Heathrow6.45% S Regulatory News (88BX)

07.00 11th March 2022

Headwinds and slow traffic growth create an uncertain environment for aviation this year

· Overall passenger numbers last month remained nearly 50% down on pre-pandemic levels with only 2.8 million passengers travelling through the UK's hub airport during February, 15% below forecast

· Outbound leisure demand is recovering strongly and countries are starting to remove travel restrictions. However demand from inbound leisure and business travel remains suppressed by the testing and quarantine requirements that are still in place in nearly two-thirds of the markets we serve. While we hope that these will be removed, we also face headwinds from higher fuel prices, longer flight times to destinations impacted by airspace closures, concerns from US travellers over war in Europe and the likelihood of new "Variants of Concern", which together create huge uncertainty over the passenger forecasts this year

· Based on the strength of outbound leisure bookings being reported by airlines, peak days in the summer holidays could be very busy, at up to 85% of pre-pandemic levels. This is likely to feel even busier in check in because of the additional pre-departure checks. This is higher than current airline, handler and airport capacity, so we are putting passengers first by gearing up across the airport for peak demand, working with airlines to reduce check in times and recruiting 12,000 new colleagues, as well as reopening Terminal 4 before July. We are particularly concerned over Border Force's ability to scale-up to meet demand

· The CAA's final decision on H7 is expected later this year, almost a year into a 5-year settlement. We have proposed a plan to invest in the things our passengers and airlines tell us are important, including a new baggage system for Terminal 2 and upgraded security scanners to enable passengers to keep their liquids and electronics inside their bags with less than a 2% increase to overall ticket prices. We are doing the right thing for consumers and just getting on with delivering this plan, relying on the CAA not to slash investment in capital projects or operating costs, which would risk the return of "Heathrow hassle", with long queues and delays

Heathrow CEO John Holland-Kaye said:

"Aviation's recovery remains overshadowed by war and COVID uncertainty. But we need to ensure we are geared up to meet peak potential demand this summer and are relying on the CAA to make a fair financial settlement that incentivises investment to maintain passenger service and encourages airlines and Heathrow to work together to grow passenger numbers."