By Sarah Young

LONDON (Reuters) – Britain’s aviation regulator has said Britain’s largest airport, Heathrow, will not be allowed to increase passenger charges as much as it wants, but airlines have opposed the scale of the rise as the hub and carriers fight to recoup losses from the pandemic.

COVID-19 has restricted flights for more than 18 months, placing huge financial constraints on Heathrow and airlines like its biggest user, British Airways, and placing airport charges at the center of a bitter row.

Airlines on Tuesday criticized initial proposals by the UK’s Civil Aviation Authority (CAA) that Heathrow be allowed to charge up to 50% more per passenger over the period 2022-2027.

Heathrow had wanted to almost double the charges at the high end of its request.

Airlines UK, the country’s industry body, said it would oppose CAA’s proposals “in the strongest terms.”

“It is Heathrow shareholders and not our customers who should foot the bill,” the group said in a statement.

Heathrow wants to be able to charge more to help recoup the $ 4 billion pandemic losses, but airlines, which have also lost billions, don’t want to have to increase ticket prices to cover higher airport fees while as they try to stimulate demand.

British Airways, owned by IAG, and British competitor Virgin Atlantic, say Heathrow is already the most expensive airport in the world and they would oppose the proposals in upcoming consultations with the regulator.

“The disproportionate increase compared to other European hubs will further undermine its competitiveness (Heathrow) and UK consumers will lose out,” said IAG boss Luis Gallego.

The CAA said its proposals, which will be finalized next year, strike the right balance between protecting consumers and allowing the airport to continue investing.

Heathrow is owned by investors such as the Spanish Ferrovial, the Qatar Investment Authority and China Investment Corp.

Responding to the proposals, Heathrow said the regulator should guarantee a “fair return” for its investors.

“The regulations are not designed to protect airlines from legitimate cost increases or the impacts of a decrease in the number of people traveling,” said an airport spokesperson.

According to the CAA’s proposals, Heathrow could increase its per passenger fee to between 24.50 pounds and 34.40 pounds ($ 33.76 to $ 47.41). Heathrow had called for the cap to be set at 32 to 43 pounds. In 2020, the load was 22 pounds.

There would be no further adjustment to Heathrow’s regulatory asset base, which Heathrow had requested, the CAA said, outlining plans for the introduction of a new risk-sharing mechanism to prevent the airport or the consumer to bear all the risks of future uncertainty.

($ 1 = € 0.8587)

($ 1 = 0.7256 pounds)

(Reporting by Sarah Young; editing by Kate Holton, Jason Neely and Bernadette Baum)


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