Heathrow airport Funding

[ACDC]

There was an article in the times about Heathrow and the current way it is funded is very inefficient ( more profits for owner). The article was behind a paywall so couldn't read all of it, but BA and Virgin wanted to make changes to make it fairer. Ultimately who is this fairer for... The passengers? I think airport duty at LHR is expensive, however saying that Heathrow is a premium airport, and is probably the flagship airport of the UK. You can see the tax component when your airline fare is broken down . How much does net zero tax play into this?

 

[Thirteen]

LHR is a business so it's going to be in the interest of the shareholders rather than the passengers.

 

[The exile]

LHR is a business so it's going to be in the interest of the shareholders rather than the passengers.

Indeed - “more profits for the shareholders” might not necessarily be equitable but it can hardly be described as “inefficient”.

 

[Butts]

I wonder how things would be if it was still BAA running the show ?

 

[zero]

There was an article in the times about Heathrow and the current way it is funded is very inefficient ( more profits for owner). The article was behind a paywall so couldn't read all of it, but BA and Virgin wanted to make changes to make it fairer. Ultimately who is this fairer for... The passengers? I think airport duty at LHR is expensive, however saying that Heathrow is a premium airport, and is probably the flagship airport of the UK. You can see the tax component when your airline fare is broken down . How much does net zero tax play into this?

This may be the article you are talking about: https://archive.md/zht5Z

Virgin Atlantic and British Airways owner IAG are pushing to seize greater control of Heathrow airport ahead of the building of the third runway.
The two airlines have set aside a long-running rivalry to demand once-in-a-generation regulatory reform that could give them a vote on major spending at the airport and allow third parties to operate its terminal buildings.
Heathrow has been a regulated monopoly since 1987, meaning that it operates on a similar economic framework to a water company. Billions of pounds in annual costs can be recouped from airlines through landing charges that are then passed onto passengers.
Weiss said: “This has yielded a very simple thing: the most expensive in the world.”
Gallego said that Heathrow’s regulatory model was “upside down”.
He said: “We think that Heathrow needs to work within a budget. The projects that Heathrow has done in the last few years, they have been delayed — because they don’t have any incentive to do it on time.”
Weiss said: “What is the remedy? Let’s give the Civil Aviation Authority (CAA) and the airlines greater power to determine the investments made by the airport.” He added: “It can be done through law, it can be done through committees, it can be done through greater powers and co-operation between the CAA and the airlines and the airport.”
And Weiss, who recently oversaw Virgin Atlantic’s return to profitability, reckons there is a very simple solution to Heathrow’s monopolistic position as the UK’s only hub airport. “It’s called competition,” he said.

I am not sure what you are referring to by 'net zero tax'.

The UK tax on flying is Air Passenger Duty, which depends on the destination country as well as the cabin of travel. APD is the same for all UK airports, except that Scottish Highland and Northern Ireland airports have some exemptions. APD is levied on airlines and does not necessarily need to be passed on to the passenger, as seen when low-cost airlines have (in the past at least) charged less for an entire ticket than the APD due, or in many BA redemption tickets where they absorb the tax and charge you a "fee".

Here BA and Virgin are complaining about the charges that are levied by Heathrow privately. Fees that are meant to recoup the cost of security screening are directly passed on to passengers as you see on your ticket breakdown, while landing/parking charges are levied on airlines and just bundled up into the total fare charged.

While these charges are regulated by the Civil Aviation Authority, it is in the interests of Heathrow and its shareholders to extract maximum profit from customers by setting them as high as they can. The airport currently has no incentive to reduce costs, particularly because of its monopolistic and premium position, and at present this is allowed by the legal/regulatory framework.

The airlines contend that they, and/or other organisations, should be allowed to operate parts of the airport or at least have more say in how it is run.

If any cost savings found lead to Heathrow dropping its charges, one can expect airlines to raise their fares by the same amount.

