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Airport charges and passenger volumes

The level of airport charges that Heathrow levies each year is in accordance to the CAA’s pricing formula, which is part of the CAA’s decision for the Q6 period of Economic Regulation at Heathrow from April 2014. The formula set by the CAA determines the level Heathrow cannot exceed in charging its airline on a per passenger basis (passenger only), which is also referred to as the “maximum allowable yield”. The maximum allowable yield is set following a period of formal consultation with the Heathrow airline community.

Heathrow Airport is also subject to the Airport Charges Regulation 2011, which was transposed into UK law from a European Directive for its member states. This regulation aims to ensure a common framework for regulating airport charges, which includes consultation and transparency of information when setting airport charges.

The CAA formula for the maximum allowable yield is calculated by taking the following into account;

Retail Price Index = April RPI is used
Value of X = Fixed at -1.5%
Cumulative Development factor = Adjusts the maximum allowable yield to reflect the cumulative changes associated with development capex projects
Capital triggers = Reduction in the maximum allowable yield when the airport has not achieved particular capital investment project milestones
Bonus = Airport can earn a bonus if it exceeds targets for certain service quality measures
Correction factor = Corrects for any under/over recovery of actual airport
charges against the maximum allowable yield
Business rates factor = Adjusts the maximum allowable yield in 2018 to reflect any change in the actual revaluation of business rates undertaken by the Valuation Office Agency 2017 compared to the regulatory allowance

The maximum allowable yield is then converted to an estimated total revenue that Heathrow can recover. This is estimated by using a forecast for total passengers (i.e. maximum allowable yield multiplied by total passenger numbers).

The total revenue from airport charges is then recovered from Heathrow’s structure of airport charges.

The structure of airport charges has been subject to formal consultation with the Heathrow airline community and has resulted in the total airport charges revenue being recovered through three categories; Landing Charges, Departing Passenger Charges and Aircraft Parking Charges. The three categories (excluding ANS) represent 21%, 75% and 4% of the total airport charges revenue respectively.

The Conditions of Use document details the term and conditions that apply to users for using Heathrow’s facilities and services.

Further details on tariffs for airport charges, previous consultations and Conditions of Use can be found at www.heathrowairport.com/cou

Airport charges are levied on a per passenger basis, for more information about passengers, please see Heathrow Traffic Statistics.

 

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