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Welcome to London Air Travel’s Monday Briefing for the week beginning 16 May 2022.
Heathrow Passenger Charges Row
It was a year ago this week the UK government reopened international travel, albeit to a limited list of countries that did not require quarantine on return.
To mark the occasion the CEOs of BA and Heathrow Airport stood, as far as social distancing guidelines would allow, side by side before the cameras at Terminal 5 to herald the return of international travel.
12 months on, relations between Heathrow and its airlines are very different.
The Civil Aviation Authority is due to rule shortly on Heathrow’s passenger charges for its next five year control period, H7. The last control period expired on 31 December 2021. Before Christmas last year, the CAA allowed an interim increase from £19.36 to £30.19.
As Lufthansa was keen to point out in its annual results presentation this increase is, by some considerable margin, substantially higher than any other major European hub.
Heathrow wants to secure an additional increase to £41.95. It maintains this is necessary for a capital projects such as a new baggage system for Terminal 2 and upgraded security scanners to allow liquids and electronics to stay in hand luggage during screening.
There is claim and counter claim over likely future passenger numbers and passenger charges.
BA accuses Heathrow of deliberately issuing downbeat passenger forecasts. A few months ago Heathrow predicted passenger numbers of 45.5 million for this year. Heathrow has already upgraded this to 52.8 million. BA maintains this number is still widely inaccurate and will be in excess of 70 million.
Last week, Heathrow hit back pointing BA’s own revised plans to cut capacity back to 74% of pre-pandemic levels and claiming its forecasts are the most accurate. This is, of course, a function of resources rather than underlying demand.
Heathrow also likes to point out that its increase will only increase ticket prices by around by 2%. The notion that passenger charges are a small cost of doing business and can just be passed on to passengers absolutely infuriates airlines. It is one of many costs, like fuel and navigation charges, they have no control over.
What also infuriates airlines is that Heathrow has not, like they have done, called on its shareholders to provide new funding to cover pandemic losses.
Behind all this is Heathrow’s extraordinary complicated debt mountain of £15.6 billion, amassed during an era of cheap money. Much of this has to be repaid to a long list of creditors in the coming years. Debts can of course be refinanced but this will be more expensive at a time of rising interest rates.
This will all come to a head soon. The likes of IAG will no doubt make noises about diverting investment away to Madrid but Heathrow knows airlines have little option but to take it all on the chin.
Also of interest this week:
BA pilot Mark Vanhoenacker has published his third book, part memoir, part travelogue, “Imagine A City A Pilot Sees The World”. (Mark Vanhoenacker)
A security screening employee at Stansted speaks anonymously about life on the job. (The Guardian)
The Bank branch of the Northern Line has fully reopened. Further improvement works will continue this year. (Transport for London)
News from London Air Travel you may have missed:
BA CEO Sean Doyle makes a second set of senior management changes in the space of four months. (London Air Travel)
Late post publication updates:
[Reserved for updates throughout the day]
JetBlue has issued an open letter to the shareholders of Spirit Airlines urging them vote no to a merger with Frontier at a forthcoming social meeting. (JetBlue)
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