UK competition authority wants Heathrow charges reconsidered

Regulator says certain parts of the cap on Heathrow's average charge per passenger should be revisited

The  UK competition regulator has found that some errors were made in a decision on how much Heathrow can charge airlines. Reuters
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The UK's competition authority is proposing that certain aspects of the decision on how much Heathrow Airport can charge airlines should be reconsidered.

In February, the Civil Aviation Authority said the cap on Heathrow's average charge per passenger must be lowered from £31.57 for 2023, to £25.43 over the next three years.

The cost of the charge tends to be passed on to passengers.

None of the parties were happy with the original decision, with the airlines arguing the cap was too high and Heathrow claiming it was too low.

Both the airport and three airlines – British Airways, Delta Air Lines and Virgin Atlantic – subsequently appealed.

The Competition and Markets Authority now says it has provisionally found some errors were made in that decision, but added that "the CAA was not wrong" for the most part.

The CMA agreed with the airlines in small parts in the way in which the CAA calculated the cost of debt for the airlines and a "small element" regarding exceptional events.

However, the CMA also agreed with Heathrow that an aspect of the adjustment aimed at recovering revenue lost due to the Covid-19 pandemic was "inappropriate".

A crowd of people gather at Heathrow Airport in London. The passenger charge made to airlines by Heathrow is largely passed on in ticket prices. EPA / ANDY RAIN

No 'significant impact'

"We welcome this provisional determination by the Competitions and Markets Authority that has largely proposed to reject most grounds of the appeals against our decision," said CAA chief economist Andrew Walker.

"While it has determined there are a small number of issues that we should review again, these are not expected to have a significant impact on the level of Heathrow's price control.

"We will now review the findings before responding in due course.

"We remain confident that our decision on the charges that Heathrow Airport Limited levies on airlines represent a good deal for consumers, while allowing the airport to invest in improving services for the future."

Virgin was one of three airlines to appeal the original CAA decision and now claims Heathrow has prioritised shareholders over consumers.

'Excessive charges'

Nonetheless, the CMA review of the CAA's decision has done little to reduce the tension between the airlines and Heathrow over the issue of charges.

"After three years of consultation, it's disappointing that the CMA has largely endorsed the CAA's decision, which did not go far enough to protect consumers from excessive charges at Heathrow," a Virgin Atlantic representative said.

"The airport has prioritised shareholders over consumers, relying on pessimistic passenger forecasts to support its agenda, in stark contrast to the actual number of passengers flying from Heathrow, which is close to pre-pandemic levels."

Meanwhile, for its part, Heathrow commented that it was "carefully considering the CMA's initial findings to understand what impact they may have on passengers and our ability to deliver our investment plans".

A final decision by the CMA is due next month.

Updated: September 08, 2023, 10:19 AM