Heathrow passengers face higher fares

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.