Heathrow boss John Holland-Kaye accuses airlines of setting prices artificially high
The boss of Heathrow 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 capitalised on pent-up demand to travel abroad after two summers of Covid restrictions.
Asked if carriers had kept fares artificially high, he said: “Completely. Airlines have put their prices up over the summer.”
Mr Holland-Kaye’s comments came as Heathrow confirmed that a cap on passenger numbers passing through the airport may be reinstated this Christmas “if needed”.
Heathrow's decision to impose a 100,000-passenger-a-day cap on airlines this summer infuriated airlines. The cap was designed to avoid a repeat of travel chaos that had blighted air travel after Covid restrictions were eased in the spring.
The Telegraph first disclosed 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 president of Emirates, to call for Mr Holland-Kaye to resign.
The Heathrow chief said the cap was only a “safety net if there is 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 the busiest airport in Europe for the first time since the start of the pandemic. The airport said it now expects to welcome between 60 million and 62 million passengers this year, having earlier this year projected that just 45 million people would flow through its terminals in 2022.
The forecast is at the centre of the row with airlines. Carriers say airport chiefs are underestimating passenger numbers in an attempt to convince regulators to increase per passenger airport charges.
One airline source said: “It’s all about Heathrow persuading the Civil Aviation Authority (CAA) that there will not be a strong rebound in passenger numbers between 2022-2026, and therefore the CAA should use a low passenger forecast that will drive a higher charge per passenger.”
Mr Holland-Kaye rejected such allegations. “That’s not the case at all,” he said. “It took us years to build up to 81 million passengers in 2019. Circumstances at the time were a booming economy, peak globalisation, very peaceful world and low interest rates. That was as good as it gets. I don’t think any of us expect the same circumstances to occur in the next couple of years.
“It is just being realistic to say we are not going to get back those boom times next year, or probably the year after that. Which is why 2025 or 2026 is more likely."
He said airlines should look at their own fare policies and the impact they have had on demand before blaming the airport.
He said: “I’d love to be wrong. I'd love for us to get back to a higher level of demand quicker. A lot of that depends on the airlines and their pricing policies - as to whether they decide to fill seats or maximise their profits, [which is] what they tend to focus on at Heathrow, given how lucrative the routes can be.”
Recent analysis by Skyscanner found that airfares are currently 25pc-30pc 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 and fill every seat and they price accordingly. Network carriers [such as British Airways] don’t do that. They want to give flexibility for 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. That’s a conscious part of the airline strategy.
A spokesman for Virgin Atlantic rejected this characterisation and said: “Heathrow is once again Europe’s busiest airport, outperforming its own forecasts, yet it continues to downplay the strength of returning passenger demand to further its agenda of securing higher charges.
“Airlines have repeatedly warned of the need to use accurate forecasts to inform airport resourcing. By maintaining a deliberately pessimistic outlook, customers risk a poorer airport experience. The airport artificially constrained supply in peak summer season to counter a lack of adequate preparation and to win an economic argument that would double passenger charges, despite it being the world’s most expensive airport.
“We urge Heathrow to avoid passenger capacity limits during the peak Christmas travel window that would ruin customer plans."
Mr Holland-Kaye said hiring by the airport and companies that work 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 at the airport this time last year [to] getting back to full capacity, which is about 75,000. We’ve come a long way to filling the gap,” he said.
“Coming into the summer, we were about halfway there. We are currently about 10pc-15pc off being at full capacity. So we are making good headway. But I just want to make sure that if you are travelling as a passenger, you don’t need to worry about whether you are going to have a smooth journey or not. And that’s what the cap has done over the summer. And if we need any kind of mechanism that is equivalent to that, it will only be needed exceptionally.
“What I am doing is encouraging companies across the airport that despite the economic headwinds that we face, we need to keep on scaling up, rather than waiting and seeing what demand comes through.
“We don’t want to turn away any business. I am hoping this is the last time we need to talk about it [the cap].”
British Airways was approached for comment.