British Airways is threatening to leave London Heathrow if a planned increase in departure taxes goes into effect. Talk about a hollow threat…
Empty Threat: British Airways “Reconsidering Use of Heathrow.”
The threat came from Luis Gallego, CEO of International Airlines Group (IAG), the parent company of British Airways:
“The reality is that more than 40% of the people who use Heathrow are connecting passengers. They are simply passing through on their way to other destinations and could easily go by other, more competitive hubs.
“Hiking charges will not help. It will not attract demand – it will have the opposite effect. If the rise in landing charges goes ahead, I know IAG will not be alone in reconsidering our airlines’ use of Heathrow.”
Even though IAG includes Aer Lingus, Iberia, LEVEL, and Vueling, along with British Airways, it is only British Airways that offers connecting traffic via Heathrow.
The UK Civil Aviation Authority (CAA) said last month that it would boost the airport’s average passenger charge by up to 76%, from £19.60 to between £24.50 and £34.40.
That’s a huge hike and will certainly make the airport less competitive. But if it applies equally to all carriers using the airport, it will not make British Airways relatively less competitive.
British Airways was granted 40% of the slots at London Heathrow and dominates Terminal 5 with presence in Terminal 3 as well. It is by the far the largest UK airline in terms of key metrics like fleet size, international destinations, and international flights.
Takeoff and landing slots are tightly controlled at London Heathrow and there is no way that British Airways will cede even one slot if it can help it. Because if it did, dozens of carriers would line up to replace it, paying no consideration to a £34.40 passenger facility charge.
This, the threat to leave London Heathrow could not be more hollow. British Airways would collapse without London Heathrow and increased taxes will not suddenly destroy operations.
CONCLUSION
Taxes are comparatively high at London Heathrow. This is especially egregious for premium cabin passengers and sting when ground services and facilities are much better in other major European airports with much lower taxes.
Will this be a long-term problem? A Heathrow spokesperson does not seem to think so, arguing:
“It’s true that Heathrow is proposing a higher pandemic price increase than continental airports, but we are neither state-owned nor have we received billions in state aid during the crisis – we rely entirely on private investment…
“Just as Aldi offers great food, plenty of Brits are still very happy to shop at Waitrose and appreciate the value for money they get.”
I’m not sure Waitrose appreciates the analogy…
image: British Airways
C’mon man, it’ll never happen. It’s about as likely as Dr. Fauci removing both his masks, or Hillary finding those 30,000 emails she deleted.
Or those tax returns and the pee tape being released!
While I agree that this is all bluster, it absolutely will make BA relatively less competitive. The traffic Gallego is talking about is connecting traffic. Unless taxes go up proportionally at CDG, AMS, FRA, etc, and there’s no current talk of them doing so, then BA is hurt far more by this change than their competitors for whom LHR is only a spoke. This makes BA less competitive on all connecting routes between Europe and the rest of the world. While the monetary amount may be small, the scope is huge. In an era of decreased business and extra leisure traffic I’d be concerned if I were BA.
While a total pull out from Heathrow is preposterous I could see tightening up the schedule and reducing flights to send a message. The majority of the “connectivity” is from the Americas. You could see them alleviate some banks of off-peak European flights (as they are less critical to Americas connectivity) and moving more leisure flights to Gatwick. The question then will be potentially losing those slots. Who though would want more off-peak slots from Heathrow at those per passenger rates? Especially with passenger numbers where they are now and not returning to 2019 levels for another two years. Virgin, with the trouble it is in already? Emirates, who I can’t see expanding to any more flights given the use of the A380? It’s a gamble, but you might find the CAA will pull back if they suddenly realize that precious Heathrow slots are less in demand as before.
In the long-term, could you maybe see IAG as a whole shifting capacity growth for connecting flows away from the UK to their cheaper hubs (Madrid, Dublin, Barcelona) and leaving heathrow as more a premium O&D airport? Not giving up slots, but maybe upguaging less aggressively?
Part of the pain is the other, yet to be explained thoroughly (unless I missed it) is the enormous AVIOS redemption “fees and surcharges” that BA blends into the cost when redeeming for a J or F ticket, even for an onward connection. That’s the charges I’d love to learn more about and why they go up and up and up…nearly doubling in the past five years. Last year I looked at a redemption for a trip I took in Nov 2021. The delta, no pun intended, between SEA and CDG via LHR was only about $475 more for the paid ticket! The odd thing is, and to another commentor’s point, If I had used my AA miles outbound, I would be charged $6 for taxes (SEA- DFW – CDG), so other airports / airlines are much more competitive….What am I missing?
Good for IAG on taking a firm pro-customer stance. They should show that they’re not money grubbing hypocrites by putting their money where their mouth is and dropping all surcharges.
“The reality is that more than 40% of the people who use Heathrow are connecting passengers. They are simply passing through on their way to other destinations and could easily go by other, more competitive hubs.” That’s exactly what I do. BA can’t leave Heathrow but I have. Eff em
“it will not make British Airways relatively less competitive”: yes it will. Sure, not compared to interline connections between other carriers at LHR, but to other carriers’ connections at their own hubs – AF to AF at CDG, LH to UA at FRA, etc
“I’m not sure Waitrose appreciates the analogy…” actually they probably do. Aldi is perceived as a decent but cheap & cheerful brand, an easyJet or JetBlue, while Waitrose is a traditional supermarket, perceived as offering quality products at normal supermarket prices…a British Airways or United. So saying that while Aldi (Jetblue) offers great food, plenty of Brits are still happy to short at Waitrose (United) is probably an analogy that would not be unwelcome.
Apologies for quibbling with your analogy, but Waitrose isn’t just a traditional supermarket but rather a premium supermarket, more akin to Whole Foods in the U.S.. Re: airlines, I think Waitrose is better compared with a Singapore Airlines or Qatar while Sainsbury’s or Tesco would be like United or BA. Iceland = Easyjet.
Precisely. This was my thought as well. Waitrose holds itself out as the top-quality supermarket versus the budget Aldi chain. But frequent flyers know Munich or even Frankfurt provides a far premium transit experience than Heathrow.
The Waitrose near where I used to live was quite poor and, when a Tesco opened nearby, people flocked to it. But it may have been just the one branch and, admittedly, that was a few years ago. Perhaps Waitrose could be considered as an airline which claims to be premium but doesn’t always succeed….. so, again, like BA? 🙂
This is not the right interpretation of what was actually said. They might route some connecting traffic via other hubs, they NEVER said they would “leave” LHR.
Ironic (and hypocritical) that BA complains about INCREASED fees when BA charges among the highest fees (surcharges) for award tickets. Maybe the UK Civil Aviation Authority should also demand that BA lower their surcharges.
That would be a good compromise!
I would also add after living in London for 16 years and now back on the East Coast that the interpretation of “reconsidering the use of Heathrow” may be lost in translation from “across the pond”. I bet BA means variability rather than exclusivity. The airline has long said they would like to send their connecting traffic via Dublin and Madrid as well as potentially other airports such as Manchester and Barcelona.