James Moore: Heathrow's bid to charge the airlines more is just increasing turbulence

Outlook. Plus: It doesn't look as if bank bonus cap is going to fit; It could be time to can those Carlsberg shares
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The Independent Online

Heathrow's bid to impose price rises of 5.9 per cent above RPI inflation on the airlines that use it comes at a rather convenient time for a Government that desperately wants to avoid making any decisions on the future of air travel in this country.

The air industry has never been one to favour polite negotiation behind closed doors when there is the possibility of a public bust-up with lots of airtime for the big personalities that are drawn to the business like moths to a candle.

Even though the proposed price rises aren't as bad as the ones the airport operator submitted in its first plan, they look high from a business that, although improvements have been made over the past five years or so, still doesn't inspire much love from its users.

This is a point which the airlines being asked to pay up won't be shy of making… ad nauseam. Which should help to divert attention away from the pedestrian progress of Sir Howard Davies's commission on whether Heathrow should be allowed to build a third runway, and perhaps a fourth. Or whether Boris Johnson should get his island in the Thames estuary.

Even if everything goes to plan, the commission is not due to report until 2015. Just in time for an election, when any unpalatable recommendation will be ignored or kicked into the long grass (again).

Tory thinkers get very frustrated when statistics are produced showing that Britain is doing well compared with continental Europe. They argue that this country should forget about Europe and concentrate on our real competitors in the "global race", such as the tiger economics of Asia.

The trouble is that the current inability to make a decision on the future of flight means we're entering that race saddled with top weight and a broken fetlock in a handicap over the big fences at Aintree.

The debate over the charges Heathrow wants to levy to fund its fancy multi-billion-pound investment programme (and to service its multi-billion-pound debt pile) is an essentially sterile one.

It doesn't matter how many gaudy new buildings you put up, or how many duty free shopping malls you unveil or how many monorail systems you envisage if the planes are stopping off in Paris, or Berlin, or flying on to Abu Dhabi before refuelling for the final leg of the journey to Asia from the US.

Heathrow in its current incarnation effectively becomes a regional airport stuck on the fringe of Europe, and the business moves elsewhere. With it moves money, to spend on Tory tax cuts or Labour's social spending, or a combination of the two, it doesn't matter much. It's still gone.

Without it, growth will be harder to come by, and our position in even the European league tables starts to look shaky.

It doesn't look as if bank bonus cap is going to fit

Talking of Europe, momentum is gaining rapidly in the direction of a cap on bankers' bonuses that will be tougher than even the new regulations enforced by the Financial Services Authority in this country.

Countries close to the UK's position (we're opposed) are rapidly falling in line with the majority because they want other parts of the EU's financial reform package. Kicking up a stink about meddling Eurocrats sticking it to our treasured financial centre won't really work in this case.

Having talked tough, and then accepted an electrified ring fence around retail banks as recommended by the Parliamentary Commission on Banking Standards, the Chancellor can hardly demand that Britain's banks be allowed carte blanche to pay up. The EU's sclerotic PR machine might actually be able to secure a few brownie points with this country's largely Eurosceptic electorate if he did. Critics are already arguing that the plans will result in bankers picking up much higher fixed salaries, denying banks the flexibility to impose cuts in wage bills by lowering variable compensation in years when performance isn't up to scratch.

Which ignores the fact that such cuts didn't appear to be imposed upon the industry's favoured sons even when things were at their worst. Even in the years directly after the financial crisis, banks were still battling to pay up while chanting the mantra of the need to retain key staff.

Perhaps the best that can be expected for the British position is that the rules won't be enforced outside the EU, thus allowing EU banks to compete with rivals in places like Asia.

Why you'd want to is debatable. Such is the competition for staff in the tigers that they can name their price. Banks are competing furiously not for business, but for people. When this sort of behaviour becomes the norm, the outcomes are usually poor, and regulators act, usually in ways that the industry doesn't find favourable.

That's why Barclays saw the light last week and pulled out of the region. But there are plenty of fools and plenty of money still playing the game.

It could be time to can those Carlsberg shares

Oh dear. Carlsberg's sales in Western Europe have taken a fall while in Russia growth has rather stalled. With all the old profit forecasts canned, and the future as murky as a pint from a bad barrel, you would think directors of the Danish drinks conglomerate might be inclined to indulge in a drop of Russia's traditional beverage rather than their own product. It looks even worse when set against Dutch rival Heineken's recent barnstorming results, fuelled by surging sales in Africa.

It's hard on poor old Carlsberg, but you do have to ask: Is it time to dump shares in the best brewer in the world? Probably.