London Heathrow boss’s fury after CAA says passenger charges must be cut 6% a year

The boss of Heathrow warned of a “worse experience” for passengers after the aviation regulator ruled charges will have to be cut by six per cent a year to 2026.

The furious row over the future funding of Britain’s only hub airport blew up again when the Civil Aviation Authority (CAA) said the cap on charges per passenger will fall by £3.88 from £30.19 today to £26.31 in 2026.

The CAA said its “final proposals” - equivalent to a six per cent annual reduction in real terms - were about “doing the right thing for consumers”. The CAA said the five year pricing regime would also allow Heathrow to invest in upgrades such as a £1.3 billion overhaul of Terminal 2 baggage facilities.

But the decision angered Heathrow’s chief executive John Holland-Kaye who said the CAA was underestimating what the west London airport needs to be able to continue to modernise.

Mr Holland-Kaye said: “The regulator “continues to under-estimate what it takes to deliver a good passenger service, both in terms of the level of investment and operating costs required and the fair incentive needed for private investors to finance it”.

There is “still time for the CAA to get this right”, he said, adding: “Uncorrected, these elements of the CAA’s proposal will only result in passengers getting a worse experience at Heathrow as investment in service dries up.”

Heathrow has called had called for the cap to range from £32 to £43. The charges are paid by airlines but generally passed on to passengers through fares.

The airport lost almost £4 billion over the course of the pandemic but passenger numbers have rebounded more quickly than expected after the lifting of travel restrictions in February. However, the CAA said they are not expected to return to 2019 levels until 2025.

Heathrow expects to remain loss-making and not pay more dividends in 2022.

However, airlines took a different view and claimed that the planned cap was still too high.

Virgin Atlantic chief executive Shai Weiss said the CAA’s announcement was a “positive step towards a price cap that puts customers first”.

But he insisted the regulator “can and must go further” to lower fees to reflect “robust demand for travel this summer and beyond”.

He added: “With travel recovery under way, our collective focus should be on upholding the best possible experience for customers with fair charges, especially with consumers facing cost-of-living pressures and our global Britain aspirations at stake.”

CAA chief executive Richard Moriarty said: “Today’s announcement is about doing the right thing for consumers. We have listened very carefully to both Heathrow Airport and the airlines who have differing views to each other about the future level of charges. Our independent and impartial analysis balances affordable charges for consumers, while allowing Heathrow to make the investment needed for the future.”

The CAA said these are its “final proposals”, with a “final decision” due to be published in the autumn.