IAG row over Heathrow charges continues
IAG International Airlines Group Chief Executive Officer Luis Gallego has warned the British Airways (BA, London Heathrow) parent may cut its investment at London Heathrow if the airport presses ahead with plans to hike passenger fees, reports The Telegraph.
A shift of British Airways flights to Europe would be a major blow for Heathrow, which has reported GBP3.4 billion pounds (USD4.5 billion) in losses since the start of the pandemic.
Gallego said that moving away from Heathrow was “not something that we want”, but warned that higher landing charges would eat into the Group’s profits. IAG claims that Heathrow is already 44% more expensive than its competitors in Europe. “From a group point of view, what is very important is the concept of capital allocation. We are going to invest in the places where we are going to have the best return of capital. If we are going to have an inefficient hub, it’s going to be difficult to invest in that hub. And I think that’s going to be a problem for Heathrow, for the UK,” he said.
Heathrow had requested the UK Civil Aviation Authority to increase the cap on its charges per passenger to between GBP32 pounds (USD43) and GBP43 (USD57), sparking an outcry from IAG and other airlines, which argued that charges should be going down, not up, to encourage post-COVID-19 recovery. Industry body, Airlines UK, opposed the CAA’s proposals “in the strongest terms,” Reuters reports.
On October 19, the CAA said it would consult with all stakeholders over the next eight weeks and would issue its final decision in Spring next year before they came into force in Summer 2022. An interim price control of GBP30 (USD40) per passenger would be implemented from January 2022. Meanwhile, a separate consultation on the interim price control would run until November 17, 2021.
However, The Sunday Telegraph reported that Ferrovial, Heathrow’s biggest investor, was displeased with the CAA’s decision, putting plans for the airport’s third runway at risk. “[It] makes me feel very sceptical about the appetite to contribute further capital into Heathrow,” Ferrovial portfolio management director Ignacio Castejon said.
Heathrow has GBP4.1 billion (USD5.4 billion) in cash to survive until the market recovers, which is not expected until at least 2026, according to its results for the nine months ending September 2021.
In the third quarter of 2021, the airport recorded its first full quarter of passenger growth since 2019, resulting from strong pent-up demand as the UK eased travel restrictions and COVID-19 testing requirements were simplified. Passenger numbers in 3Q21 recovered to 28%, and cargo to 90% of pre-pandemic levels, it said.