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.
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