Heathrow Airport Adds New Tax Due To Coronavirus

Heathrow Airport Adds New Tax Due To Coronavirus

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The airport with the highest passenger taxes in the world has just added yet another tax.

Heathrow Airport adds £8.90 “exceptional regulatory charge”

Within the past week, Heathrow Airport has added a new £8.90 (~$12.20) tax to all tickets, billed as a “United Kingdom Exceptional Regulatory Charge.” The same tax applies regardless of the cabin you’re traveling in, and regardless of the distance you fly, as long as you’re departing Heathrow.

This is in addition to all the other taxes you’ll find on tickets from Heathrow (some of which are airport specific, and some of which apply to all UK airports), including the air passenger duty, passenger service charge, etc.

For a one-way economy ticket from London to Dusseldorf this is pretty significant. On a $110 ticket, the taxes now total about $54, so that’s about half of the total ticket cost.

For a one-way business class ticket from London to New York that costs $1,621, you’re now paying around $345 in taxes (the carrier imposed surcharge is charged directly by the airline, so doesn’t count as a tax).

What is this new Heathrow Airport tax?

As you’d expect, traffic at Heathrow Airport is way down due to the pandemic, and this is causing the airport to lose money. Heathrow Airport has certain features that are fixed costs (baggage claim, an employee car park, etc.), and it’s the responsibility of airlines to pay for these costs. Airlines are being presented with a bigger bill than usual for these services, and the airport claims that the airlines have asked this tax to simply be added to ticket prices.

So now these costs are being passed on directly from airlines to consumers. The tax could be adjusted in the future, and the goal is for it to be eliminated by December 31, 2021.

As a Heathrow spokesperson explains:

“Heathrow provides key airport services like the baggage system, colleague car parks, airline check-in desks and utilities for our partners to use. The fee to use these services is calculated purely to cover the cost of providing them – Heathrow makes absolutely zero profit from these services. To ensure this remains the case, the fee is closely monitored by the CAA, as well as being scrutinised and agreed with airport users annually – as was the case with this year’s charge. The cost per passenger to cover these services naturally fluctuates depending on the number of passengers using the airport.”

Heathrow Airport has added an “exceptional regulatory charge”

Kind of unreasonable, kind of not…

When I first heard about this I was going to blast Heathrow Airport for this new tax. Generally it doesn’t seem smart to me to increase taxes, and thereby reduce demand, at a time when demand is at an all time low. This seems backwards and counterproductive. However, I kind of see both sides here.

On the one hand:

  • Tickets departing Heathrow already have the highest taxes of any airport in the world
  • Adding more taxes to ticket costs will only decrease demand further, which is the opposite of what the airport needs
  • Heathrow Airport made record profits in 2019, so it’s a bit ridiculous that the airport is now trying to add even more taxes for consumers

At the same time:

  • While Heathrow is privately owned, perhaps it’s not that bad to discourage discretionary travel right now, even if it works against the interests of the airport owners
  • It sounds like airlines are contractually on the hook for these fees, so Heathrow can’t be blamed for trying to recover them; if airlines ask Heathrow to bill consumers directly, then it sounds like it’s airlines we should be frustrated with?

Airlines have allegedly asked the airport to pass on this fee to consumers

Bottom line

Heathrow Airport has added a new passenger tax that is essentially intended to recover some coronavirus related losses. An additional ~$12 is being added to the cost of every ticket out of Heathrow, in addition to the already outrageously high taxes.

There is a bit of nuance, though — these are costs that airlines are contractually on the hook for, and airlines have asked the airport to just add a tax directly to ticket costs, so that’s where we’re at.

Making tickets out of Heathrow even more expensive won’t help with Heathrow’s goal of improving passenger numbers.

What do you make of Heathrow’s new “exceptional regulatory charge” on tickets?

(Tip of the hat to Head for Points)

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  1. Prat P

    One more reason for me to add to my passion to avoid Heathrow at ALL COSTS ! (pun intended)

  2. john

    at Andy 11235 most major pizza companies/ chains now charge 3 or 4 dollars as an extra fee to bring you your pizza.(((((((((((( so a 10 dollar delivered pizza from pizza hut costs about 20 after tax tips and fees.