 

[ACDC]

Does anyon

This may be the article you are talking about: https://archive.md/zht5Z



I am not sure what you are referring to by 'net zero tax'.

The UK tax on flying is Air Passenger Duty, which depends on the destination country as well as the cabin of travel. APD is the same for all UK airports, except that Scottish Highland and Northern Ireland airports have some exemptions. APD is levied on airlines and does not necessarily need to be passed on to the passenger, as seen when low-cost airlines have (in the past at least) charged less for an entire ticket than the APD due, or in many BA redemption tickets where they absorb the tax and charge you a "fee".

Here BA and Virgin are complaining about the charges that are levied by Heathrow privately. Fees that are meant to recoup the cost of security screening are directly passed on to passengers as you see on your ticket breakdown, while landing/parking charges are levied on airlines and just bundled up into the total fare charged.

While these charges are regulated by the Civil Aviation Authority, it is in the interests of Heathrow and its shareholders to extract maximum profit from customers by setting them as high as they can. The airport currently has no incentive to reduce costs, particularly because of its monopolistic and premium position, and at present this is allowed by the legal/regulatory framework.

The airlines contend that they, and/or other organisations, should be allowed to operate parts of the airport or at least have more say in how it is run.

If any cost savings found lead to Heathrow dropping its charges, one can expect airlines to raise their fares by the same amount.

Wow thanks for that reply. Very interesting. Thanks for the article as well.

 

[RailWonderer]

This may be the article you are talking about: https://archive.md/zht5Z



I am not sure what you are referring to by 'net zero tax'.

The UK tax on flying is Air Passenger Duty, which depends on the destination country as well as the cabin of travel. APD is the same for all UK airports, except that Scottish Highland and Northern Ireland airports have some exemptions. APD is levied on airlines and does not necessarily need to be passed on to the passenger, as seen when low-cost airlines have (in the past at least) charged less for an entire ticket than the APD due, or in many BA redemption tickets where they absorb the tax and charge you a "fee".

Here BA and Virgin are complaining about the charges that are levied by Heathrow privately. Fees that are meant to recoup the cost of security screening are directly passed on to passengers as you see on your ticket breakdown, while landing/parking charges are levied on airlines and just bundled up into the total fare charged.

While these charges are regulated by the Civil Aviation Authority, it is in the interests of Heathrow and its shareholders to extract maximum profit from customers by setting them as high as they can. The airport currently has no incentive to reduce costs, particularly because of its monopolistic and premium position, and at present this is allowed by the legal/regulatory framework.

The airlines contend that they, and/or other organisations, should be allowed to operate parts of the airport or at least have more say in how it is run.

If any cost savings found lead to Heathrow dropping its charges, one can expect airlines to raise their fares by the same amount.

Isn't it the shortage of capacity at Heathrow that is keeping Heathrow Airport's charges to airlines high?

 

[zero]

Isn't it the shortage of capacity at Heathrow that is keeping Heathrow Airport's charges to airlines high?

That certainly contributes, but some would say the main factor is the greed of Heathrow's owners and management.

 

[ACDC]

That certainly contributes, but some would say the main factor is the greed of Heathrow's owners and management.

Would a third runway increase the costs for passengers. What about capacity at Northolt or Farnborough and high speed link? I'm sure Farnborough has had A380s take off, however it was empty and the distance that V1 was reached would be less than normal?

 

[RailWonderer]

That certainly contributes, but some would say the main factor is the greed of Heathrow's owners and management.

Mismanagement more like.

Heathrow warned it cannot afford a third runway

Planned expansion to increase passenger charges and add to ballooning debt, damning report claims

www.telegraph.co.uk

In a damning new report, the ratings agency S&P Global said the planned expansion will potentially imperil the airport by significantly increasing its borrowings, which are are already as high as nearly £20bn.

