The plans of London Heathrow Airport — the British capital’s main international airport — to pursue planning permission for a third runway suffered a big setback earlier this week, as Virgin Atlantic, one of the two carriers based at the airport, withdrew its unconditional support to the project, as a reaction to the airport’s proposed intention to raise landing charges by 120%.
Sahi Weiss, Virgin Atlantic’s Chief Executive, speaking at the Airlines 2022 conference in London has called upon the U.K. Civil Aviation Authority (CAA) to “reform a broken system” and “pay close attention to the abuse of power by a de facto monopolistic airport.”
“Until that happens, it is difficult to see how expansion at Heathrow can be supported,” he added, The Guardian reports.
The U.K. CAA authorized Heathrow airport to raise its passenger charges by 56% at the beginning of 2022, to account for the uncertainties over how traffic will recover after the drop in demand caused by the COVID-19 pandemic. These charges have skyrocketed from £19.60 to £30.19 per passenger (from $23.30 to $35.89), but the U.K. regulator has also established Heathrow Airport will have to reduce those charges annually for the next four years until 2026.
The Long Saga of A Much-Needed Runway
Until 2019, London’s Heathrow Airport was operating essentially at full capacity and could not attract more traffic despite very strong demand from airlines. It was the first airport that was allowed by E.U. Authorities to allow slot trading on a monetary basis, with a pair of slots at peak times being sold for up to $75 million, and Virgin Atlantic issued a bond tied to the value of its slots at Heathrow raising £220 million.
The South-East of England has lacked runway capacity for decades, and an extra runway at Heathrow was selected more than once as the most favored solution to solve this infrastructure issue. However, this came not without controversy: Heathrow is located in a heavily-populated area West of London, and the last proposed plan for an extra runway did involve the destruction and relocation of an entire village, displacing 761 homes, as reported by the BBC.
In February 2020, the plan to build a third runway at Heathrow was considered illegal by a U.K. Court in a swiping victory by environmentalist groups. The plan was considered not compatible with the Paris Climate Agreement signed by the United Kingdom and with the related limit to greenhouse gas emissions linked to the agreement. The ruling was overturned in December 2020, but at this moment there is no timeline as to when the project will get the go-ahead.
Battle Between Airport and Airlines
After a chaotic summer during which airlines operating at Heathrow were asked to cancel flights due to the airport’s inability to deal with projected passenger flows and the unprecedented decision by the airport company to cap the number of passengers at 100,000 a day throughout the busiest travel period of the year, tension is high between Heathrow and the airlines operating at the airport, including Virgin Atlantic.
“This is not just about the next price control period in four years’ time,” Weiss said, as reported by The Guardian. “Everyone in this room will recognize the damage to consumer confidence that summer disruption caused. A repeat of this in summer 2023 is completely avoidable if honest and accurate passenger forecasts are used now for resource planning and building resilience.”
Heathrow’s medium to long-term plans also includes the construction of new satellite terminals that will lead to the demolition of Terminal 3, where Virgin Atlantic is currently located, together with most of the smaller operators at the airport as well as those not aligned with a major alliance. Of course, the carrier is trying to use all the leverage it can muster to obtain a better solution for itself in terms of terminal facilities.
John Holland-Kaye, the Heathrow chief executive, told the Guardian he expected to continue to “have a constructive relationship and conversations” with Virgin Atlantic, and that redevelopment of Terminal 3 or a move to the new Terminal 2 was in the airport’s medium-term plans.
After his speech, Weiss confirmed to the same British outlet that the company would still support Heathrow’s development, including its third runway, if some conditions were met, “including lower charges so that it remains competitive and consumers are protected, as well as massive renovation of Heathrow’s Terminal 3 where Virgin is based.”
