Heathrow’s Passengers Set to Lose out in Double Whammy of Price Hikes and Spending Cuts

he owner of Heathrow Airport is gearing up to hit passengers with a double whammy of price increases coupled with a cut in spending on facilities.

This move, which will be to the detriment of all airport-users, is set to be sanctioned by the Civil Aviation Authority (CAA), which has a new statutory obligation to further the interests of customers.

On October 3, the CAA is due to publish its final proposals for the airport charges that are levied on airlines and their customers for the period from 2014 to 2019.

The CAA’s initial proposal of RPI–1.3 per cent means that charges at the airport are set to increase by £600m over the five year period. This will maintain Heathrow’s position as the most expensive hub airport in the world and will continue the upward trajectory of charges levied by the airport.

In the last regulatory period (from 2008) Heathrow invested £4.5bn in new facilities at the airport, including the delivery of Terminal 5 and construction of Terminal 2. By its own admission, in the next five years Heathrow plans to cut spending at the airport by £1.5bn even as the charges increase. Indeed, the airport owner has publicly stated that if it does not get a settlement of RPI+2 per cent it will cut spending by a further £1bn. This means that among other measures, it will only undertake “reactive maintenance” whereby facilities will be fixed only if faulty rather than maintained to standard or improved.
Willie Walsh, chief executive of IAG, said: “Heathrow’s management seem incapable of running their business efficiently within a routine cost control environment which is a day-to-day reality for most companies. If they can’t introduce customer improvements in a cost effective way, then they should step aside and let someone else run the airport.

“Rather than become more efficient, it appears that Heathrow’s priority is to further line its investors’ pockets. The airport already pays its shareholders a handsome dividend and has grown its profits throughout the period of global recession – a luxury not afforded to a large number of businesses.

“Heathrow has been protected from the harsh realities of the market place due to past over-generous regulated charges. The CAA has the responsibility to deliver a Heathrow that is efficiently run, fairly rewarded, and priced comparably with other hub airports.”

Source / Author: British Airways