Heathrow Airport, the largest airport in Britain, has reported a £139 million loss for the first half of 2023, despite a significant increase in passenger numbers. This comes as a surprise, as the airport was expecting to return to profitability following the easing of travel restrictions.
The loss is attributed to a ruling by the Civil Aviation Authority (CAA), which has capped the amount that Heathrow can charge airlines for each passenger they carry. Currently, the airport charges an average maximum of £31.57 per customer, but this is set to be reduced to £25.43 in 2024. The airport is appealing to the Competition and Market Authority to overturn this decision.
Despite the financial setback, Heathrow saw a strong rebound in passenger traffic, with 37.1 million people passing through its premises in the first half of the year. This represents a 42.1% increase compared to the same period last year, and is only 4% below pre-pandemic levels. All markets experienced a boost, with North America seeing a 50% increase in passengers, Europe-bound customers growing by nearly a third, and trips to the Asia-Pacific region more than doubling.
This resurgence in travel helped boost Heathrow’s turnover to £1.74 billion, a 36.1% increase. However, the removal of duty-free shopping has led to a decline in average retail revenue per passenger. The UK Government’s decision to abolish VAT-free shopping for overseas visitors in 2021 has been blamed for driving tourists to other European destinations.
In October, Heathrow’s chief executive, John Holland-Kaye, will be stepping down after nine years in charge. He will be replaced by Thomas Woldbye, the CEO of Copenhagen Airport. Before his departure, Holland-Kaye is expecting a busy summer season, although he warns that cost-of-living pressures may impact second-half demand.
Despite rising prices in many tourist destinations, Britons and Europeans are still eager to take overseas summer holidays, often opting for more affordable locations like Turkey. To cope with the increase in demand, Heathrow has increased staffing to avoid the delays and cancellations experienced last year.
Heathrow’s financial struggles highlight the ongoing challenges faced by the aviation industry as it attempts to recover from the pandemic. While passenger numbers are increasing, regulatory decisions and cost pressures continue to impact profitability. The airport’s appeal to the Competition and Market Authority will determine its ability to charge airlines and potentially influence its future financial performance.