Airlines and Airports – The Battle on Charges Set To Continue

by Bernard Lavelle
Willie Walsh, Director General , IATA

The retirement from IAG of Willie Walsh last year must have caused a sigh of relief at airports around the world and in particular, London Heathrow, home to IAG’s largest airline, British Airways. Mr Walsh has been a constant thorn in the side of airports, regularly taking them to task about their charges and their need to develop infrastructure at ‘inflated’ costs.

However, seven months later and Walsh is back. Bigger and better than ever and in his first major media briefing as the new Director General of IATA on 7 April, he was soon focusing on his favourite theme – airport charges. Walsh has promised ‘strong and aggressive’ resistance to airports that look to increase charges to cover losses due to the pandemic.

Ignoring the extremely competitive nature of the airport industry, Walsh went on to say that ‘some of these guys act as monopoly suppliers’ and IATA will ‘work on their (airlines) behalf to resist efforts of some suppliers to increase costs, which is total madness in this environment.’

The ongoing battle

Warming to his theme, Walsh commented on Heathrow in particular. ‘It’s the likes of airports like Heathrow who have clearly demonstrated that they want to try to recover lost revenues.’ In this instance, Walsh is correct as Heathrow sought last year to increase charges to recover £1.7 billion in pandemic related losses. This was rejected by the UK’s CAA but they did leave the door open to more targeted increases. As the UK’s only price-regulated airport, Heathrow’s charges are usually set every five years by the CAA. Work is due to start next year on a new longer-term regulatory settlement which is usually linked to an inflation plus formula.

The battle between airports and airlines over increasing costs has been on-going for many years. Airports invest in long-term infrastructure to the benefit of passengers and airlines and they need to secure a certain rate of return to allow them to invest in the necessary construction and to perhaps secure the loans required to make the investments. Airlines, whilst appreciating the need for airports to invest, take umbrage at inflated costs and believe that airports should generate higher returns through their non-aero revenues gleaned from shops and food and beverage outlets.

Perhaps the Canadian model would ensure greater harmony. Airports in Canada tend to be ‘not for profit organisations’ and rely on an Airport Infrastructure Fee, agreed between the airport and the airlines to pay for required infrastructure projects.

Whatever method is chosen, the battle between airports and airlines is likely to continue and with Walsh now heading up IATA, the battle is likely to be more vocal and vociferous than ever before. Watch this space.

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