Heathrow’s bid to raise charges to cover £2.6bn Covid costs rejected

Heathrow’s request to increase airport charges to recoup £2.6bn lost during the pandemic has been rejected by the UK’s aviation regulator.

The Civil Aviation Authority’s consumers and markets director, Paul Smith, described the plan as “disproportionate and not in the interests of consumers”.

He added: “We do, however, recognise that these are exceptional circumstances for the airport and there are potential risks to consumers if we take no action in the short term.”

The CAA will allow Heathrow to raise an extra £300m through higher charges as an interim adjustment, and will consider the issue as part of the airport’s next regulatory period, which begins on 1 January.

Heathrow expects to run up losses of £3bn during the crisis, including an annual loss of £2bn for 2020, as its passenger numbers have plunged to their lowest levels since the 1960s because of travel bans. About 542,000 people travelled through the west London airport in March, down 83% year on year, while cargo volumes fell by more than a quarter.

The airport asked the CAA for an increase in its regulatory asset base, part of a funding model set by the regulator that maintains an appropriate level of risk and reward for investors while setting the charges paid by passengers.

Smith said: “The decision we have announced today will incentivise and allow Heathrow to maintain investment, service quality and be proactive in supporting any potential surge in consumer demand later this year.”

However, Heathrowsaid the CAA decision undermined investor confidence in UK businesses.

“The CAA accepted the need for it to act in order to meet its duties to consumers and to Heathrow’s financeability – but today it has failed to deliver,” a Heathrow spokesperson said.

“At a minimum, it needed to immediately restore regulatory depreciation in line with UK regulatory principles – the interim adjustment falls far short. This undermines investor confidence in UK regulated businesses, and puts at risk the government’s infrastructure agenda.”