A bid by Heathrow Airport to hike landing fees, in a bid to cover its pandemic losses, has been rejected by the Civil Aviation Authority, it was revealed on Tuesday.
The capital’s largest airport had asked the regulator for an immediate adjustment of £800m to its regulatory asset base, and a total adjustment of £2.6bn by the end of 2021, which would have been recoverable through airport fees charged to airlines from 2022.
In its response, however, the CAA described Heathrow’s requested adjustment as “disproportionate”, and “not in the interest of consumers”, adding that it would prefer to deal with many of the issues raised by Heathrow in the next scheduled price review, ‘H7’.
The authority did agree, however, that the current, severely depressed air travel market made for “exceptional circumstances”, with potential risks to consumers in the short-term, thus allowing Heathrow a much smaller regulatory asset base adjustment of £300m.
A smaller adjustment would incentivise the airport operator to plan effectively, reopen its terminals in a timely way for a summer recovery, and invest to benefit consumers, the CAA claimed.
“Following Heathrow’s request for a regulatory asset base adjustment, we have taken the decision that an early intervention on the scale of its request is disproportionate and not in the interests of consumers,” said CAA director Paul Smith.
“The other issues raised by Heathrow as part of its request will be dealt with during the next price control review.”
Smith said the authority did recognise the “exceptional circumstances” Heathrow was in, with consumers facing “potential risks” if the regulator took no action in the short term.
“The decision we have announced today will incentivise and allow Heathrow to maintain investment, service quality and be proactive in supporting any potential surge in consumer demand later this year.”
The number of flights operating at Heathrow, and demand for those that are operating, has remained severely limited since the start of the Covid-19 pandemic, with the airport only operating two terminals at a limited capacity to try and maintain social distancing.
Foreign travel remains illegal in England apart from a number of specified purposes, though the government is expected to release information on a relaxing of those rules in the coming days.
