A UK Civil Aviation Authority's decision to fix 2023 airline levies at London Heathrow has drawn strong criticism from airlines who want a steeper cut, while the airport says it makes no sense and will not benefit consumers.

"The CAA has chosen to cut airport charges to their lowest real terms level in a decade at a time when airlines are making massive profits, and Heathrow remains loss-making because of fewer passengers and higher financing costs. This makes no sense and will do nothing for consumers at a time when the CAA should be incentivising investment to rebuild service. We will now take some time to carefully consider our next steps," the airport said in a statement.

On March 8, the UK CAA announced that charges for 2023 would remain fixed at the level set out in its interim decision issued earlier this year. In current year prices, the maximum price per passenger for 2023 is GBP31.57 (USD37.4). The average maximum price per passenger would then fall by about 20% to GBP25.43 (USD30.19) per passenger in 2024 and would remain broadly flat at that level until the end of 2026. This means the average charge over the five years will be GBP27.49 (USD32.6) compared to GBP28.39 (USD33.7), a reduction of GBP0.90 (USD1.06).

The average charge requested by Heathrow over the price control period was around GBP40 (USD47.4) per passenger, whilst airlines suggested it should be no more than around GBP18.50 (USD21.9) on average (both in 2020 prices).

But Luis Gallego, Chief Executive Officer of IAG International Airlines Group - the parent of British Airways - said Heathrow already charged three times more per passenger than other major airports in Europe. "Britain needs an efficient airport hub that will attract business, serve customers and support jobs. But high charges, designed to reward shareholders at the expense of customers, risk undermining its competitiveness. Heathrow already charges three times more per passenger than other major airports in Europe, including London Gatwick and Madrid Barajas, and five times more than Dublin International. If the CAA had fully taken into account industry forecasts of passenger volumes post-COVID, it should result in lower prices for consumers. We will continue to assess our options for further action to ensure UK consumers do not pay an unfair price to use Heathrow."

Virgin Atlantic Chief Executive Officer Shai Weiss criticised the regulator for not having "gone far enough to push back on a monopolistic Heathrow and fulfil its statutory duty to protect consumers". "An average cap of GBP27.49 until 2026, adjusted for inflation, still penalises passengers at the world's most expensive airport, which by its own admission, grew more than any other airport last year."

"Heathrow has abused its power throughout this process, peddling false narratives and flawed passenger forecasts in an attempt to win an economic argument", he alleged. "This process has proven that the regulatory framework, including the formula used to set charges, is fundamentally broken." He added that Virgin would review its position carefully ahead of the busy Easter holidays.

Heathrow Airport and airlines may appeal to the Competition and Markets Authority (CMA) for a final determination on the matter.

"This lower level of charges from 2024 recognises that passenger volumes are expected to return to pre-pandemic levels and should benefit passengers in terms of lower costs while also allowing Heathrow Airport to continue investing in the airport for the benefit of consumers and supporting the airport's ability to finance its operations," the UK CAA said in a statement.

The package includes a GBP3.6 billion (USD4.2 billion) capital investment programme at Heathrow, including more modern security scanners and a new baggage system in Terminal 2, which are collectively expected to cost around GBP1.3 billion (USD1.5 billion).