Heathrow charges provisionally backed by UK competition regulator

By Sarah Young

LONDON (Reuters) -Britain’s competition regulator on Friday gave its provisional backing for most of the CAA aviation regulator’s decisions over how much Heathrow can charge airlines over the 2024-2026 period after appeals by the airport and carriers.

The Competitions and Markets Authority (CMA) stepped in to review the CAA’s decision after the cut to charges it proposed for the next three years angered both sides.

Heathrow said lower fees would hit investment, but British Airways owner IAG and Virgin Atlantic said the cuts did not go far enough.

The airport operator argues it needs higher fees to provide a good service, pay shareholder returns and fund investment. The airlines, meanwhile, questioned the CAA’s calculations.

The airlines said the new price was based on overly pessimistic passenger forecasts and that even with the cut Heathrow remained one of the most expensive airports in the world.

The CMA has until Oct. 17 to decide whether to allow or dismiss the appeals, it said in a statement, adding that it would now consider comments on the provisional findings.

“Overall we provisionally consider that the CAA was not wrong in most of the decisions that were appealed,” it said.

The CAA told Heathrow in March that fees would need to fall to about 25.43 pounds ($31.75) per passenger in nominal terms over the 2024-2026 period, compared with the 31.57 pounds per passenger this year.

“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 Heathrow spokesperson said.

Virgin Atlantic and IAG both said they were disappointed by the CMA’s statement.

“We would be disappointed if this was the final outcome of the CMA appeal … We will participate in the remainder of the appeal process,” said IAG Chief Executive Luis Gallego.

The CAA said it would review the findings and then issue a response.

“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,” its statement said.

The CMA said that it wanted the aviation regulator to reconsider elements of the charge where there had been errors in its calculations, adding that this was unlikely to result in big changes to the proposed level.

“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,” the competition watchdog said.

($1 = 0.8010 pounds)

(Reporting by Sarah YoungEditing by Sharon Singleton, Alexander Smith and David Goodman)