  3. Edgar

    As long as people will continue to fly from Heathrow then this foul practice will never cease. There's no point tiring yourself on this blog

  4. dee

    Don't they have enough airport/airlines taxed anyway to fly into UK??? Even points tix cost over $600 in taxes crazy

  5. M Jones

    Someone should report Heathrow to Trading Standards for "deliberate false information". These profit generating charges are not Taxes as they claim and as such this is misrepresentation. Any other Business would be charged as fraud for trying such a trick.

  6. Andy 11235

    I think this needs to be put in perspective of what any other business would or could do. For example, imagine a world in which a supplier raises delivery charges for a chain of pizza restaurants. This is normally an expense that is contractually owed by the restaurant. However, the restaurants are experiencing difficulties, so the restaurants ask that the supplier bills customers directly. There will now be a special fee added onto the price...

    I think this needs to be put in perspective of what any other business would or could do. For example, imagine a world in which a supplier raises delivery charges for a chain of pizza restaurants. This is normally an expense that is contractually owed by the restaurant. However, the restaurants are experiencing difficulties, so the restaurants ask that the supplier bills customers directly. There will now be a special fee added onto the price of each pizza. Just because LHR's action has the imprimatur of the CAA doesn't make it any less ridiculous.

    In reality, I suspect given the restrictions on travel, it is likely that airlines anticipate only critical business travel. Such travel is often governed by contracts that fix prices in some fashion. This fee allows the airlines to pass on the cost to these corporate clients.

  7. KK13

    Yep, try to steal from consumer in every possible way for all the lost revenue due to Brexit in the name of Corona epidemic and/or baggage handling, check-in facilities etc.! Pray tell thee why such fees were/ are not being imposed by other airports in Europe? *eyeroll*

    Reason no. eleventy eleven why I don't fly through UK/ Heathrow or even BA. I have seen some of these assurance on "temporary" fees since late 90s. You're not getting my money, nuh uh!

  8. Andreas

    For travellers, it’s the total price that’s relevant. This consists of the actual base fare, airline fees, airport fees and government taxes. The latter two are costs imposed by third parties, and it’s not given an airline can pass any increase on to their customers. Assume these add up to £50. One airline can charge £1 as a base fare and £49 in fees, while another has a base fare of £50 and no fees....

    For travellers, it’s the total price that’s relevant. This consists of the actual base fare, airline fees, airport fees and government taxes. The latter two are costs imposed by third parties, and it’s not given an airline can pass any increase on to their customers. Assume these add up to £50. One airline can charge £1 as a base fare and £49 in fees, while another has a base fare of £50 and no fees. Total price is the same for the customer.

    Now assume airport fees increase by £1, but nobody is willing to pay £101 to fly. In that case, the airline will have to give up £1 of revenue per ticket. However, if they’re willing to pay £100,50, the airline is able to pass on 50% of the increase. The real world is more complex of course, but this is Microeconomics 101.

  9. Robert J Fahr

    Vote with your pound or dollar if this matters to you.

  10. Speedbird

    This is going to be another "temporary" add on fee that will become permanent much like how airlines swore that charging for checked luggage was to help cover fuel costs, 15 years later, they've only increased those charges while fuel is cheap again.

  11. Lwy

    How about an article on UK removing VAT reclaims for foreign visitors.... this would be very significant for leisure travellers (when tourism eventually recovers), but not widely reported in the news.

  12. Larry R

    We purchased RT business class tickets SFO-LHR-SFO for October 2021. If in fact we take the trip, will be assessed the extra fees at the airport, or are tickets already purchased exempted?
    I personally like LHR but resent the super high extra fees on business class upgrades that they impose, which I do not see how they justify.

  13. dan

    Heathrow if you can handle the wall to wall shopping, isn't that bad. I've been to many Public airports that suck. Whenever they talk about expansion you have politicians screw things up and raise costs

  14. The Original Donna

    If LHR was a fantastic airport, the extra taxes wouldn’t be a deal breaker. However, for someone like myself who only transits LHR, it’s an awful experience with the T3/T5 transfer, security hassles, delays and wait times. I’ve been successful in avoiding it recently so I don’t have a dog in this fight but I sympathize with those who can’t avoid it.

