Holidaymakers and frequent flyers will face yet more misery next year, with Heathrow set to hike the price it charges airlines by more than £8 per passenger.
The Civil Aviation Authority (CAA) has given the west London airport the green light to increase passenger charges to £30.19 from January 1 – up from £22 this year.
Bosses at the airport had wanted to set the charge – paid by airlines but generally passed on to customers – to a staggering £43 from January.
Heathrow chiefs argued the steep increase in the airport levy, which covers the costs of operating terminals, baggage systems and security, would help the business recover from its £3.4billion Covid losses.
But the CAA stepped in to cap the increase at £30.19 for next year, having previously consulted on a figure of £29.50 per passenger.
The authority said the final £30.19 figure, announced on Thursday, reflects ‘the uncertainty of the recovery of passenger volumes’ due to Covid.
But Heathrow chiefs say they are ‘extremely disappointed’ in the figure. Bosses of the airport say the increase is not enough and warn that it risks leaving the airport ‘without sufficient cashflow’.
Meanwhile, airline bosses including ex-BA chief Willie Walsh and bosses at Virgin Atlantic accused Heathrow chiefs of ‘greed’.
Others warned the hike could put passengers off flying, with Virgin Atlantic saying the increase adds up to £200 to the cost of a family trip to Florida.
Holidaymakers and frequent flyers will face yet more misery next year, with Heathrow set to hike the price it charges airlines by more than £8 per person. Pictured: Library image
Willie Walsh (pictured left), the former boss of BA, attacked the ‘greed’ of Heathrow’s predominantly overseas shareholders, while bosses at Virgin Atlantic, founded by Sir Richard Branson (pictured right), said the move ‘defies belief and fails to protect consumers’
However a spokesperson for Heathrow said: ‘We are extremely disappointed in this interim decision from the CAA.
‘It relies on rushed analysis and will undermine passenger experience at the UK’s hub airport.
‘As an example, the CAA’s flawed analysis assumes that operating costs at Heathrow next year will be £173 million lower than our budget.
‘This is even lower than we were able to achieve in 2020, when we served half as many passengers with only one runway and two terminals operating and the benefit of a Government furlough scheme.
‘There are material and basic errors in many aspects of the CAA’s assessment.
‘Uncorrected, this risks leaving Heathrow without sufficient cashflow to support investment in improving passenger service and resilience.’
However, Luis Gallego, chief executive of British Airways’ parent company IAG, said the firm is ‘disappointed that Heathrow charges will increase further’.
‘The UK’s economic recovery depends on its ability to compete on the global stage,’ he said.
‘Heathrow is already 44 per cent more expensive than its European competitors. The reality is around 40 per cent of Heathrow passengers are connecting to other destinations and could easily travel via other European hubs.
‘After the worst crisis in aviation history we need to attract demand to stay competitive.
‘Hiking charges will have the opposite effect. Britain will become not more competitive, but less.
‘A cost-efficient Heathrow would benefit UK consumers, businesses and trade. Global Britain needs a global and competitive hub.’
Willie Walsh, the former boss of BA, previously attacked the ‘greed’ of Heathrow’s predominantly overseas shareholders.
Bosses of Virgin Atlantic, founded by businessman Sir Richard Branson, meanwhile said the move ‘defies belief and fails to protect consumers’.
Shai Weiss, CEO, Virgin Atlantic said: ”Today’s decision enables Heathrow, already the world’s most expensive airport, to increase charges in 2022 as its owners seek to recoup their pandemic losses and secure hundreds of millions in dividends to shareholders.
‘The CAA has failed in its duty to protect the British consumer. Together with industry partners, we will now consider options to appeal to the Competition & Markets Authority (CMA), so that passengers are protected from these egregious proposals and ensure the CAA fulfils its duties.
‘Just as UK airlines raised significant funds from shareholders in order to clear a path to recovery, it’s only right that Heathrow turns to its equity owners first, rather than expecting consumers and industry to shoulder the burden.
‘Abusing its unique position as the UK’s only hub airport, an increase of Heathrow charges on this scale will hurt the UK’s economic recovery, damage Global Britain aspirations and unfairly hit the pockets of families and businesses around the nation.’
Luis Gallego, chief executive of British Airways’ parent company IAG, said the firm is ‘disappointed that Heathrow charges will increase further’. Shai Weiss (pictured right), CEO, Virgin Atlantic said: ‘The Civil Aviation Authority’s decision defies belief and fails to protect consumers.’
