Heathrow6.45% S Regulatory News (88BX)

28.06.2022

This morning the CAA released its Final Proposals for the H7 price control period which runs from January 2022 - December 2026. The CAA is now undertaking a consultation on the proposal to which Heathrow will respond. The CAA will consider the feedback it receives during this consultation before making a final decision on the H7 price control which is expected later this year.

Heathrow CEO John Holland-Kaye said:

"As the industry rebuilds, our focus is to work alongside airlines and their ground handlers to give passengers a reliable and consistent journey through Heathrow. The CAA continues to underestimate what it takes to deliver a good passenger service, both in terms of the level of investment and operating costs required and the fair incentive needed for private investors to finance it. Uncorrected, these elements of the CAA's proposal will only result in passengers getting a worse experience at Heathrow as investment in service dries up.

"Economic regulation should drive affordable private investment in Britain's infrastructure to the benefit of users, not hamper it. The CAA's proposal will undermine the delivery of key improvements for passengers, while also raising serious questions about Britain's attractiveness to private investors.

"We will take time to assess the CAA's proposal in more detail and will provide a further evidence-based response to this latest consultation. There is still time for the CAA to get this right with a plan that puts passengers first and encourages everyone in the industry to work together to better serve the travelling public." 

--Ends--

Notes to Editors

Unlike airlines, Heathrow's prices are set by the CAA - which means the airport's profits are capped in the good times, though losses are unlimited in the bad times. While Heathrow's prices remain controlled by the CAA, unregulated airlines have been able to benefit from the capacity constraints at the airport to generate £25bn in extra airfares since 2012.

The H7 regulatory period runs from January 2022 - December 2026. The CAA has already instituted an interim H7 charge of £30.19. The CAA has confirmed today that the 2022 charge will remain unchanged at £30.19 and fall by the Consumer Prices Index minus 5.74% in each subsequent year through to December 2026. This is subject to consultation, and a final decision is expected in the autumn.

Supported by the appropriate incentives, Heathrow's plan would invest a further £4bn in the service passengers want without adding to ticket prices. Airlines set their fares to what the market will bear not their cost base, and they have already increased fares by up to 100% this year.

Heathrow has encouraged the CAA to utilise regulatory depreciation, delaying investor returns in H7 to the next regulatory period, which would smooth the passenger charge from Heathrow's proposal of £41.95 to £34. This is the same approach the CAA successfully used to enable the construction of Terminal 5.

Airports around the world are increasing their prices in the aftermath of the pandemic. While airlines often point to more limited price increases at continental airports like Amsterdam, Frankfurt and Paris - they fail to mention that these airports received billions of pounds in state aid during COVID while Heathrow received virtually none.