Heathrow airport has said it remained loss-making in the first quarter of the year despite a recovery in passenger numbers, blaming a cap on the fees it can charge airlines and the rising cost of servicing its debt.
The UK’s biggest airport said on Wednesday that it did not expect to pay its owners, a group of international investors led by Spanish infrastructure company Ferrovial, a dividend in 2023 after it reported a £60 million (€67.8 million) pretax loss in the first three months of the year.
In March, the Civil Aviation Authority (CAA) told Heathrow to cut landing fees from the current £31.57 per passenger to £25.43 from next year. The charges are typically passed straight on to consumers in ticket prices, and Heathrow has among the highest landing charges in the world.
Last week, the airport appealed against the CAA’s decision. Heathrow’s biggest customers, including British Airways and Virgin Atlantic, have been pushing for lower landing charges.
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The cost of servicing Heathrow’s £15 billion of debt rose significantly, from £308 million in the first quarter of 2022 to £442 million in the same period this year. It last paid its owners a dividend – of £100 million – in February 2020.
The airport did, however, report an operating profit of £309 million in the first quarter, while revenues rose almost 60 per cent year-on-year to £814 million.
Almost 17 million passengers passed through the airport in the three months, up from 9.7 million a year earlier.
The airport said the recovery in passenger numbers was driven by leisure travel, while business travel accounted for 29 per cent of traffic, compared with 35 per cent in the same period before the pandemic.
It has revised its 2023 traffic forecast to between 70 million and 78 million passengers, up from a February figure of 58 million to 73 million.
John Holland-Kaye, Heathrow’s chief executive, said the UK had become “less attractive” for pension funds and other infrastructure investors because of low returns.
“Regulated assets need to produce dividends to attract investment, particularly for pension funds. You can’t pay pensions unless you are generating dividends,” Mr Holland-Kaye said.
Airlines have argued that Heathrow should shoulder more of the financial fallout from the pandemic, rather than raising landing fees.
Passengers using Heathrow have not suffered any significant disruption this year, and the airport said it expected people to be able to travel “as normal” during the busiest periods in May, which includes school half-term holidays and the UK coronation, despite a planned strike by some security guards. – Copyright The Financial Times Limited 2023
