Heathrow wants to put up ticket costs to recover covid losses – and the Government agrees

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• Scottie says:

  9 Feb9 February 08:13

  Fat Cats to get guaranteed UK cream it seems ! Whether based overseas or in the UK. And the poor old UK tax payers must foot the bill for any losses or risk. What a warped and biased system it is !

  • JDB says:

    9 Feb9 February 08:50

    There is no suggestion that taxpayers will foot any bill in relation to this. If permitted by the regulator, airlines will see increased charges that will be passed on to passengers.

    • Arnie says:

      9 Feb9 February 11:17

      And are the passengers not tax payers????

• Paul pogba says:

  9 Feb9 February 08:13

  Will flights at Gatwick also be adding charges or will they be getting comparatively cheaper? Airlines could rebel a little and ramp up flights at alternative airports before Heathrow.

  • insider says:

    9 Feb9 February 09:18

    It doesn’t really matter – LGW is slightly less regulated than LHR, so in theory they can ramp up charges, but within a cap. But LHR are effectively asking the CAA to underwrite their business, whether the airlines turn up or not [retrospectively in this case, but it sets a precedent].

    • kitten says:

      9 Feb9 February 14:48

      No, LHR are effectively asking the government to underwritw their losses but the profits belong to Heathrow and their shareholders.

      CAA should send Heathrow away with nothing. If they don’t it’s really clear that this needs to go to the Monopolies Commission ( now the CMA?) and the protection of passengers entrusted to a different agency that actually has the competence to identify the ripoff Heathrow and their shareholders want to perpetratw here and actually protect consumers against these monopolies.

      The CAA is not up to the task and it should be taken away from them.

• JDB says:

  9 Feb9 February 08:34

  This isn’t a new story; it has been in the public domain for months – all published on the Civil Aviation Authority website. Most utilities are regulated, in part, based on their RAB which is the the subject of intense debate between the companies and their regulator at each review. If the facts change fundamentally, the RAB will change.

  • Rob says:

    9 Feb9 February 09:21

    It’s not new, and we’ve written about it before. Now we’re writing about it again, because there are new developments.

• Cheshire Pete says:

  9 Feb9 February 09:04

  They cried poverty as the reason to impose new car parking drop charges, and withdrawn their subsidy for the Free red Buses around the perimeter. Now they want it all back anyhow, so they’ve lost nothing and still withdraw what we’re Free concessions!?

  Sharks, springs to mind.

• Stephen says:

  9 Feb9 February 09:13

  This is a proposal to increase the regulatory asset base not to give heathrow the equivalent amount of money.
  Just like the regulated utilities, a blended cost of capital x RAB is used to calculate allowed regulatory return so heathrow is seeking that % multiplied by £2.8 billion, not £2.8 billion! The narrative in the consultation makes it seem like CAA are against the RAB adjustment and instead want to sweep it all into discussions for the H7 review this year. They also note that they think heathrow has benefited from an overly profitable H6 regulatory period so that probably ought to be taken into account and thus an equity injection equivalent to excess distributions might be appropriate as a starting point

  • Rob says:

    9 Feb9 February 09:19

    The x% is paid every year, however. If the return on RAB is, say, 5% then Heathrow will be able to charge an extra £140m per year for ever. The DCF of that at current rates is actually higher than £2.8 billion, and indeed Heathrow could – if it wished – go out and borrow £2.8 billion at 1% secured against the £140m of additional annnual income.

  • insider says:

    9 Feb9 February 09:37

    The single till system means that HAL will recover that £2.8bn, just over a longer period of time (as Rob says above). The RAB is depreciated each year, and the depreciation is effectively money into HAL’s pocket, once it flows through the calculations. Plus the fact they will earn the WACC on that £2.8bn, in reality, they will recover a substantial chunk more than £2.8bn over time

• Dance-Ace-Base says:

  9 Feb9 February 09:14

  Just because “that’s how it works” (to encourage private investment) doesn’t mean people aren’t justified to be angered about ALL of the risk being passed onto the consumer and all of the profits going to foreign investors (with no benefit to the taxpayer). That may be the system but the system is warped too far in favour of private investors at the expense of the consumer. Cost to the consumer may be “regulated” but only ever changes in one direction.

• David S says:

  9 Feb9 February 09:54

  We will maybe help you out but you can’t pay any dividends to your shareholders for x number of years. Sounds a bit fairer and stops the £2.8BN simply ending up in shareholders pockets.

  • Rob says:

    9 Feb9 February 10:38

    Why should the shareholders care whether the money is paid in dividends now or just mounts up in the company to be paid out in a massive lump sum in 5 years?

    I’m happy to take no money from HfP for 5 years (and then take it all in 1 chunk in 2026) if the Government agrees to give me 1 year of normal revenue as covid compensation.

  • kitten says:

    9 Feb9 February 14:52

    David S then Heathrow will just artificially depress profits and hoard them until the restrictions pass and then shareholders take them. Plenty of ways to do this in the accounts.

• A frequent flyer says:

  9 Feb9 February 09:56

  Any investment is a risk and the investors in this case should take a big loss.
  BA should not have to pay the investors nor should BRITISH taxpayers.

  • kitten says:

    9 Feb9 February 14:54

    nor British consumers (passengers) nor companies whose employees use the monopoly airport known as Heathrow.

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