Air Freight News

Heathrow told it can claw back $416 million in airline fees

London’s Heathrow airport will be allowed to increase airline fees on a limited basis to help it ride out the coronavirus crisis, the U.K.’s aviation regulator said.

Heathrow can claw back 300 million pounds ($416 million) after submitting an application to recover 2.6 billion pounds, the Civil Aviation Authority said Tuesday. While its full request will be considered in a wider review, the airport said the decision risks damaging its ability to attract funding.

“The CAA has failed to deliver,” Heathrow said in a statement. “This undermines investor confidence in U.K. regulated businesses and puts at risk the government’s infrastructure agenda.”

Passenger numbers at what’s normally Europe’s busiest airport collapsed after curbs aimed at stemming the spread of Covid-19 effectively wiped out demand on long-haul routes. In February, the company said it lost more than 2 billion pounds last year, though it maintains enough liquidity to see it through to 2023.

Heathrow isn’t allowed to lift prices directly. It sought a boost to its regulatory asset base, the sum not recovered in airport charges that’s used in setting price controls.

British Airways owner IAG SA, the biggest carrier at Heathrow, said it was disappointed that the fees were raised at all. “Heathrow is the most expensive hub airport in the world,” the company said in a statement.

While the CAA viewed Heathrow’s initial request as “disproportionate and not in the interests of consumers,” Director Paul Smith said that the amount granted reflects the exceptional circumstances facing the airport and will help it cope with “any potential surge in consumer demand later this year.”

Heathrow said the CAA should at the very least have helped it cover the cost of regulatory depreciation and that the matter must be addressed in the next regulatory settlement starting in 2022 if it’s to remain attractive to investors.

The regulator had rejected the airport’s initial application on Feb. 2, saying it would either fold the issue into work on the future settlement or make “a more limited and targeted intervention” now.

The airport, controlled by interests including Spanish builder Ferrovial SA, the Qatar Investment Authority, private-equity firm Alinda Capital Partners and China Investment Corp., had said its plan would have lifted fares by 1.20 pounds per passenger.

Bloomberg
Bloomberg

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© Bloomberg
The author’s opinion are not necessarily the opinions of the American Journal of Transportation (AJOT).

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