Heathrow blames £140m loss on new customer charging rules

Economy
By Liam

Heathrow Airport blames £140m loss in three months on new customer pricing rules as CEO joins calls to abolish ‘tourist tax’

  • Heathrow posts an adjusted pre-tax loss of £139m on first quarter revenue of £814m
  • The number of travelers increased by 74% to 16.9 million in the first three months of 2023
  • Boss rejects the decision to abolish VAT refunds on purchases by foreign visitors

By Mike Sheen This is money

published: | Updated:

Heathrow is challenging new customer pricing rules, blaming the airport’s slide to an adjusted loss of £139m at the start of the year.

The British Airways hub recorded a 74 per cent annual increase in passenger numbers to 16.9 million in the first three months of 2023, reflecting a recovery in travel following last year’s Covid-19 restrictions .

The recovery helped Heathrow maintain its position as Europe’s busiest airport as revenues rose 57.8 per cent to £814 million over the period.

But Heathrow Airport was forced to cut passenger charges last month, following a much-anticipated decision by the aviation regulator – these charges are paid by airlines to use the airport.

The recovery in travel helped Heathrow maintain its position as Europe’s busiest airport

The Civil Aviation Authority has set Heathrow’s average fare per passenger lower than previous expectations following a better-than-expected recovery in demand for flights and overseas travel.

At the time, a Heathrow spokesperson denounced the decision, claiming it “makes no sense and will do nothing for consumers.”

How do the surcharges work?

The surcharges will be charged directly to the airlines and the change will benefit the likes of British Airways and Virgin Atlantic by making the airport cheaper for them. The costs are usually passed on to customers via airline tickets.

Under the new terms, the fee drops from £31.57 for 2023 and last year to £25.43 for the next three years.

Passengers were expected to pay an average of £28.39 in nominal charges over the five-year period to 2026.

The CAA said it has now reduced this average by 90 pence to £27.49 for the period.

Heathrow had sought to raise the cost to £32 to £43 over four years.

Heathrow told investors on Wednesday it is contesting the CAA’s decision, as well as other new regulatory developments, on which the Competition and Markets Authority will make a final decision “between August and October.”

The airport also took aim at the government and joined the call for the abolition of the so-called ‘tourist tax’.

Burberry chairman Gerry Murphy brought up the row earlier this week, attacking Rishi Sunak’s decision when the Chancellor abolished VAT refunds on foreign visitors.

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Leaving the door open for a tax reversal, the prime minister said he was ready to look at data showing “what’s happening in practice.”

Heathrow said on Wednesday: “We are urging ministers to make the UK more competitive for foreign visitors vis-à-vis the EU by abolishing the ‘tourist tax’ on VAT on shopping, which will lead to more spending in shops, restaurants and attractions across Britain.”

Chief executive John Holland-Kaye added: ‘2023 is off to a great start and I am proud of the way colleagues are working together to deliver great passenger service every day.

“We are building our route network to connect all of Britain to the world’s growing markets – now we need the government to entice international visitors back to the UK by doing away with the ‘tourist tax’.”

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