer,” he said. “Together with industry partners, we will now consider options to appeal to the Competition & Markets Authority (CMA), so that passengers are protected from these egregious proposals and ensure the CAA fulfils its duties.”
“The CAA has a statutory responsibility to protect consumers and if it thinks a 50% increase in passenger charges at the world’s most expensive airport is the way to do this, then something has gone very wrong,” added Tim Alderslade, Airlines UK’s chief executive.
“Heathrow is behaving as if it’s the only company to be adversely hit by Covid.”
The airport had previously called for the new prices to be between £32 and £43, prompting major carriers such as British Airways (BA) and Virgin Atlantic to condemn the request.
IAG recently threatened to cut flights at the airport if fees didn’t go down.
Speaking at the Airlines 2021 conference in Westminster on 22 November, IAG’s chief executive Luis Gallego said: “The reality is that more than 40 per cent of the people who use Heathrow are connecting passengers. They are simply passing through on their way to other destinations and could easily go by other, more competitive hubs.”
“Hiking charges will not help. It will not attract demand – it will have the opposite effect.”
Gallego’s Westminster comments followed what he said a week prior, when he stated that the hub was “back at its old tricks.”
Writing in the Sunday Telegraph alongside Virgin Atlantic’s boss Shai Weiss and Walsh, Gallego accused Heathrow of hindering the country’s recovery.
“The UK’s Global Britain aspirations rely on cost-efficient infrastructure. Heathrow’s plans to further increase its charges – even at the lower level that the CAA has suggested – put that in jeopardy,” they said.
Today, the company’s shares opened at 126.14p, going up 1.22 per cent to 127.34p.