  15. James Yardley

    Heathrow has not imposed a tax to recover the revenue lost due to COVID. The Civil Aviation Authority, in granting Heathrow a license, allows them to recover the cost of doing certain activities through the Other Regulated Charges mechanism. These are billed directly to the airlines to recover the cost of baggage handling, check-in facilities, passengers with reduced mobility etc. I used to sit on the Baggage Governance Group and Other Regulated Charges Group in...

    Heathrow has not imposed a tax to recover the revenue lost due to COVID. The Civil Aviation Authority, in granting Heathrow a license, allows them to recover the cost of doing certain activities through the Other Regulated Charges mechanism. These are billed directly to the airlines to recover the cost of baggage handling, check-in facilities, passengers with reduced mobility etc. I used to sit on the Baggage Governance Group and Other Regulated Charges Group in my time working at Heathrow airport. Heathrow are made accountable on all these charges and it is done in complete cooperation with the HEATHROW AOC LIMITED and the airlines that attended these groups.

    The charges are calculated based on forecasted numbers, so it is hardly surprising that during 2020, the revenue for these activities and thus the costs, was not met. People might not agree with the mechanism, but that is the prerogative of the CAA and how the license to operate Heathrow has been awarded.

    It is not a scandal.

    The full details of the new charge can be found in the General Notice.

  16. Mark

    Another reason to avoid LHR. Since I am Exec Platinum on AA, I often flew through LHR when headed to Europe and beyond, and LHR has always been an inconvenience with its size, security, lost luggage history (we've had luggage lost at LHR on several occasions) and delays, but with AA and other One World partners increasing nonstop flights from the US to many cities in Europe and beyond, it is becoming easier for me...

    Another reason to avoid LHR. Since I am Exec Platinum on AA, I often flew through LHR when headed to Europe and beyond, and LHR has always been an inconvenience with its size, security, lost luggage history (we've had luggage lost at LHR on several occasions) and delays, but with AA and other One World partners increasing nonstop flights from the US to many cities in Europe and beyond, it is becoming easier for me to avoid LHR completely. Although I sometimes enjoy stopping in the UK I would rather and will skip LRH all together whenever possible.

  17. Bill

    If Heathrow is privately owned and they were the ones who imposed the fee then how is this a tax? Doesn't seem like this was imposed by the government other than its monitored by the CAA. Seems like this is the cost of doing business for the airlines and the airlines are trying to pass it off to the consumers directly which is total garbage. If airlines want to raise their airfare to cover this...

    If Heathrow is privately owned and they were the ones who imposed the fee then how is this a tax? Doesn't seem like this was imposed by the government other than its monitored by the CAA. Seems like this is the cost of doing business for the airlines and the airlines are trying to pass it off to the consumers directly which is total garbage. If airlines want to raise their airfare to cover this then fine, but when passengers run to other airlines that don't pass the fee on to consumers don't cry about it.

  18. Zymm

    That statement from Heathrow is BS. Heathrow has been petitioning the CAA for months now for a fee increase related to the pandemic and the CAA hasn't publicly announced what they've decided to allow. It seems likely that's what this fee is, but it's nonsense to claim that it's solely related to fixed costs when capital expenditures play a huge role in calculating the per-passenger fees the airport is allowed to charge.

  19. Joe

    The tax may be higher but consider whether flying into a different airport is actually cheaper. Not just the ticket prices but transportation in/out of the airport. I don't like flying into heathrow not because of the taxes but because of crowds and congested air/delays. When I do fly into heathrow it's more so because of flight options and connecting into Europe.

  20. Jen Fan Tse

    Horrible airport!

    Once airports start these types of charges, they NEVER eliminate them! Shame on major carriers like BA/VS/AA/DL/UA for not pushing back on this- airlines roll over and allow this to happen.

  21. Jordan

    England is over in 3D, and the worst part is yet to come.

    Stay tuned!

  22. George N Romey

    It's not so much this "fee." It's the fact that for a $1K base fare taxes and fees add 60% to the price of a ticket. GB ain't the only place on Earth for tourism. I'd rather take some of that $600 and spend it on the actual trip.