The cap will move up or down depending on factors such as passenger numbers and commercial revenue.
It comes as Heathrow chiefs revealed in October the airport had lost £500million over the summer.
The figure means Britain’s busiest airport has now lost £3.4billion since the start of the Covid-19 pandemic.
Heathrow told investors in October that the losses mounted despite efforts to cut 30 per cent of operating outgoings during the Covid period.
However it reassured them of its ‘financial strength’ with £4.1billion of cash in reserve.
It also said there were signs of improvement but it did not expect passenger numbers to recover fully for five years.
Heathrow’s seven billionaire owners include the sovereign wealth funds of Qatar, Singapore and China.
It has paid out about £4 billion in dividends since 2012 and has said it could restart payouts next year, after pausing them over the pandemic, if its debts come under control.
Heathrow bases its charges on the numbers using the airport. It expects around 40 million passengers next year, compared to 80 million before the pandemic, and said this means each passenger must pay more to cover the shortfall.
Company documents show Heathrow would have raised around £1.6billion from airport charges next year – had it been able to charge the higher rate it had requested. But the new £30 charge is expected to only raise around £300million.
Heathrow last month introduced a new £5 drop-off charge outside its terminals.
The new charge applies to all vehicles – including taxis and private hire cars – entering the forecourt areas outside the airport’s terminals.
Heathrow last month introduced a new £5 drop-off charge outside its terminals. The new charge applies to all vehicles – including taxis and private hire cars – entering the forecourt areas outside the airport’s terminals
The fee must be paid online or over the phone, with number plate reading cameras, instead of barriers, being used to enforce the charge.
Heathrow chiefs say the move, which brings the airport’s policy in line with the likes of Gatwick and Manchester, who also have £5 drop-off charges, is aimed at ‘improving air quality and reducing congestion’.
The move could bringing in as much as £100million-a-year for the airport.
It comes as Chancellor Rishi Sunak in October announced plans to cut air passenger duty (APD) on domestic flights by 50 per cent.
The tax cut, due to take effect from 2023, will result in 400,000 more airline passengers a year, according to estimates by one fiscal watchdog.
However aviation chiefs warned that the ‘fundamentally flawed’ tax increase on ultra-long haul flights will ‘penalise’ a global Britain and be a further blow to airlines recovering from the impact of Covid.
The Government plans to slap a £91 air passenger duty (APD) on flights to far flung destinations such as Australia, east Asia and large parts of South America from 2023.
Aviation bosses say the new ultra-long haul charge will unfairly punish long haul carriers who have faced major disruption and a huge drop in passenger numbers since March last year due the Covid pandemic.
The charge, which will be brought in from April 2023, is a new level on top of the current long distance charge.
Current long haul destinations, such as the US, Dubai and Brazil, will remain in the current long haul area for air passenger duty – which will rise from £82 to £87.
But even longer haul destinations will now be moved into a new area, the ultra-long haul zone, which will be charged at £91.
Luis Gallego, boss of British Airways owner IAG, said that increasing APD on long-haul flights ‘will penalise Global Britain’.
He also said the move will ‘limit the airlines’ ability to invest in green technologies’.
Meanwhile, Willie Walsh, Mr Gallego’s predecessor and now head of body Iata, told the Telegraph: ‘It is astounding that the Chancellor thinks now is the time to raise the cost of flying.
‘Masquerading this cash grab as a green tax the week before Cop26 is the height of political hypocrisy that people are fed up with.’
A Virgin Atlantic spokesperson added: ‘The announcement of a new ultra-long haul band for Air Passenger Duty (APD) is fundamentally flawed, as it will fail to reward increased efficiency or reduced carbon emissions.
‘Passengers will pay the same rate of APD whether flying with modern, fuel efficient airlines such as Virgin Atlantic, or those with a fleet of older, less efficient aircraft.
‘Increasing the highest long-haul taxes in the world will make the UK less competitive while hindering, rather than supporting, investment in sustainable aviation fuels, which are essential for decarbonising long haul aviation.
‘With economic recovery at stake, UK Government has missed a vital opportunity to lower the cost of long haul travel for UK businesses and consumers by reducing APD, at a crucial time when airlines are focussing on recovery from the Covid-19 pandemic.’
The decision to increase the tax on long haul flights was announced alongside a cut to domestic flight tax, which will drop from £12 to £6.50.
The move will mean a further 400,000 people taking domestic flights a year, according to estimates by the Office of Budget Responsibility (OBR).