A verdict on how much Heathrow airport can charge airlines must be reconsidered in part, the UK’s competition watchdog has ruled, amid a longrunning row at Europe’s busiest airport.
In March, the aviation regulator, the Civil Aviation Authority (CAA), ordered London’s largest airport, to cut its passenger charges by about 20% next year, which could result in lower air fares.
The CAA said the cap on Heathrow’s average charge for each passenger must be reduced from £31.57 for 2023 and last year, to £25.43 over the next three years. The airport had hoped to raise the fees it charges to airlines to fund baggage handling, security and other costs, which are set by the regulator.
Heathrow and three airlines – British Airways, Delta and Virgin Atlantic – appealed against the CAA’s decision. The airlines argued that Heathrow’s charges were higher than industry averages and that it could curb the aviation sector’s recovery from the Covid pandemic. Heathrow argued lowering the cap on fees would damage investment into the airport.
The companies lost their appeal after a provisional ruling by the Competition and Markets Authority (CMA) in September, although it found that the regulator had “made some errors” that needed to be revised.
The CMA said on Tuesday that the CAA “was not wrong on most of the issues that were appealed to it”, but had ordered it to reconsider three parts of its pricing decision.
Kirstin Baker, who chairs the CMA’s group that assessed the appeals, said: “Having considered these appeals, we found that the CAA’s Heathrow price control struck broadly the right balance between ensuring prices for passengers are not too high and encouraging investors to maintain and improve the airport over time.
“There are a handful of smaller issues we have ordered the CAA to look at again and it has agreed to do this swiftly.”
Of the three issues, the first relates to a part of the CAA’s cost of capital calculation, the second relates to a part of its passenger forecast, and the third relates to a specific adjustment known as the “AK factor”.
A Heathrow spokesperson said: “We’re naturally disappointed, but it’s time to move on. We will do our best to deliver the outcomes that passengers told us they wanted within this tight framework.”
Luis Gallego, the chief executive of British Airways’ parent company, IAG, said: “Heathrow’s charges remain among the highest in the world and are not competitive. We would like to work with the CAA to improve the regulatory framework for the future.”
A Virgin Atlantic spokesperson said: “Following more than three years of regulated consultation on Heathrow charges, 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.”
