Heathrow airport told to cut landing charges ‘in best interest of consumers’ – business live | Business

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Julia Kollewe

Introduction: Heathrow Airport told to cut landing fees

Good morning, and welcome to our rolling coverage of business, the world economy and the financial markets.

Landing charges at Heathrow will fall over the next few years, the UK’s aviation regulator has ruled, following pressures from airlines to cut the cost of flying to the London airport.

Britain’s Civil Aviation Authority is proposing this morning that the average maximum price per passenger that airlines will pay Heathrow will fall from £30.19 today to £26.31 in 2026.

The CAA says its final proposals would be “in the best interest of consumers”, and works out as a 6% reduction every year once you account for inflation.

The decisition follows a long-running consultation into charges at the UK’s largest airport, as the sector tries to recover from the pandemic.

Heathrow had pushed for higher landing fees, while the airlines warned higher charges would be passed onto consumers, in a bitter dispute between the two sides (who had “starkly divergent views on the level of charges”, the CAA says).

The move should please airlines, who have been piling pressure on the CAA to lower these fees as they try to recover from the pandemic. But it’s a blow to the airport, which had argued for higher fees to help provide a better service.

The cap was just £22 per customer in 2020, but was raised to £30 on an interim basis this summer.

Richard Moriarty, chief executive at the UK Civil Aviation Authority, said this morning:

“Today’s announcement is about doing the right thing for consumers.

We have listened very carefully to both Heathrow Airport and the airlines who have differing views to each other about the future level of charges.

The deal will allow Heathrow to “make the investment needed for the future”, Moriaty adds.

BREAKING: .@UK_CAA announces that average Heathrow Airport passenger charges will fall from £30.19 today to £26.31 in 2026 ✈️

– Agreement includes H’row investing in “next generation security equipment” and a new baggage system for Terminal 2#travel #ttot #Heathrow

— Ben Clatworthy (@benclatworthy) June 28, 2022

This is necessary, judging by the masses of uncollected baggage that has piled up in the travel chaos, and the misery suffered by some passengers during recent disruption.

The CMA explains:

Allowing Heathrow to appropriately invest in keeping the airport safe, secure and resilient, while at the same time providing a good experience for passengers. This includes investing in next generation security equipment and a new baggage system for Terminal 2.

Heathrow had called for the charges to range from £32 to £43 a passenger, as it sought to recoup losses caused by the coronavirus pandemic.

That proposal led Willie Walsh, the head of global airline body Iata, to accuse the airport of “gouging” its customers.

Also coming up today

European Central Bank policymakers are gathering in Sintra, Portugal, for their annual forum on Central Banking — at a time when the eurozone risks both a downturn and a new sovereign debt crisis, as policymakers try to cool inflation. We’ll hear from Christine Lagarde this morning.

Tram drivers in south London have started a 48-hour walkout in a dispute over pay, after about 150 members of the Aslef union on the London Trams network, formerly known as the Croydon Tramlink, rejected a 3% offer from operator FirstGroup.

In parliament, MPs will question the Government’s preferred candidate to chair the Competition and Markets Authority, Marcus Bokkerink.

The Business, Energy and Industrial Strategy (BEIS) Committee will also hear from business secretary Kwasi Kwarteng.

The agenda

  • 7am BST: German consumer confidence survey for May
  • 8.30am BST: SMMT International Automotive Summit
  • 9am BST: ECB president Christine Lagarde speech at its Forum on Central Banking
  • 10.15am BST: Marcus Bokkerink, the government’s preferred candidate for Chair at Competition and Markets Authority, appears at the BEIS committee
  • 11am BST: Business secretary Kwasi Kwargeng appears at the BEIS committee

Heathrow charges: what the papers say

Today’s final proposal on Heathrow landing fees is at the lower end of the range the CAA had been considering, points out the Financial Times.

Overall, the charges will average £28.39 between 2022 and 2026 — enough, the regulator said, for Heathrow to install security equipment and a baggage system in Terminal 2, replacing technology that failed this month.

The decision can be appealed to the Competition and Markets Authority.

