Heathrow passengers are facing decades of increased air fares after the airport secured permission to recover early costs incurred during the development of its expansion plan.
The Civil Aviation Authority (CAA), the aviation regulator, announced it has allowed Heathrow Airport Limited (HAL) to recoup £320 million.
This sum was spent on its proposal to construct a third runway since the beginning of last year. The money will be recovered through higher charges levied on airlines, which are typically passed directly to passengers via air fares, over an estimated period of 20 to 25 years.
Meanwhile, Heathrow West, a competing expansion project spearheaded by property billionaire Surinder Arora, has also been authorised to recover £4.1 million.
This amount covers its expenditure up to 25 November, the date the Government declared HAL’s proposal as its preferred option.
The CAA stated that its decision would lead to an increase of approximately 15p in the maximum airport charge per passenger in 2028, projected to rise to 30p in subsequent years.
British Airways, the largest carrier operating from Heathrow, had previously cautioned that HAL’s early cost recovery risked making the expansion “unaffordable for consumers and inconsistent with a credible benefits case”, according to a CAA document.
Airlines have repeatedly complained that Heathrow has the highest charges of any airport in the world.
The money that can be recovered includes the planning and design costs necessary to develop a credible expansion proposal, including preparing material to support a future development consent order (DCO) application.
DCOs grant permission for major infrastructure projects to go-ahead.
Tim Johnson, the CAA’s director of consumers and markets, said: “Our decision strikes a balance between supporting the delivery of benefits to consumers through timely progress on Heathrow expansion, whilst also protecting them from undue increases in costs.
“The costs Heathrow can recover are capped, independently scrutinised and subject to efficiency reviews, helping ensure that passengers only pay for efficient costs that are justified.”
A separate process will be conducted to decide arrangements for costs incurred from 2027.
Last month, the Government launched a consultation on its Heathrow expansion national policy statement, setting out the conditions needed if the project is to be given the go-ahead.
Former chancellor Rachel Reeves said she was determined to get “spades in the ground” for the third runway in the current Parliament, and for it to be built by 2035.
Prime Minister Andy Burnham, who sacked Ms Reeves, has previously expressed concerns over Heathrow expansion, stating the plans divert infrastructure investment “away from the North and traps it in London”.
HAL’s scheme is estimated to cost £33 billion, including £1.5 billion to move the M25, and is expected to be fully privately financed.
It would see Heathrow’s annual capacity increase to 756,000 flights and 150 million passengers.
A Heathrow spokesperson said the project will give passengers more choice while providing a “real economic boost to every region and nation of the country”.
He went on: “We have been clear from the start that unlocking the private investment that will deliver these benefits requires a supportive regulatory framework.
“We are carefully considering the CAA proposals and will make investment decisions accordingly.”
