IAG boss calls on Heathrow not to raise passenger charges

The chief executive of International Airlines Group (IAG) has warned that British Airways (BA) could reduce flights at Heathrow Airport should passenger charges rise next year.

Speaking at the Airlines 2021 conference, Luis Gallego said that the UK’s largest airport, where BA’s central hub is based, already has among the highest traveller charges in the world.

He remarked that any increase in fees would force IAG and other airline owners to review their use of Heathrow, which is the third busiest airport globally by international passenger volumes.

Last month, the Civil Aviation Authority (CAA) released proposals that, if approved, could allow Heathrow to set landing charges of between £24.50 and £34.40 from next summer, compared to just under £20 right now.

However, the airport has called on the organisation to set the cap at a much higher range of £32 to £43. A consultation is currently taking place on the matter and runs until 17 December.

Heathrow’s results covering the first nine months of 2021 showed it making a loss of £1.38billion due to tumbling passenger numbers caused by harsh coronavirus-related travel restrictions.

IAG’s results for the January to September period also showed it making a huge loss of €2.62billion, which was still a fall of more than half on the same period last year.

Hiking the passenger charges significantly would help the airport recoup much needed financial strength, but Gallego said to do so would incentivise passengers to travel through other airports.

‘Hiking charges will not help. It will not attract demand – it will have the opposite effect,’ he stated. ‘If the rise in landing charges goes ahead, I know IAG will not be alone in reconsidering our airlines’ use of Heathrow.’

His comments were echoed by his predecessor Willie Walsh, who warned the airline sector risked ‘shooting everybody in the foot’ by allowing Heathrow to hike charges, as passengers ‘have an option to go somewhere else.’

Mr Walsh, the director general of the International Air Transport Association, the global airline trade association, added: ‘You can make a strong case that not only should airport charges not go up, but in fact, I think you could argue that they could come down and Heathrow could continue to be fully financed.’ 

The two men’s comments on the same day the UK’s competition authorities revealed it was investigating whether IAG’s intended takeover of the Air Europa airline would ‘result in a substantial lessening of competition’ in the UK.

IAG, which also owns Aer Lingus and Spanish flag carrier Iberia, originally agreed to purchase Air Europa in late 2019 before agreeing a much lower £450million bid last year. The CMA is inviting comment from interested parties for the next week. 

Also speaking at the same event today was Tim Alderslade, chief executive of trade body Airlines UK, who warned that the level of Heathrow’s fees threatens the viability of its expansion project.

He said: ‘Their inability to keep their charges under control will be the death of runway three.’  

In response, a Heathrow spokeswoman said passengers ‘know when they’re getting a raw deal’ as she claimed the proposed increase in charges of up to £15 is ‘not comparable’ with airlines charging ‘over £2,000’ for economy class air fares on US flights over Christmas.

She went on: ‘It’s true that Heathrow is proposing a higher pandemic price increase than continental airports, but we are neither state-owned nor have we received billions in state aid during the crisis – we rely entirely on private investment.’

Heathrow’s owners include sovereign wealth funds from China and Qatar, Spanish construction firm Ferrovial and large infrastructure funds.

The spokeswoman said higher charges would enable the airport to ‘deliver key investments in the next five years to protect passenger service.’

She added: ‘Just as Aldi offers great food, plenty of Brits are still very happy to shop at Waitrose and appreciate the value for money they get.’