London Heathrow Airport flew into turbulence this morning after a regulatory ruling deemed the level it charges for landing fees too high.
Following a six week consultation, the UK Civil Aviation Authority (CAA) on Thursday capped Heathrow’s price per passenger at an estimated £23.73 in 2025 and £23.71 in 2026.
The landing fee, which is paid by passengers as part of the cost of their ticket, covers things like security and luggage handling. It has been the subject of a bitter feud between Heathrow and airlines such as Virgin Atlantic in recent years and it’s clear why.
Heathrow looks, finally, to be nearing the end of a long and bumpy road to recovery from Covid-19 following years of financial trouble and low demand. It turned a first profit since the pandemic in February and forecast record annual passenger traffic.
But executives at the Hounslow hub see the price cap as critical to the longevity of that recovery. When the CAA launched its most recent consultation in March, chief executive Thomas Woldbye warned he would have to “pull ever lever” to overcome the “huge cost challenge” set by the CAA and stay profitable.
Heathrow has yet to offer a statement on Thursday’s verdict. In the past, airlines and the UK’s busiest hub have traded harsh insults, with the latter repeatedly accused of attempting to price gouge customers. The changes have not been changed much (around six per cent) but could fuel a fresh spat.
The airport’s financial position is at its strongest in years currently. Some 81.5m passengers passed through its gates last year, the most ever, and it is expected to break that record again this year amid booming demand for UK-US flights.
It is, however, still in the process of whittling down a near £17bn debt pile at a time when spending is set to rise as Heathrow deals with creaking infrastructure and its long-running third runway saga.
Backroom talks with Whitehall over a looming business rates bill have also been held in recent weeks after it was revealed that changes in how they’re calculated could result in costs reaching as high as £300m a year, up from £200m.
Whatever happens next, its financial future may rest largely in the hands of Saudi Arabia. The oil-rich nation’s sovereign wealth fund stands to acquire a 37.6 per cent majority stake in the airport, alongside the French private equity firm Ardian.
The deal, valued at £3.26bn, sees the Spanish infrastructure giant Ferrovial exit after more than 17 years. Heathrow’s new owners will have a lot on their plate.