London’s Heathrow airport has been ordered to reduce its landing charges over the next four years, a proposal that will please airlines while the airport said it would result in a worse experience for passengers.
The move by the Civil Aviation Authority (see opening post) deals a blow to the airport, which had argued for higher fees to help protect customer service, at a time when the travel industry is recovering from the pandemic.
The regulator said the average maximum price for each passenger that airlines will pay Heathrow will fall from £30.19 now to £26.31 in 2026. Excluding the effects of inflation, this is equal to a near-6% reduction every year until then.
The CAA said its final proposals would “be in the best interest of consumers”. It is undertaking a consultation and will announce its final decision later this year.
In a bitter dispute, airlines had pushed for a reduction in landing charges, while Heathrow argued that this would hit customer service. The CAA said the two sides had “starkly divergent views on the level of charges for the next five years”.
The airport’s chief executive, John Holland-Kaye, said:
“The CAA continues to underestimate 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.
“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.”
Inflation in the euro area is undesirably high and it is projected to stay that way for some time to come, European Central Bank chief Christine Lagarde has warned this morning.
Speaking at the Forum on Central Banking in Sintra, Portugal, this morning, Lagarde says the ECB – which expects to raise interest rates from record lows in July – will “go as far as necessary” to get price rises back to its 2% target.
As she puts it:
As Victor Hugo is said to have remarked, perseverance is the “secret of all triumphs”.
Lagarde blames “an extraordinary series of external shocks”, including global supply chain disruption and the Ukraine war, for driving eurozone inflation to a record 8.1% last month.
She vows to “act decisively”, if needed, to “stamp out the risk of a self-fulfilling spiral” if higher inflation threatens to de-anchor inflation expectations.
Lagarde warns that rising inflation will eat into people’s real incomes — which could lead to a loss of demand and pressure on the jobs market. But she plays down speculation of a recession, saying:
In this setting, we have markedly revised down our forecasts for growth in the next two years. But we are still expecting positive growth rates due to the domestic buffers against the loss of growth momentum.
Fears of a new eurozone debt crisis flared up this month, as the gap between Italian and German borrowing costs widened.
Lagarde said that European Central Bank’s new crisis tools will prevent a disorderly widening of bond yield spreads while keeping pressure on eurozone governments to keep their budgets in order:
“The new instrument will have to be effective, while being proportionate and containing sufficient safeguards to preserve the impetus of Member States towards a sound fiscal policy.
Postal workers have begun voting on whether to take industrial action in a dispute over pay that could intensify Britain’s summer of strikes.
Around 115,000 members of the Communication Workers Union (CWU) have received ballot papers and will decide in the coming weeks if they want to mount a campaign of industrial action. A result is due on 19 July.
The CWU is insisting on a “straight, no-strings” pay increase for employees, saying that a planned 2% pay rise which will be a “dramatic real-terms wage cut” because of soaring inflation.
A union spokesman said:
“Britain’s postal workers are being forced into accepting a massive pay cut by the same people they have generated incredible profits for.”
But Royal Mail insists there are no grounds for industrial action, with a spokesperson saying:
We offered a deal worth up to 5.5% for CWU grade colleagues, the biggest increase we have offered for many years, which was rejected by the CWU.
We need to reach an agreement on the changes required to ensure Royal Mail can grow and remain competitive in a fast-moving industry, securing jobs for the future and retaining our place as the industry leader on pay and terms and conditions.”
That 5.5% figure includes a new ‘above and beyond’ bonus for staff, and is also dependent on changes to working patterns being agreed.
European stock markets have opened higher, as anxiety over a global downturn appears to ease.
London’s FTSE 100 index has jumped by 75 points, or 1%, to 7334, its highest in over two weeks. Miners, oil companies and hospitality firms are leading the risers.
This follows gains in Asia, where traders were cheered by Beijing announcing an easing of quarantine rules for people arriving in China.
Travelers will now only need to spend seven days in a quarantine facility, and then monitor their health at home for a further three days, according to a revised government protocol released by China’s National Health Commission.
This move has boosted hopes of a recovery for the world’s second biggest economy from the pandemic.
Overall, the charges will average £28.39 between 2022 and 2026 — enough, the regulator said, for Heathrow to install security equipment and a baggage system in Terminal 2, replacing technology that failed this month.
The decision can be appealed to the Competition and Markets Authority.
Heathrow passengers face “a worse experience”, the airport has warned, after it was told by the regulator to cut charges levied on travellers amid a surge in demand for flights.
The Civil Aviation Authority (CAA) said that the cap on landing fees charged per passenger at Heathrow will fall from £30.19 to £26.31 by 2026, following a furious lobbying effort by the airport and airlines.
Airlines have long argued that Heathrow is one of the most expensive airports in the world and urged the CAA to resist its demands to raise charges to more than £40 per passenger.
Heathrow, meanwhile, has said that it needs to raise the fees to make sure the airport does not fall into disrepair.
Reuters says the CAA has responded to presure from airlines over the cost of flying at Heathrow:
Major airlines including British Airways and Virgin Atlantic have been locked in a bitter dispute with Britain’s biggest airport for months, with airlines arguing that Heathrow was already the most expensive airport in the world.
Heathrow had argued it needed to double the fee it charged airlines in order to invest and provide a better service to customers while retaining the support of private investors.
Camelot, the outgoing UK national lottery operator, has warned that players have “tightened their belts” in the face of soaring living costs, as it reported lower sales of tickets and instant win games.
The company, which has launched legal action against the Gambling Commission after losing the lottery’s next licence to the Czech-owned newcomer Allwyn, posted a 3% drop in sales to £8.1bn in the year to 31 March.