  23. Tim Dunn

    Arguing about semantics of what the charge is doesn't change the fact that LHR is continuing to do all it can to ensure it will never return to being the premier business airport in Europe again. Nobody expected covid and everyone has to figure out how to survive. Throwing one more charge onto consumers is only going to make the return of demand to LHR much less likely.

  24. Ed

    This is is a fee not a tax. If you don’t like it fly into Gatwick.

  25. James S

    As quite a few others have said, this is what you get with the Thatcherite philosophy that everything must pay its own way, even essential infrastructure. It's why, pre-Covid, using Heathrow meant picking your way through a bazaar-like maze of shops and "exciting retail opportunities" in an effort to find your gate or even a place to sit down.

    The plan worked fine until the pandemic, but now those shops and restaurants can't prop...

    As quite a few others have said, this is what you get with the Thatcherite philosophy that everything must pay its own way, even essential infrastructure. It's why, pre-Covid, using Heathrow meant picking your way through a bazaar-like maze of shops and "exciting retail opportunities" in an effort to find your gate or even a place to sit down.

    The plan worked fine until the pandemic, but now those shops and restaurants can't prop up the repairs and maintenance that ACTUAL airport facilities require to keep operating.

    Instead of this tax, I'm surprised they didn't fall back on the old Heathrow tactic of simply not maintaining the non-revenue-generating areas of the airport. Remember what LHR's terminals were like circa 2005? If it wasn't a shopping area, it was a complete shambles. Leaky ceilings, electric tape holding the (stained) carpet down, broken seats, moving walkways out of service, filthy windows, lights burnt out on the boarding piers. It was an astonishingly awful set of facilities.

    The sorry state of British airports ~15 years ago was a major reason for breaking up BAA's near-monopoly. When everything was finally ripped away from them and they only had Heathrow to focus on, it finally looked like maybe they gave a damn about something other than surcharges and retail - but I guess not.

  26. Steve_CC

    No one is going to cancel their travel plan or flight because of this new fee (not a tax). Its a lot like Netflix charging an extra dollar, if you can get away with it why wouldnt you charge or increase the fee.

  27. Phillip

    Heathrow Airport Holdings Limited is in turn owned by FGP Topco Limited, a consortium owned and led by the infrastructure specialist Ferrovial S.A. (25.00%), Qatar Investment Authority (20.00%), Caisse de dépôt et placement du Québec (CDPQ) (12.62%), GIC (11.20%), Alinda Capital Partners of the United States (11.18%), China Investment Corporation (10.00%) and Universities Superannuation Scheme (USS) (10.00%).

    PS: in December, Heathrow got the green light from the High Court to proceed with the planning application...

    Heathrow Airport Holdings Limited is in turn owned by FGP Topco Limited, a consortium owned and led by the infrastructure specialist Ferrovial S.A. (25.00%), Qatar Investment Authority (20.00%), Caisse de dépôt et placement du Québec (CDPQ) (12.62%), GIC (11.20%), Alinda Capital Partners of the United States (11.18%), China Investment Corporation (10.00%) and Universities Superannuation Scheme (USS) (10.00%).

    PS: in December, Heathrow got the green light from the High Court to proceed with the planning application for the third runway throwing out the case that paused it back in February!

  28. ChrisC

    It's NOT a tax. It's an airport fee levied by the private company that owns and operates LHR.

    Only Governments can levy a tax. This has not been levied by the UK government.

    How hard is it for you to get this basic fact right?

    The only tax levied by the UK government on flights is APD.

  29. David

    I typically have a choice of LHR or FRA on my way back to the US from Africa. I kind of like LHR. But as others have suggested, I don't use them anymore for reasons like this and the $100 tax should I score an upgrade.

  30. Andy

    Since governments are doing anything possible to make "non essential travel" unattractive/impossible/illegal, those flying right now are arguably all "essential traveller". And if travel is really essential, a USD 12 surcharge is not decision relevant. And other cost added (such as testing, quarantine etc.) come much more pricey.

  31. Airfarer

    Not to worry, the tax will be 'eliminated' at the end of this year.

  32. Lisa Whiteneck

    Annoying, but if I was going to travel another $12 per person wouldn’t stop me.

