Heathrow airport makes first profit in three years but warns of ‘tough choices’ on investment

‘We have a great foundation on which to build an even stronger hub for the United Kingdom’ – Thomas Woldbye, CEO

Blue skies: Virgin Atlantic is one of the leading airlines at Heathrow, which has reported its first annual profit for three years (Simon Calder)

Britain’s busiest airport is back in profit, with passenger numbers almost back to pre-pandemic levels.

In 2022 Heathrow suffered a £684m adjusted loss before tax. Last year this swung to a £38m profit – representing almost £2 for each of the 79.2 million passengers who passed through the airport.

Heathrow’s new chief executive, Thomas Woldbye, said: “We delivered much improved service for our customers, and managed to turn a small profit after three consecutive years of losses.

“We have a great foundation on which to build an even stronger hub for the United Kingdom.”

But he warned: “In 2024, we are expected to deliver even further improved service to more passengers, but with airport charges cut by 20 per cent in real terms.

“We will have to pull every lever to become more efficient and make tough choices on where we spend and invest our money to overcome the huge cost challenge set by the CAA [Civil Aviation Authority] and remain profitable over the next three years.”

Because demand from passengers and airlines for Heathrow far outstrips the available capacity, the CAA caps the level of passenger charges the airport can apply.

In March 2023 the regulator said the maximum would fall by about 20 per cent to £25.43 per passenger in 2024 “and will remain broadly flat at that level until the end of 2026”.

Announcing its results, Heathrow said: “Maintaining even a small profit will require us to close a £400 million gap with efficiencies and investment trade-offs over the next three years.”

The airport is spending £1bn to upgrade its 146 security lanes with new scanners that allow passengers to leave laptops and liquids in their cabin baggage.

Last year only seven per cent of passengers waited longer than five minutes to clear security, compared with 31 per cent in 2022.

Heathrow called for a return to tax-free shopping at the airport, saying it would make Britain “a magnet for international tourism spend by levelling the playing field with the UK’s European rival”.

Tax-free shopping was ended by Rishi Sunak while chancellor. In 2022, during his brief tenure as chancellor in Liz Truss’s government, Kwazi Kwarteng pledged to restore tax refunds for overseas visitors who take purchases home in their personal baggage, but his replacement Jeremy Hunt scrapped the plan.

In addition, the new UK Electronic Travel Authorisation (ETA) scheme is detrimental to Heathrow. Passengers who simply want to connect airside between international flights must apply for this online permit and pay £10.

At Heathrow’s rivals, including Amsterdam, Frankfurt and Paris Charles de Gaulle, no such permission is needed.

The London Heathrow-New York JFK route remains the airport’s busiest, with over three million passengers on the link for the first time since 2019.

On plans for a third runway, which was recommended by the Davies Commission in 2015, the airport said: “We are conducting an internal review of the work we have carried out and the different circumstances we find the aviation industry in, and this will enable us to progress with appropriate recommendations and ways forward.”