It said most of that fall was caused by a 7% decline in sales of National Lottery Instants to £3.4bn.
“This was largely down to greater competition for people’s attention and spend after the lifting of Covid restrictions, followed by growing economic uncertainty over the latter part of the year.”
Virgin Atlantic chief executive Shai Weiss argues that the CAA should insist on lower landing fees at Heathrow.
Weiss argues that this morning’s proposals are a move in the right direction, saying:
“In its final proposals for Heathrow charges, the CAA has taken a positive step towards a price cap that puts customers first.
“However, the regulator can and must go further to lower the cap beyond the proposed average of £28.39, adjusted for inflation, up to the end of 2026, reflecting robust demand for travel this summer and beyond.
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.”
The Civil Aviation Authority says its final proposal on heathrow landing fees will bring ‘considerable passenger benefits’.
- This will include allowing significant investment to improve Heathrow for passengers, such as £1.3bn upgrading Terminal 2’s baggage facilities and introducing new generation security scanners to help reduce queues in the future.
- Heathrow is among the most expensive airports in the world for its charges to airlines and it is important to note that the five-year period will see airport charges reduce over time from today’s level.
Last year, our financial editor Nils Pratley wrote a stinging rebuke of Heathrow’s push for a big rise in landing charges.
He argued that the airport’s owners should count their blessings, rather than look for special pandemic privileges, and dismissed the argument that investors would shun the UK.
Pointing out that Heathrow’s shareholders enjoyed £4bn of dividends in recent years before the pandemic, he wote:
The owners of Heathrow, who have done very nicely for themselves over the years, have an extraordinary ability to believe the world owes them a living in all circumstances.
Heathrow has criticised the CAA’s decision that its landing fees should fall over the next few years.
CEO John Holland-Kaye said it will mean a worse experience for passengers:
“As the industry rebuilds, our focus is to work alongside airlines and their ground handlers to give passengers a reliable and consistent journey through Heathrow.
The CAA continues to underestimate 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. 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.
Holland-Kaye also claims that the CAA’s ruling raises “serious questions about Britain’s attractiveness to private investors” [Heathrow is owned by a consortium of shareholders, led by Spanish infrastructure group Ferrovial and Qatar’s sovereign wealth fund].
And he’s not given up changing the CAA’s mind, it seems:
“We will take time to assess the CAA’s proposal in more detail and will provide a further evidence-based response to this latest consultation. There is still time for the CAA to get this right with a plan that puts passengers first and encourages everyone in the industry to work together to better serve the travelling public.”
Good morning, and welcome to our rolling coverage of business, the world economy and the financial markets.
Landing charges at Heathrow will fall over the next few years, the UK’s aviation regulator has ruled, following pressures from airlines to cut the cost of flying to the London airport.
Britain’s Civil Aviation Authority is proposing this morning that the average maximum price per passenger that airlines will pay Heathrow will fall from £30.19 today to £26.31 in 2026.
The CAA says its final proposals would be “in the best interest of consumers”, and works out as a 6% reduction every year once you account for inflation.
The decisition follows a long-running consultation into charges at the UK’s largest airport, as the sector tries to recover from the pandemic.
Heathrow had pushed for higher landing fees, while the airlines warned higher charges would be passed onto consumers, in a bitter dispute between the two sides (who had “starkly divergent views on the level of charges”, the CAA says).
The move should please airlines, who have been piling pressure on the CAA to lower these fees as they try to recover from the pandemic. But it’s a blow to the airport, which had argued for higher fees to help provide a better service.
The cap was just £22 per customer in 2020, but was raised to £30 on an interim basis this summer.
Richard Moriarty, chief executive at the UK Civil Aviation Authority, said this morning:
“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.
The deal will allow Heathrow to “make the investment needed for the future”, Moriaty adds.
This is necessary, judging by the masses of uncollected baggage that has piled up in the travel chaos, and the misery suffered by some passengers during recent disruption.
The CMA explains:
Allowing Heathrow to appropriately invest in keeping the airport safe, secure and resilient, while at the same time providing a good experience for passengers. This includes investing in next generation security equipment and a new baggage system for Terminal 2.
Heathrow had called for the charges to range from £32 to £43 a passenger, as it sought to recoup losses caused by the coronavirus pandemic.
That proposal led Willie Walsh, the head of global airline body Iata, to accuse the airport of “gouging” its customers.
Also coming up today
European Central Bank policymakers are gathering in Sintra, Portugal, for their annual forum on Central Banking — at a time when the eurozone risks both a downturn and a new sovereign debt crisis, as policymakers try to cool inflation. We’ll hear from Christine Lagarde this morning.
Tram drivers in south London have started a 48-hour walkout in a dispute over pay, after about 150 members of the Aslef union on the London Trams network, formerly known as the Croydon Tramlink, rejected a 3% offer from operator FirstGroup.
In parliament, MPs will question the Government’s preferred candidate to chair the Competition and Markets Authority, Marcus Bokkerink.
The Business, Energy and Industrial Strategy (BEIS) Committee will also hear from business secretary Kwasi Kwarteng.
- 7am BST: German consumer confidence survey for May
- 8.30am BST: SMMT International Automotive Summit
- 9am BST: ECB president Christine Lagarde speech at its Forum on Central Banking
- 10.15am BST: Marcus Bokkerink, the government’s preferred candidate for Chair at Competition and Markets Authority, appears at the BEIS committee
- 11am BST: Business secretary Kwasi Kwargeng appears at the BEIS committee