Competition regulator proposes Heathrow charges are reconsidered

The competition regulator has provisionally found that some errors were made in a decision on how much Heathrow Airport can charge airlines.

The Competition and Markets Authority (CMA) said it proposes to require aviation regulator the Civil Aviation Authority (CAA) to reconsider certain aspects of its conclusion.

In February, the CAA said the cap on Heathrow’s average charge per passenger must be reduced from £31.57 for 2023 and last year, to £25.43 over the next three years.

Charges are paid by airlines but are generally passed on to passengers in air fares.

The airport and three airlines, British Airways, Delta Air Lines and Virgin Atlantic, appealed against the CAA’s decision.

The CMA provisionally found that “the CAA was not wrong in most” parts of its determination.

The competition regulator agreed with the airlines in a “relatively minor” aspect of the CAA’s cost of debt calculation and a “small element” within its allowance for exceptional events which might reduce passenger numbers.

Meanwhile, the CMA also agreed with Heathrow that the application of an adjustment in relation to the recovery of revenues lost due to the coronavirus pandemic was “inappropriate”.

The CMA said: “Where we have provisionally found that the CAA has made errors, we have provisionally decided to require the CAA to reconsider them.

“While it is not possible now to quantify any changes in the price cap that could result from CAA reconsideration of these aspects, we would expect any such changes to have only a small net impact relative to the CAA’s overall price control decision, particularly as they may work in opposite directions.”

A Heathrow spokesman said: “We are carefully considering the CMA’s initial findings to understand what impact they may have on passengers and our ability to deliver our investment plans.”

A Virgin Atlantic spokesman said: “After three years of consultation, it’s disappointing that the CMA has largely endorsed the CAA’s decision, which did not go far enough to protect consumers from excessive charges at Heathrow.

“The airport has prioritised shareholders over consumers, relying on pessimistic passenger forecasts to support its agenda, in stark contrast to the actual number of passengers flying from Heathrow which is close to pre-pandemic levels.”

CAA chief economist Andrew Walker said: “We welcome this provisional determination by the Competitions and Markets Authority that has largely proposed to reject most grounds of the appeals against our decision.

“While it has determined there are a small number of issues that we should review again, these are not expected to have a significant impact on the level of Heathrow’s price control.

“We will now review the findings before responding in due course.

“We remain confident that our decision on the charges that Heathrow Airport Limited levies on airlines represents a good deal for consumers, while allowing the airport to invest in improving services for the future.”

Heathrow, the airlines and the CAA have the opportunity to respond to the CMA’s provisional determination.

The CMA said it will reach its final determination by October 17.