The UK Civil Aviation Authority has published its final decision for the annual caps that will apply to the charges that UK airport operator Heathrow Airport Limited levies on airlines for using the airport until the end of 2026.
The regulator has confirmed that charges for 2023 will remain fixed at the level set out in its interim decision issued earlier in 2023. The average maximum price per passenger will then fall by about 20% from £31.57 (US$37.38) per passenger in 2023 to £25.43 (US$30.11) per passenger in 2024 and will remain broadly flat at that level until the end of 2026.
This means the average charge over the five years will be £27.49 (US$32.55) compared to £28.39 (US$33.61) for final proposals, a reduction of £0.90 (US$1.07). According to the organization, this lower level of charges from 2024 recognizes that passenger volumes are expected to return to pre-pandemic levels and should benefit passengers in terms of lower costs, while also enabling Heathrow Airport Limited to continue investing in the airport for the benefit of consumers and supporting the airport’s ability to finance its operations.
The package includes a £3.6bn (US$4.26bn) capital investment program. These investments include updated security scanners and a new baggage system in Terminal 2, which are collectively expected to cost around £1.3bn (US$1.5bn). These investments are intended to improve the passenger experience, improve the security process and build a more resilient infrastructure.
The arrangements are also to incentivize Heathrow to provide a good quality service for passengers and include a suite of measures, targets and incentives to capture the main aspects of airport operation services that are important to consumers. This includes retaining some current measures such as time waiting in security queues, but also now includes new measures such as helpfulness/attitude of security staff, wi-fi performance, availability of check-in infrastructure, as well as hygiene safety testing and more.
The Civil Aviation Authority’s updated analysis reflects a passenger forecast that has been revised upwards since final proposals were first published in June 2022, as recovery from the Covid-19 pandemic continues. The decision also reflects changes in the wider macroeconomic environment, in particular, updated forecasts of inflation and interest rates since the final proposals were published.
Richard Moriarty, chief executive at the UK Civil Aviation Authority, said, “Our priority in making this decision today is to ensure the traveling public can expect great value for money from using Heathrow in terms of having a consistently good quality of service, while paying no more than is needed for it. We have carefully considered the sharply differing views from Heathrow Airport Limited and the airlines about the future level of charges. Understandably, their respective shareholder interests lead the airport to argue for higher charges and the airlines to argue for lower charges.
“Our job is to reach an independent decision from these conflicting commercial interests and focus on what is in the best interests for the traveling public that will use Heathrow in the years to come. In doing so we have taken all the points made by Heathrow Airport Limited and airlines into account, along with extensive consultation and our own detailed analysis. We are confident our final decision represents a good deal for consumers using Heathrow while having regard for the airport’s need to efficiently finance its operations and be able to invest in improving services for the future.”
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