Heathrow boss John Holland-Kaye accuses airlines of setting artificially high prices

John Holland-Kaye - Yui Mok / PA

John Holland-Kaye – Yui Mok /PA

The Heathrow boss has accused airlines of keeping fares artificially high this summer to boost profits, as a long-running war of words between the airport and airlines continues.

John Holland-Kaye said carriers such as British Airways and Virgin Atlantic had capitalized on pent-up demand for overseas travel after two summers of Covid restrictions.

When asked if carriers have kept fares artificially high, he replied, “Completely. Airlines increased their prices over the summer.

Mr Holland-Kaye’s comments came as Heathrow confirmed a cap on the number of passengers passing through the airport could be reinstated this Christmas ‘if necessary’.

Heathrow’s decision to impose a 100,000 passenger-per-day cap on airlines this summer has infuriated airlines. The cap was designed to avoid a repeat of the travel chaos that had blighted air travel after the easing of Covid restrictions in the spring.

The Telegraph first revealed earlier this month that Heathrow was in talks with carriers to impose an ad hoc cap during peak periods this Christmas.

The revelations prompted Sir Tim Clark, the chairman of Emirates, to ask Mr Holland-Kaye to resign.

The Heathrow chief said the cap was just a ‘safety net if there was a risk of demand on peak days’ this Christmas and he ruled out it being needed next Easter.

Passenger numbers hit 18 million during the summer months, making Heathrow Europe’s busiest airport for the first time since the pandemic began. The airport said it now expects to handle between 60 and 62 million passengers this year, having forecast earlier this year that only 45 million people would pass through its terminals in 2022.

Heathrow Airport - Mike Hewitt/Getty Images Europe

Heathrow Airport – Mike Hewitt/Getty Images Europe

The forecast is in the center of the row with the airlines. Carriers say airport managers are understating passenger numbers in a bid to convince regulators to raise airport charges per passenger.

An airline source said: ‘This is to persuade Heathrow’s Civil Aviation Authority (CAA) that there will not be a strong rebound in passenger numbers between 2022 and 2026, and therefore , the CAA should use a low passenger forecast which will result in a higher load. per passenger.

Mr. Holland-Kaye denied those allegations. “That’s not the case at all,” he said. “It took us years to reach 81 million passengers in 2019. The circumstances at the time were a booming economy, maximum globalization, a very peaceful world and low interest rates. It was also good as possible. I don’t think any of us expect the same circumstances to occur in the next couple of years.

“It’s just being realistic to say that we’re not going to have those boom times again next year, or probably the year after that. That’s why 2025 or 2026 is more likely.”

He said airlines should look at their own pricing policies and the impact they have had on demand before blaming the airport.

He said, “I wish I was wrong. I would like us to return to a higher level of demand more quickly. Much depends on the airlines and their pricing policies – whether they decide to fill seats or maximize profits, [which is] what they tend to focus on at Heathrow, given how profitable the routes are.

A recent analysis by Skyscanner revealed that airfares are currently 25-30% more expensive than before the pandemic.

Mr Holland-Kaye continued: “If you look at airline strategies, which are perfectly legitimate, low-cost carriers tend to try to fill every seat and they set their prices accordingly. Network operators [such as British Airways] do not do that. They want to give flexibility to passengers. They run their schedule for connections. They tend to have much lower load factors. So at Heathrow typical load factors would be 75-80pc. It’s a conscious part of the airline’s strategy.

A Virgin Atlantic spokesperson dismissed that characterization and said: ‘Heathrow is once again Europe’s busiest airport, beating its own forecast, but it continues to play down the strength of the return in demand for passengers to pursue its program of obtaining higher royalties.

“Airlines have repeatedly warned of the need to use accurate forecasts to inform airport resources. By maintaining a deliberately pessimistic view, customers risk a poorer airport experience. The airport has artificially constrained the offer in high summer season to counter a lack of adequate preparation and win an economic argument that would double passenger fares, while it is the most expensive airport in the world.

“We urge Heathrow to avoid passenger capacity limits during the peak Christmas travel period which would ruin customer plans.”

Mr Holland-Kaye said hiring by the airport and the companies working there was now going well, supporting his belief that the passenger cap would not be in contention beyond this Christmas.

“We are on the journey of only around 50,000 people through the airport this time last year [to] back to full capacity, which is around 75,000. We’ve come a long way to close the gap,” he said.

“As summer approached, we were about halfway there. We are currently about 10 to 15 pc away from being at full capacity. So we are making good progress. But I just want to make sure that if you’re traveling as a passenger, you don’t have to worry about whether you’re going to have a good trip or not. And that’s what the cap did over the summer. And if we need a mechanism equivalent to that, it will be necessary only exceptionally.

“What I’m doing is encouraging airport businesses to say that despite the economic headwinds we’re facing, we need to keep growing, rather than wait and see what demand comes up.

“We don’t want to refuse any company. I hope this is the last time we have to talk about it [the cap].”

British Airways has been approached for comment.

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