Heathrow Airport has signed a landmark deal on airport charges worth hundreds of millions of pounds with airlines operating at the airport. Following detailed negotiations over the past several months, Heathrow and major airlines operating at the airport have agreed terms which should deliver significant passenger benefits in releasing funds to drive investment and growth. The CAA has supported the negotiation of the commercial arrangement and is expected to launch a public consultation on the solution in the coming weeks.
Under the terms of the agreement, Heathrow will establish a new growth incentive that will encourage airlines to increase passenger numbers at the airport ahead of expansion. Airlines at Heathrow currently operate with average load factors below the IATA global average. If airlines at Heathrow reached global averages for filling aircraft there is an opportunity to reduce passenger charges by 10-20% against what they might otherwise be, in addition to helping Heathrow meet the Government’s affordability target for expansion. With more passengers on each existing flight, Heathrow would be able to spread the development costs of expansion across a larger passenger base – helping to keep airport charges close to 2016 levels in real terms throughout the expansion project.
If the CAA gives final approval to the commercial arrangement, the current regulatory settlement would be extended until December 2021 – removing the need to negotiate an interim iH7 regulatory settlement. This would allow all parties – from the regulator to airlines and the airport – to focus their resources on agreeing the regulatory settlement that will be in place during the main expansion works from 2022 (subject to the airport being successful in its development consent order application).
