U.K. Regulator Delays Decision on Heathrow Fare Increase

(Bloomberg) -- London's Heathrow airport may be allowed to raise airline fees on a limited basis after Britain's aviation regulator dismissed the hub's pitch for a more substantial hike during the coronavirus pandemic.

The Civil Aviation Authority said Friday it plans to reject Heathrow's proposal, which the airport reckons would lift fares by 1.20 pounds ($1.44) per passenger, as disproportionate and not in the best interests of consumers.

Instead, the CAA said its preferred options are to fold the issue into work on a new, longer-term regulatory settlement that starts early next year, or to make “a more limited and targeted intervention” now.

Passenger numbers at what's normally Europe's busiest airport have collapsed as curbs aimed at stemming the spread of Covid-19 effectively wipe out demand on long-haul routes. Heathrow isn't allowed to lift prices directly, and is instead seeking a 1.7 billion-pound ($2.5 billion) boost to its regulatory asset base, the sum not recovered in airport charges that's used in setting price controls.

Heathrow said the CAA “has accepted that doing nothing is not an option,” but that it had requested a reasonable adjustment and that unlike other airports and airlines it is not seeking a taxpayer bailout.

The hub, controlled by interests including Spanish builder Ferrovial SA, the Qatar Investment Authority, private-equity firm Alinda Capital Partners and China Investment Corp., said the CAA decision could lead to a higher price increase by undermining investor faith and boosting borrowing costs.

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