British Airways owner warns it could cut Heathrow flights over higher charges
British Airways could move flights away from Heathrow if the airport is allowed to increase charges by 50%, the airline’s owner has warned.
The International Airlines Group chief executive, Luis Gallego, said it “would not be alone” in taking its business elsewhere, undermining the global competitiveness of the UK.
IAG, which also owns Aer Lingus and Iberia, is the biggest operator at the London hub and has led objections to proposed increases in landing charges.
The price for each passenger could rise by up to 56% by 2023, from £22 to £34.50, under a decision by the CAA, the aviation regulator, which airlines say would be passed on in higher fares.
Gallego said Heathrow was currently a big advantage for a “Global Britain”, but was already significantly more expensive than European competitors.
Speaking at an airline conference in London, he said: “Heathrow’s leading position is not inevitable. The reality is more than 40% of the people who use Heathrow are connecting passengers … and could easily go via other, more competitive hubs.”
He added: “If the rise in landing charges goes ahead I know IAG would not be alone in reconsidering our airlines’ use of Heathrow.”
Willie Walsh, the director general of the global airline body Iata and a former IAG boss, later told the conference that the regulator was allowing Heathrow to “shoot everyone in the foot” as the UK aviation sector started to recover from Covid restrictions.
Walsh said: “By pushing up the charges to such a high level you’re actually pushing people away from Heathrow, which will undermine significantly the recovery of the industry in the UK.”
Heathrow hit back by highlighting the steep rise in airline fares. A spokesperson said: “Passengers know when they’re getting a raw deal. A £10-15 increase in airport charges is not comparable to pushing up economy-class tickets to the US to over £2,000 this Christmas, which is what some airlines are doing.”
She added that the airport had not received the state aid given to other European airports during the pandemic, and the charges would help investment for passengers.
She said: “Heathrow passengers want a reliable, quality experience. 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.”
Heathrow has lost £3.4bn during Covid, and while the resumption of transatlantic flights has boosted passenger numbers, last month they remained less than half of pre-pandemic levels.
Separately, the UK’s competition regulator is examining the proposed €500m (£420m) takeover of Air Europa by IAG, adding another potential hurdle to the long-trailed acquisition.
IAG first announced its intention to buy the Spanish airline in late 2019 for €1bn, but in January it announced a renegotiated deal at half that price as Covid led to enormous losses among airlines.
IAG owns both Iberia, Spain’s flag carrier airline, and Vueling, meaning that it has a significant crossover in their networks’ crossover with Mallorca-based Air Europa.
The takeover would allow IAG to target the South American market as well as potentially setting up Madrid as a hub airport. The deal was planned by Walsh, who left just as the pandemic was hitting.
The UK’s Competition and Markets Authority has invited comments from the companies on whether the deal “may be expected to result, in a substantial lessening of competition” within the UK.
The companies have a week to submit their views on the merger, and the CMA has until 19 January to decide whether to pursue a phase 1 investigation to decide whether the merger will reduce competition.
The takeover is already under investigation by the European Commission.
In the UK, Air Europa flies from London Gatwick to a range of cities in Spain and from Edinburgh to some South American destinations. Iberia and Vueling fly some of the same routes.
The British union Unite, which represents some ground crew, has previously expressed its opposition to the deal, on the grounds that IAG was pushing through cost savings to the detriment of staff while also spending £420m on a takeover.
“We will collaborate with the CMA. The London-Madrid route is highly competitive and is already part of the European Commission [investigation] process,” IAG said on Monday.