CAA wins backing over Heathrow passenger charges

In March, the CAA told the UK’s hub airport that it must reduce average passenger charges, which are passed on to consumers in the fare paid, from the current £31.57 per passenger to £25.43 in 2024 and then stay “broadly flat” at that level until the end of 2026.

This decision by the CAA prompted an appeal from the airport to the Competition and Markets Authority (CMA). Heathrow wants to be allowed to increase the charge to between £32 and £43 per passenger over the current 2022-2026 price control period.

Several airlines, such as British Airways, Virgin Atlantic and Delta, also separately appealed to the CMA against the CAA decision arguing that the Heathrow charge should be reduced to an average of around £18.50.

Now, the CMA has provisionally backed the CAA’s decision on Heathrow’s price cap, although it has asked the aviation regulator to “reconsider” some elements of its ruling where it may have made mistakes. 

But these issues are only likely to have a “small net impact” on the eventual figure for the price cap, added the CMA.

“Overall, we provisionally consider that the CAA was not wrong in most of the decisions that were appealed to us,” said the CMA in a statement.

“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.”

Andrew Walker, the CAA’s chief economist, said the aviation regulator welcomed the CMA’s provisional determination 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,” added Walker. “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".

The CMA has until 17 October to issue a final decision on the appeals by Heathrow and the airlines over Heathrow charges.

In response to the CMA statement, a Heathrow spokesperson 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 spokesperson said: “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.”