How does one of the world's busiest airports manage to saddle themselves with such large debt, is it managed by chimpanzees? They also charge the world's highest APD. Gatwick should be expanded to stand up to Heathrow like Narita does to Haneda - two equal flagship airports with modernity, style, first class amenities and capacity to fit and soon Heathrow would have to cut its APD. It would also encourage BA to move more flights there.

 

[Watershed]

Mismanagement more like.

Heathrow warned it cannot afford a third runway

Planned expansion to increase passenger charges and add to ballooning debt, damning report claims

www.telegraph.co.uk

How does one of the world's busiest airports manage to saddle themselves with such large debt, is it managed by chimpanzees? They also charge the world's highest APD. Gatwick should be expanded to stand up to Heathrow like Narita does to Haneda - two equal flagship airports with modernity, style, first class amenities and capacity to fit and soon Heathrow would have to cut its APD. It would also encourage BA to move more flights there.

Air Passenger Duty is levied by the government. It's the Passenger Service Charge that is levied by airports. Both are amongst the highest in the world at Heathrow.

Heathrow is closer to central London, has proper airside transit facilities, and will therefore always be more popular than Gatwick.

 

[Tetchytyke]

How does one of the world's busiest airports manage to saddle themselves with such large debt, is it managed by chimpanzees?

They take out debt to fund dividends to shareholders. It’s a feature, not a bug.

As for Virgin and IAG, I think they have a point. The fees that Heathrow can charge are set based on the capital base of the airport. That capital base will go up to fund a third runway. As the two largest airlines at Heathrow, effectively IAG and Virgin will be the ones paying for it. But they probably won’t get the benefit of the extra capacity afforded by the runway- those slots will likely be given to their competitors. Paying to let your competitors on to your patch? I can see why IAG are underwhelmed.

== Doublepost prevention - post automatically merged: 10 May 2025 ==

Heathrow is closer to central London, has proper airside transit facilities, and will therefore always be more popular than Gatwick

Depends what you mean by closer and depends what you mean by central London. It’s about 30 minutes on the Gatwick Express to Victoria. That’s slightly slower than the HEx to Paddington but not so very different to the 35 minutes Crossrail takes.

Gatwick needs better facilities, but for those to be worth it it needs the second runway.

 

[weeklycommuter]

Mismanagement more like.

Heathrow warned it cannot afford a third runway

Planned expansion to increase passenger charges and add to ballooning debt, damning report claims

www.telegraph.co.uk

How does one of the world's busiest airports manage to saddle themselves with such large debt, is it managed by chimpanzees? They also charge the world's highest APD. Gatwick should be expanded to stand up to Heathrow like Narita does to Haneda - two equal flagship airports with modernity, style, first class amenities and capacity to fit and soon Heathrow would have to cut its APD. It would also encourage BA to move more flights there.

They take out debt to fund dividends to shareholders. It’s a feature, not a bug.

This is why a third runway will never be built at Heathrow Airport. The privatisation of Heathrow Airport ensured that it will never have a third runway.

 

[Peter Mugridge]

Would a third runway increase the costs for passengers. What about capacity at Northolt or Farnborough and high speed link? I'm sure Farnborough has had A380s take off, however it was empty and the distance that V1 was reached would be less than normal?

Yes, A380s have appeared at the Farnborough Air Show in the past.

Somewhere in the aviation videos thread I have a YouTube showing one on the ground there.

 

[camflyer]

That certainly contributes, but some would say the main factor is the greed of Heathrow's owners and management.

I don't see any prospect of the government nationalising Heathrow and spending tens on billions of taxpayers money on improving facilities.

 

[zero]

I don't see any prospect of the government nationalising Heathrow and spending tens on billions of taxpayers money on improving facilities.

