John Holland-Kaye, CEO of London’s Heathrow Airport, today called for more to be done to get airlines and passengers back flying again within Europe. Holland-Kaye was interviewed on Eurocontrol’s Aviation Straight Talk series.
Whilst recognising that governments need to get the balance right between economic needs and health issues, that balance needs to be achieved in the right way. Holland-Kaye noted that ‘in the US, if you have been vaccinated, you don’t need to be tested. We haven’t seen that in Europe yet.’ The implications being clear that Holland-Kaye believes governments are being too cautious.
Vaccinations and testing
Holland Kaye believes it will take a couple of years to get back to ‘some form of normality,’ ‘The UK needs to be confident that other countries have vaccinated their people to allow travel to these countries.’ Holland-Kaye recognises that countries will be cautious but believes that the industry should be encouraging similarities in approach between countries to make it easier for passengers to understand the rules. When asked about the cost of testing and who should pay for this, Holland-Kaye was clear that it would be the passenger or governments, airports should not be asked to cover this cost.
When asked about current concerns within airports, Holland-Kaye cited UK Border Control queues of up to 6.5 hours due to the manual checking of every passenger, at a time when there were very few passengers. Going forward when flights ramp up, Border Control is an area of ‘huge concern.’
The topic of Heathrow’s third runway was also broached. When asked if Heathrow still needed a new runway, Holland-Kaye was unequivocal with his response: ‘Absolutely.’ The timing is the issue, claimed Holland-Kaye, stating that the time to build a third runway will be longer than the wait time needed for demand to return. Holland-Kaye was supportive of growth at all UK airports but was keen to point out that no other UK airport can deliver what Heathrow delivers in terms of long-haul connections and connectivity. Holland-Kaye went even further and suggested that, contrary to industry-held belief, long-haul traffic at Heathrow will come back before short-haul, stating that most of the current flights are long-haul cargo operations and that many long-haul markets are further ahead with their vaccination programmes than Europe.
Recovering operational costs
A current area of contention between Heathrow and its airlines is costs. Heathrow has applied to its regulator, the CAA, to allow it to put up charges to recover operational costs. This request was rejected by the CAA. Holland-Kaye was keen to point out that as Heathrow’s charges are regulated, ‘we can’t charge as much as the market will bear when times are good. It also means when times are bad, we don’t have the reserves that we have accumulated to cover all of the downside. That’s the nature of being a regulated airport.’ Holland-Kaye further added that ‘this means that when times are bad, we need to be able to recover some of our costs through the regulated model. We need to put our charges up in the short-term to recover operational costs.’ Although there have been long and loud complaints from the airlines on this, Holland-Kaye claimed that it was the airlines themselves who had suggested a one-off cost, rather than a longer-term cost that would have smoothed the increase. It is clear that Holland-Kaye would rather that Heathrow was not regulated: ‘The regulatory model is a real issue at the moment, it was not designed for pandemics.’
Airport costs are always a thorny issue between airports and airlines. Airports need to invest in large infrastructure projects to ensure they have the facilities airlines need now and into the future. As an example, Holland-Kaye pointed out that Heathrow has 95% pier service, which means additional costs to provide the piers as well as underground trains and travellators to ensure passengers get to and from the gates quickly. Holland-Kaye was also keen to point out that the airlines achieve a premium fare from passengers flying from Heathrow, compared to other UK airports and it is the airlines that benefit from this. The benefit of investing in Heathrow is that passengers want to fly from Heathrow and this is reflected in the fare yield airlines achieve.
Coming to the end of this wide-ranging interview, Holland-Kaye was asked about aviation’s need to reduce carbon emissions. Holland-Kaye was adamant that ‘none of us in the aviation sector will be in business in 30 years’ time if we don’t decarbonise our sector.’ Holland-Kaye believes that for short-haul flights, electric or hydrogen driven aircraft will be used but for long-haul flights, it will be about Sustainable Aviation Fuel (SAF) and that ‘we need urgent world action on a commitment to build up the supply of SAF’.
Given the sometime difficult relationship Heathrow has with its largest customer, British Airways, it will be interesting to see how BA respond to some of the comments made. Just as well then that the CEO being interviewed next month, is Sean Doyle of British Airways.