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BBT March/April 2019 cover
March/April 2019

Heathrow agrees deal to cut passenger charges

Aircraft lined up at a terminal at Heathrow airport

Heathrow airport says it has reached an agreement with airlines operating at the hub to potentially reduce passenger charges – if carriers deliver higher load factors.

Airlines at Heathrow currently operate with load factors below the IATA global average, according to the airport.

The airport claims the deal could see passenger charges reduced by 10-20 per cent as long as airlines increase passenger numbers by hitting global load factor averages. Heathrow says this would allow it to keep charges close to 2016 levels in real terms throughout the project to expand the airport.

Hitting these averages would also help Heathrow meet the government’s affordability target for expansion, with the airport able to spread development costs across a larger passenger base.

The UK Civil Aviation Authority (CAA) has supported the negotiation of this commercial arrangement and is expected to launch a public consultation on the solution in the coming weeks.

Heathrow’s announcement comes after it reported a record 80 million passengers in 2018, with numbers continuing to grow in January.

The airport vowed in July 2017 that it would try to keep charges to current levels throughout the expansion project, but in November the CAA’s chief executive Richard Moriarty expressed concerns over how Heathrow would pay for its third runway.

Heathrow has continued to faced repeated calls from organisations such as ABTA to guarantee that the cost of building a third runway would not be passed on to passengers through charges.

Transport secretary Chris Grayling acknowledged fears of an increase in passenger charges in May 2018, calling on the airline industry to work together to ensure expanding the airport continued to deliver value for money for customers.

Heathrow’s agreement on load factors is the first hint the public has had that development costs could be passed on to airlines, and in turn passengers.

CEO John Holland-Kaye said: “Over the past several months, we’ve been working hard with our airline partners to agree a deal on airport charges to 2021. We are delighted that the result is the first-ever commercial agreement at Heathrow which will unlock hundreds of millions of pounds of potential investment for our passengers. We’ve shown that we can achieve more by working together and we will continue working to build on this momentum as we expand.”

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