Heathrow Says Travel Surge Is A ‘bubble That Will Burst

Heathrow, the UK’s busiest airport, has predicted that this year’s surge in demand for air travel is a “bubble” that is unlikely to last past this summer and has forecast another year of losses.

The owner of London’s main airport raised its passenger forecasts for this year from 45.5mn to 52.8mn, about 65 per cent of pre-pandemic levels.

But it put the rise in passenger numbers down to a “temporary increase in demand” driven by holidaymakers “taking advantage” of relaxed international travel rules.

“That is not normal demand, that is a bubble that will work through at some point and will settle down,” said chief executive John Holland-Kaye.

Heathrow predicted the rush of bookings would last all summer, but then could be followed by a “winter freeze”. It said some airlines had cancelled autumn flights because of factors such as higher fuel costs and pressures on the wider economy.

Holland-Kaye said there was “a huge amount of uncertainty” over the outlook after the summer and that the airport’s passenger forecasts were based on a “middle ground” of stronger demand lasting until September before tailing off.

Heathrow reported a pre-tax loss of £191mn in the first three months of the year, compared with a £307mn loss a year previously, taking its overall losses since the start of 2020 to £4bn.

Revenue more than tripled to £516mn in the first three months of the year as passengers flooded back, but the airport does not forecast a return to profit or dividends this year.

Heathrow has clashed with airlines after it asked UK regulators for permission to increase the landing fees it charges to help its finances recover from the pandemic.

Heathrow’s view of the recovery is notably more pessimistic than most of the rest of the industry, which has welcomed the mass return of passengers as a sign that the worst of the pandemic is over.

Virgin Atlantic, which plans to run 100 per cent of its 2019 schedules this summer, said: “Despite the return of travel at scale, Heathrow is seeding doubt in the strength of demand so it can seek excess returns to shareholders and secure an unjustified increase in charges.” 

Airlines UK, an industry group, said on Monday that Heathrow was “an outlier in the sector” with its negative commentary on passenger numbers, which it said was to suit Heathrow’s “regulatory agenda”.

Holland-Kaye defended the airport’s forecasts as realistic because they reflect the uncertainty facing the industry.

“We think it is a fair balance . . . it reflects the reality of the world we are in,” he said.

The Civil Aviation Authority has proposed allowing Heathrow to increase landing fees from £22 per passenger to between £24.50 and £34.40 over the next five years, which is less than the airport has pushed for.

Javier Echave, Heathrow’s chief financial officer, said it risked losing its investment-grade credit rating if it gets “a penny below” the CAA’s proposal.

Parts of the aviation industry have been struggling to cope with increased passenger numbers amid staff shortages. Holland-Kaye said the airport was “redoubling” efforts to ensure smooth journeys this summer.

The airport is recruiting 1,000 security officers and reopening Terminal 4, which was mothballed during the pandemic. It also forecasts that airlines, ground handlers and retailers need to fill more than 12,000 vacancies at the airport.

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