UK regulator limits Heathrow expansion costs passed on to passengers

08:15

By: Sahili Aya

UK regulator limits Heathrow expansion costs passed on to passengers

The UK Civil Aviation Authority (CAA) has set limits on how much Heathrow Airport can recover from passengers to fund the early stages of its long-planned expansion, seeking to balance infrastructure investment with affordability for airlines and travelers.

Under the regulator's proposal, Heathrow will be allowed to increase airport charges by approximately 15 pence per passenger in 2028 to cover the initial planning and design costs associated with expanding Britain's busiest airport.

The decision forms part of the financial framework supporting the airport's proposed £33 billion ($43.9 billion) expansion project, which includes the construction of a new runway west of London. The UK government aims to have the runway operational by 2035, arguing that additional capacity is needed as Heathrow continues to operate at full capacity.

The expansion will be financed through private investment rather than public funding. To facilitate the project, the CAA is establishing rules governing how Heathrow can recover eligible development costs through airport fees.

According to the regulator, Heathrow will be permitted to recover spending incurred during 2025 and 2026, subject to a funding cap of £320 million. The airport's recovery of these costs is expected to result in a modest increase in passenger charges, with the maximum fee rising by about 15 pence in 2028 and potentially reaching around 30 pence per passenger in subsequent years.

The CAA also confirmed that a competing runway proposal, which was not selected by the government, will be allowed to recover approximately £4.1 million in eligible development costs.

The announcement comes amid concerns from airlines over the cost of operating at Heathrow. International Airlines Group (IAG), the parent company of British Airways, along with other carriers, has argued that Heathrow is already among the world's most expensive airports and has urged regulators to prevent further increases in airport charges.

The CAA said it will launch a further consultation later this year to determine how costs incurred from 2027 onward should be treated as the expansion project progresses.

The latest decision represents an early step in one of the United Kingdom's largest infrastructure projects, with regulators attempting to support airport growth while limiting the financial burden placed on airlines and passengers.