The UK Civil Aviation Authority has today published its Final Decision for the annual caps that will apply to the charges that 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 this year. The average maximum price per passenger will then fall by about 20% from £31.57* per passenger in 2023 to £25.43** 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 compared to £28.39 for Final Proposals, a reduction of £0.90 (all in nominal prices).
This lower level of charges from 2024 recognises that passenger volumes are expected to return to pre-pandemic levels and should benefit passengers in terms of lower costs, while also allowing 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 £3.6 billion capital investment programme. Passengers will benefit from investments such as next generation security scanners and a new baggage system in Terminal 2, which are collectively expected to cost around £1.3 billion and should bring considerable passenger benefits, including an improved security experience and more resilient infrastructure.
The arrangements also incentivise 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 pandemic continues. The decision also reflects changes in the wider macro-economic 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 travelling public can expect great value for money from using Heathrow in terms of having a consistently good quality of service, whilst 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 travelling 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”.
Notes to Editors
- *£26 per passenger in 2020 prices
- ** £21 per passenger in 2020 prices
- The average charge requested by Heathrow Airport Limited over the price control period was around £40 per passenger, whilst airlines suggested that the proposed charge should be no more than around £18.50 on average (both in 2020 prices)
- Figures are set out in nominal pricing and are subject to change depending on inflation over the price control period.
- In current year prices the maximum price per passenger for 2023 is £31.57.
- The consultations that informed our Final Decisions ran from June 2022 to August 2022.
- Following the publication of our Final Decision, Heathrow Airport Limited and airlines may decide to appeal to the Competition and Markets Authority (CMA) for a final determination of matters relating to the new price control arrangements.
- Further information about today’s announcement is available on the UK Civil Aviation Authority website.