The Telegraph focuses on Heathrow’s warning that customers will suffer (see earlier post):

Heathrow passengers face “a worse experience”, the airport has warned, after it was told by the regulator to cut charges levied on travellers amid a surge in demand for flights.

The Civil Aviation Authority (CAA) said that the cap on landing fees charged per passenger at Heathrow will fall from £30.19 to £26.31 by 2026, following a furious lobbying effort by the airport and airlines.

Airlines have long argued that Heathrow is one of the most expensive airports in the world and urged the CAA to resist its demands to raise charges to more than £40 per passenger.

Heathrow, meanwhile, has said that it needs to raise the fees to make sure the airport does not fall into disrepair.

Reuters says the CAA has responded to presure from airlines over the cost of flying at Heathrow:

Major airlines including British Airways and Virgin Atlantic have been locked in a bitter dispute with Britain’s biggest airport for months, with airlines arguing that Heathrow was already the most expensive airport in the world.

Heathrow had argued it needed to double the fee it charged airlines in order to invest and provide a better service to customers while retaining the support of private investors.

Cost of living crisis hits lottery tickets sales

Julia Kollewe

Julia Kollewe

Camelot, the outgoing UK national lottery operator, has warned that players have “tightened their belts” in the face of soaring living costs, as it reported lower sales of tickets and instant win games.

The company, which has launched legal action against the Gambling Commission after losing the lottery’s next licence to the Czech-owned newcomer Allwyn, posted a 3% drop in sales to £8.1bn in the year to 31 March.

It said most of that fall was caused by a 7% decline in sales of National Lottery Instants to £3.4bn.

Camelot said:

“This was largely down to greater competition for people’s attention and spend after the lifting of Covid restrictions, followed by growing economic uncertainty over the latter part of the year.”

Virgin Atlantic chief executive Shai Weiss argues that the CAA should insist on lower landing fees at Heathrow.

Weiss argues that this morning’s proposals are a move in the right direction, saying:

“In its final proposals for Heathrow charges, the CAA has taken a positive step towards a price cap that puts customers first.

“However, the regulator can and must go further to lower the cap beyond the proposed average of £28.39, adjusted for inflation, up to the end of 2026, reflecting robust demand for travel this summer and beyond.

With travel recovery under way, our collective focus should be on upholding the best possible experience for customers with fair charges, especially with consumers facing cost-of-living pressures and our Global Britain aspirations at stake.”

The Civil Aviation Authority says its final proposal on heathrow landing fees will bring ‘considerable passenger benefits’.

It explains:

  • This will include allowing significant investment to improve Heathrow for passengers, such as £1.3bn upgrading Terminal 2’s baggage facilities and introducing new generation security scanners to help reduce queues in the future.
  • Heathrow is among the most expensive airports in the world for its charges to airlines and it is important to note that the five-year period will see airport charges reduce over time from today’s level.

Last year, our financial editor Nils Pratley wrote a stinging rebuke of Heathrow’s push for a big rise in landing charges.

He argued that the airport’s owners should count their blessings, rather than look for special pandemic privileges, and dismissed the argument that investors would shun the UK.

Pointing out that Heathrow’s shareholders enjoyed £4bn of dividends in recent years before the pandemic, he wote:

The owners of Heathrow, who have done very nicely for themselves over the years, have an extraordinary ability to believe the world owes them a living in all circumstances.

Heathrow: This means passengers would get worse experience

Heathrow has criticised the CAA’s decision that its landing fees should fall over the next few years.

CEO John Holland-Kaye said it will mean a worse experience for passengers:

“As the industry rebuilds, our focus is to work alongside airlines and their ground handlers to give passengers a reliable and consistent journey through Heathrow.

The CAA continues to underestimate what it takes to deliver a good passenger service, both in terms of the level of investment and operating costs required and the fair incentive needed for private investors to finance it. Uncorrected, these elements of the CAA’s proposal will only result in passengers getting a worse experience at Heathrow as investment in service dries up.

