Heathrow passengers face higher fares
Regulator allows airport to recoup £320m in early expansion costs over two decades.
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Heathrow passengers may face higher fares for up to 25 years following a decision by the Civil Aviation Authority (CAA). The regulator has permitted Heathrow Airport Limited (HAL) to recover up to £320m spent on planning its proposed third runway. This cost recovery will be implemented through increased charges to airlines, which are typically passed on to travellers.
The CAA's decision allows HAL to recoup early investment costs over a period of 20 to 25 years. This move has drawn objections from airlines, with British Airways stating that early cost recovery could make expansion "unaffordable for consumers". Airlines have consistently raised concerns about Heathrow's existing high charges compared to other global airports.
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Rival Scheme Costs
In addition to HAL's costs, the CAA will also allow Heathrow West, a rival expansion scheme led by Surinder Arora, to reclaim £4.1m. This amount was spent on its plan before HAL's proposal was designated the government's preferred option. The CAA stated this refund is necessary to foster competition and will be funded by Heathrow's additional charges.
Projected Fare Increases
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Current airport charges stand at approximately £26.22 per passenger. The CAA anticipates that the approved cost recovery will lead to an increase of about 15p per passenger in 2028. Further increases, estimated at 30p, are projected for subsequent years. These figures are part of a broader plan for a third runway estimated to cost £33bn.
Tim Johnson, the CAA's director of consumers and markets, said the decision aimed to balance progress on expansion with protecting consumers from excessive cost increases. He added that recovered costs are capped, scrutinised, and subject to efficiency reviews to ensure passengers only pay for justified expenses.
Expansion Scope and Government Consultation
The planned third runway project includes additional terminal facilities and a £1.5bn diversion of the M25 motorway. Heathrow estimates the total cost at £33bn. The runway is expected to boost capacity by 50%, enabling 756,000 flights and accommodating 150 million passengers annually. A spokesperson for Heathrow Airport stated the expansion would offer passengers more choice and provide a significant economic boost nationwide.
The government is currently consulting on a national policy statement for Heathrow expansion, outlining conditions for its potential approval. The former chancellor, Rachel Reeves, had expressed a commitment to commencing construction during the current parliamentary term, with a target completion by 2035. Concerns have been raised by figures like Andy Burnham regarding the potential diversion of infrastructure investment away from northern regions towards London.
A study by the New Economics Foundation suggested that the third runway could redirect jobs from areas like Birmingham and the Midlands to the south of England.
Questions this report answers
+How much will passengers pay more because of the expansion?
Passengers are expected to pay about 15p more per flight in 2028 due to increased airport charges. This rise is part of a plan allowing Heathrow to recover £320m spent on third runway plans over 20 to 25 years, with further increases of around 30p projected later.
+Who else can claim back costs from the expansion plans?
Surinder Arora’s Heathrow West scheme can reclaim £4.1m spent on its rival expansion proposal. The Civil Aviation Authority approved this to encourage competition, and the amount will be funded through Heathrow’s additional charges to airlines and passengers.
+How long will the higher fares last?
Higher fares could apply for up to 25 years as Heathrow recovers £320m in early expansion costs. The Civil Aviation Authority has permitted this cost recovery through increased charges, affecting passengers for decades.
+What does the third runway expansion include?
The third runway project includes a new runway, additional terminal facilities, and a £1.5bn diversion of the M25 motorway. Heathrow estimates the total cost at £33bn and expects the expansion to boost capacity by 50%, handling 150 million passengers annually.
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