  33. Lack

    I know this a glorified shopping mall, where you just arrive by plane, but still saying that baggage handling services, check in, parking and utilizes are not driving profits it's some next level BS.
    Only match by the expiry date of that fee...

  34. The nice Paul

    A normal market mechanism when demand exceeds supply is to keep increasing prices until demand is at the highest level that can be sustainably managed.

    LHR is (or was) far beyond that capacity, which also causes delays and puts a strain on surrounding infrastructure (roads, rail). The airport owners (Spanish and Canadian, if I remember correctly) wanted to build a new runway — but the public sector would then be shafted for even more...

    A normal market mechanism when demand exceeds supply is to keep increasing prices until demand is at the highest level that can be sustainably managed.

    LHR is (or was) far beyond that capacity, which also causes delays and puts a strain on surrounding infrastructure (roads, rail). The airport owners (Spanish and Canadian, if I remember correctly) wanted to build a new runway — but the public sector would then be shafted for even more infrastructure costs.

    There are then a couple of other factors:
    — there is spare airport capacity at other airports in the region (Stansted, Gatwick)
    — there are climate change issues that LHR hasn’t even started to address seriously
    — a huge amount of traffic at LHR is of marginal benefit to the U.K. economy: a lot of it consists of people transiting the airport (so there’d be little damage to tourism or wider industry if they are instead encouraged to transit through Schipol, CDG, etc); and a lot of it is still low-cost leisure traffic, small planes cluttering up the airport so that Quentin and Jocasta can have yet another weekend break.

    Lucky thinks airport taxes are “outrageous” — so just fly somewhere else.

    It’s my home airport and I don’t think the taxes are either outrageous or even excessive. In fact I think they’re way too low and don’t even begin to pay for the externalities of the operation.

  35. Scudder

    I’m somewhat ambivalent about the tax as it is—it’s a low cost to fund truly essential travel, which is the only travel that should be happening these days.

    My issue will be when we’ll all still be paying that tax in 4 years, when traffic meets or exceeds 2019 levels.

  36. George N Romey

    You look at the taxes on that sample ticket and think oh wow. If the UK is trying to destroy tourism they're doing a good job of it.

  37. Christian

    I’m with @John. Pure greed like this is exactly why having major airports being privately owned is a terrible idea.

  38. derek

    While I am usually open to discussion and understanding others' views, I don't agree that there is a on one hand, other hand for this wicked tax or charge.

    How about OMAAT should be put in prison...
    On one hand, that would be a dictatorship
    denial of due process
    cruel

    On the other hand,
    not every article is useful so Lucky is wasting electricity and going green is of vital interest to humanity. He, therefore, must be punished.

    See.

  39. Creditcrunch

    @Andrew Heathrow have already advised they are considering introducing a £5 drop off fee from the end of 2021

  40. Steve

    Sounds like a great way to increase passenger demand when it's down to historic levels. Who are the geniuses that think up these things?

  41. D3kingg

    If you have to ask how much something is it usually means you can’t afford it. So don’t fly to Heathrow then. And don’t fly international first class.

  42. Andrew

    Up next an airport forecourt access drop off charge and mass abandonment of tenants from the terminal shopping malls due to cutting duty free sales.

    On the bright side, they probably won’t ever have to build that runway they already spent £3 billion on consultancy and lobbying and enabling. To put that in perspective Dublin airports new runway cost £280mil TOTAL.

  43. John

    Just another reason to keep our essential infrastructure out of private hands.

  44. Yolo

    You would think that after brexit the UK would better position themselves to allow their airlines to compete vs mainland Europe ones, this is quite the opposite. Even though its private, the gov should incentivize the airport to lower fees overall.

Featured Comments Load all 44 comments Most helpful comments ( as chosen by the OMAAT community ).

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Prat P

One more reason for me to add to my passion to avoid Heathrow at ALL COSTS ! (pun intended)

john

at Andy 11235 most major pizza companies/ chains now charge 3 or 4 dollars as an extra fee to bring you your pizza.(((((((((((( so a 10 dollar delivered pizza from pizza hut costs about 20 after tax tips and fees.

Edgar

As long as people will continue to fly from Heathrow then this foul practice will never cease. There's no point tiring yourself on this blog

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