The boss of Heathrow today staunchly defended the airport’s planned hike in landing and take-off charges that will see passenger fares rise, saying they provided a “crucial return for shareholders”.
Heathrow, the company formerly known as BAA which owns that airport plus up-for-sale Stansted, returned to the black at an underlying level in 2012, with pre-tax profits of £46.4 million. That was turned around from a £166.7 million adjusted pre-tax loss the previous year.
But despite the move into profit, the airport is still demanding regulators approve a five-year plan which will see the fees it charges airlines rise from £19.33 per passenger this year to as much as £27.30 in 2018.
Those airline tariffs are usually passed on to passengers, pushing up fares. But Heathrow’s chief executive Colin Matthews said higher fees were needed to make a profit, which “isn’t just a nice extra” but was vital to keep investors on board. “The equity investment made in Heathrow doesn’t come from the taxpayer,” Matthews said. “Private money could go to other countries, or other infrastructure. The investment has to make a fair return, otherwise it won’t come into our airports. We have to remunerate investors for the capital that’s spent at Heathrow.”
Last year Britain’s biggest airport paid its foreign shareholders a £240 million dividend for the first time since a consortium led by Spanish infrastructure fund Ferrovial bought the airport in 2006. “They originally invested £5.5 billion, and have received less than 1% back,” Matthews added. The airport claims it also needs to raise fees to pay for £3 billion of investment, including on the new Terminal 2 building, which is due to open next year.
But some of Heathrow’s biggest customers, including British Airways and Virgin Atlantic, have condemned the expected increase in charges.
BA said: “Heathrow Airport’s charges have already tripled over the past 11 years.”
Last year, the airport’s earnings from airline tariffs rose 10.7%, which helped overall revenues at Heathrow and Stansted to increase 8.1% to £2.5 billion. Heathrow has just sold Stansted to Manchester Airports Group for £1.5 billion, under orders from the Competition Commission. One of the new buyer’s first jobs will be to turn around a downturn in demand: Stansted’s passenger numbers fell 3.2% to 17.5 million last year.
By contrast, Heathrow’s traffic last year hit a record 70 million, up 600,000 on the previous year. The airport is full to capacity and can only increase flier numbers when fuller and larger planes use its runways. There were 471,341 flights during 2012, just below Heathrow’s cap of 480,000. North Atlantic traffic rose the most, up 3.2% to 16.3 million passengers.
Matthews predicted a “small rise” in passenger numbers this year. He added the international grounding of Boeing’s Dreamliner jet could impact, saying: “The whole industry will be pleased when the plane is flying again.”