Holland-Kaye also claims that the CAA’s ruling raises “serious questions about Britain’s attractiveness to private investors” [Heathrow is owned by a consortium of shareholders, led by Spanish infrastructure group Ferrovial and Qatar’s sovereign wealth fund].

And he’s not given up changing the CAA’s mind, it seems:

“We will take time to assess the CAA’s proposal in more detail and will provide a further evidence-based response to this latest consultation. There is still time for the CAA to get this right with a plan that puts passengers first and encourages everyone in the industry to work together to better serve the travelling public.”

Introduction: Heathrow Airport told to cut landing fees

Good morning, and welcome to our rolling coverage of business, the world economy and the financial markets.

Landing charges at Heathrow will fall over the next few years, the UK’s aviation regulator has ruled, following pressures from airlines to cut the cost of flying to the London airport.

Britain’s Civil Aviation Authority is proposing this morning that the average maximum price per passenger that airlines will pay Heathrow will fall from £30.19 today to £26.31 in 2026.

The CAA says its final proposals would be “in the best interest of consumers”, and works out as a 6% reduction every year once you account for inflation.

The decisition follows a long-running consultation into charges at the UK’s largest airport, as the sector tries to recover from the pandemic.

Heathrow had pushed for higher landing fees, while the airlines warned higher charges would be passed onto consumers, in a bitter dispute between the two sides (who had “starkly divergent views on the level of charges”, the CAA says).

The move should please airlines, who have been piling pressure on the CAA to lower these fees as they try to recover from the pandemic. But it’s a blow to the airport, which had argued for higher fees to help provide a better service.

The cap was just £22 per customer in 2020, but was raised to £30 on an interim basis this summer.

Richard Moriarty, chief executive at the UK Civil Aviation Authority, said this morning:

“Today’s announcement is about doing the right thing for consumers.

We have listened very carefully to both Heathrow Airport and the airlines who have differing views to each other about the future level of charges.

The deal will allow Heathrow to “make the investment needed for the future”, Moriaty adds.

BREAKING: .@UK_CAA announces that average Heathrow Airport passenger charges will fall from £30.19 today to £26.31 in 2026 ✈️

– Agreement includes H’row investing in “next generation security equipment” and a new baggage system for Terminal 2#travel #ttot #Heathrow

— Ben Clatworthy (@benclatworthy) June 28, 2022

This is necessary, judging by the masses of uncollected baggage that has piled up in the travel chaos, and the misery suffered by some passengers during recent disruption.

The CMA explains:

Allowing Heathrow to appropriately invest in keeping the airport safe, secure and resilient, while at the same time providing a good experience for passengers. This includes investing in next generation security equipment and a new baggage system for Terminal 2.

Heathrow had called for the charges to range from £32 to £43 a passenger, as it sought to recoup losses caused by the coronavirus pandemic.

That proposal led Willie Walsh, the head of global airline body Iata, to accuse the airport of “gouging” its customers.

Also coming up today

European Central Bank policymakers are gathering in Sintra, Portugal, for their annual forum on Central Banking — at a time when the eurozone risks both a downturn and a new sovereign debt crisis, as policymakers try to cool inflation. We’ll hear from Christine Lagarde this morning.

Tram drivers in south London have started a 48-hour walkout in a dispute over pay, after about 150 members of the Aslef union on the London Trams network, formerly known as the Croydon Tramlink, rejected a 3% offer from operator FirstGroup.

In parliament, MPs will question the Government’s preferred candidate to chair the Competition and Markets Authority, Marcus Bokkerink.

The Business, Energy and Industrial Strategy (BEIS) Committee will also hear from business secretary Kwasi Kwarteng.

The agenda

  • 7am BST: German consumer confidence survey for May
  • 8.30am BST: SMMT International Automotive Summit
  • 9am BST: ECB president Christine Lagarde speech at its Forum on Central Banking
  • 10.15am BST: Marcus Bokkerink, the government’s preferred candidate for Chair at Competition and Markets Authority, appears at the BEIS committee
  • 11am BST: Business secretary Kwasi Kwargeng appears at the BEIS committee