Who said anything about nationalisation? This is about IAG and Virgin wanting to spend money on improving things

 

[Snow1964]

DfT has issued a letter to those looking at expanding facilities at Heathrow, it is bit long but includes sections on asking for funding proposals

The government’s clear objective is to enable the delivery of an operational third runway by 2035, with applications for planning consent coming forward in time to enable decisions to be made this Parliament. The expansion scheme should seek to maximise cross-economy growth opportunities and value for money. Scheme costs should be minimised for passengers, customers, and government by financing through private funding, including any surface transport costs. All proposals should demonstrate how they are compatible with the UK’s legal, environmental and climate obligations, including in relation to local noise and air pollution.

Letter to potential promoters of Heathrow expansion

www.gov.uk

 

[Cloud Strife]

Actually, all things considered, it's not a terrible idea for the airlines to operate their own terminals at Heathrow. IAG in particular could easily finance and operate their own terminal, and it would allow for some internal competition at Heathrow too. I remember the discussions at Stansted and Dublin, and Michael O'Leary was always adamant that Ryanair could do a much better and cheaper job of building a new pier than the airport owners.

I wonder how things would be if it was still BAA running the show ?

Hard to say. BAA were sometimes very progressive in their thinking, as for instance, they were willing to build Satellite 4 at Stansted, and they were wise enough to build Satellite 3 before the low cost revolution really took off. The problem was that they were also quite guilty of neglecting the smaller airports in their portfolio, especially Aberdeen and Southampton. So, difficult to say whether BAA would have been better, although they probably would have been forced to allow the airlines to take over the operation of the terminals if it wasn't for BAA being broken up.

But at the end of the day, Heathrow is still incredibly busy and has a very strong position as a transit airport. No other UK airport has transit infrastructure like Heathrow, and in some cases like Stansted, transit is actively discouraged by the airport.

 

[HSTEd]

How does one of the world's busiest airports manage to saddle themselves with such large debt, is it managed by chimpanzees?

Well, if we were being hyper cynical, they might have calculated that they are "too big to fail" and that their debts are functionally underwritten by the state.

The airport industry does seem to be shot through with moral hazard.

 

[Acfb]

It seems utterly ridiculous there are is no heavy rail link to the SWML at Heathrow.

I'm not necessarily opposed to the third runway but I'm concerned it's a money pit.

 

[Tetchytyke]

Actually, all things considered, it's not a terrible idea for the airlines to operate their own terminals at Heathrow.

Terminal 5 is largely operated by British Airways already; BA directly employ the ground handling and most other services in the terminal building. But even T5 isn't big enough to handle all of IAG's operations, with BA also in T3, Aer Lingus in T2, and Qatar in T4.

It seems utterly ridiculous there are is no heavy rail link to the SWML at Heathrow.

Nowhere for the trains to go once they reach Network Rail metal, but there is passive provision in T5 to build one.

 

[Class 170101]

From BBC News last week https://www.bbc.co.uk/news/articles/cj6yz77nlw4o

Heathrow Airport has revealed details of its plan to expand and modernise the airport at a cost of £49bn.

Thomas Woldbye, CEO of Heathrow Airport, said expansion was "urgent" as the airport was currently working at capacity, "to the detriment of trade and connectivity". The work would be funded by private finance.

The government has backed plans for a third runway, with Chancellor Rachel Reeves saying it would "make Britain the world's best connected place to do business".

However, the plans face opposition from environmental groups, politicians, and locals. London's mayor Sir Sadiq Khan said it would have a "severe impact on noise, air pollution and meeting our climate change targets"

== Doublepost prevention - post automatically merged: 3 Aug 2025 ==

It seems utterly ridiculous there are is no heavy rail link to the SWML at Heathrow.

I'm not necessarily opposed to the third runway but I'm concerned it's a money pit.

Nowhere for the trains to go once they reach Network Rail metal, but there is passive provision in T5 to build one.

Are we sure about that? I thought SWR weren't running full service compared with pre covid currently. I'd extend the current Heathrow Express paths to Southampton / Bournemouth (2tph) and Portsmouth (2tph).

Elizabeth Line services at T5 I'd extend back to the GWR.