Passengers flying out of Britain’s busiest airport are paying inflated fares because British Airways effectively has a monopoly over many routes, it is claimed.
A group of former Government advisers suggests people using key routes could typically be paying 10 per cent more for their tickets – around £80 for a return – because of a lack of competition.
The analysis calculates that the International Airlines Group (IAG), where BA is the largest carrier, operated 77 monopoly routes out of the Heathrow this summer to destinations such as San Diego, Madrid and Osaka as well as from Glasgow and Belfast.
The claims come from WPI Economics, which is calling for a second UK flag carrier to be given slots out of Heathrow to bring down fares and increase choice for passengers as a result of expansion linked to the building of a third runway.
Britiah Sirways is part of a group of carriers called the International Airlines Group (IAG), whose other brands include Iberia, Aer Lingus and Vueling.
The study states that around one in four passengers – or 18.5million people – had to fly on routes from Heathrow where they had no choice but to fly with IAG,
The research was supported by BA’s rival, Virgin Atlantic, which would hope to gain extra flights, passengers and profits if it was able to grab the lion’s share of new take-off and landing slots that are anticipated.
The study states that around one in four passengers – or 18.5million people – had to fly on routes from Heathrow where they had no choice but to fly with IAG, whose other brands include Iberia, Aer Lingus and Vueling.
WPI experts say someone flying directly on a return flight from Heathrow to Osaka on BA could expect to pay £838.
They argue that if there was another airline to choose from the total cost could be reduced to £754.
The fares charged by BA has helped the parent company deliver stellar annual profits of around £2billion.
The company’s pilots have been on strike this week, bring disruption to thousands of people, because they argue they deserve a greater slice of this money.
The report, ‘Letting competition fly: the case for two national flag carriers’, is co-authored by Matthew Oakley, a former senior Treasury official, and James Edgar, a former senior economist at the Department for Transport.
They say that BA’s dominance at Heathrow is a reflection of flaws in the way take-off and landing slots are allocated. Currently, IAG operates over half of all slots – 55per cent.
And they claim the proportion of routes where IAG has no competition has risen from 18per cent in 2005 to 39per cent today.
As a result, between June 2018 and May 2019, almost one in four of the 80m passengers using Heathrow flew on monopoly routes.
The authors argue that to achieve effective competition, a new scale operator – a second national flag carrier – capable of carrying as many as 20million passengers a year needs to be established at Heathrow to link domestic and European routes to international destinations.
Currently, IAG operates over half of all slots – 55per cent – from London’s hub airport
They claim that plans to expand Heathrow with a Third runway would provide a golden opportunity to allow in a new large competitor.
Specifically, they would be given a significant share of the estimated 350 more take-off and landing slots expected to be created.
Mr Edgar said: ‘The current system of allocating take-off and landing slots has contributed to one airline group controlling over half of the available capacity at Heathrow.
‘This limits choice for passengers and international evidence suggests this could well increase fares.
‘Expansion of capacity at Heathrow provides the opportunity to increase choice and create the UK’s second national flag carrier to extend the global reach of British business and consumers alike.’
Mr Oakley added: ‘The Government must ensure that allocation of extra capacity at Heathrow delivers more choice for passengers and effective competition between airlines.
‘Ensuring the system for allocating capacity supports the emergence of a second flag carrier with the scale and capacity to compete with IAG is the best way of introducing effective competition at Heathrow.
‘Heathrow expansion presents a unique opportunity to boost competition, lower fares and increase choice for UK air passengers.’
The analysts claim plans to expand Heathrow with a third runway would provide a golden opportunity to allow in a new large competitor
Head of research at the Adam Smith Institute, Matthew Lesh, (correct) said: ‘It is concerning that over half of the slots at Heathrow are currently allocated to British Airways/IAG.
‘Expansion provides an opportunity to totally rethink how we allocate take-off and landing slots to enable the creation of a second flag carrier that can compete.
‘Consumers need competition to ensure that disruption to one airline doesn’t destroy travel plans and that they can access more flights to more destinations.’
IAG pointed out the report was supported by Virgin Atlantic and said it was ‘surprised’ by the findings.
It said: ‘In 2001 British Airways had 36.2 per cent of Heathrow slots. That rose to 52.6 per cent in 2016 as BA bought slots at the airport.
‘In 2001 Virgin Atlantic had 2.3 per cent of Heathrow slots – this rose to 3.3 per cent in 2016.
‘Virgin had the opportunity to increase its slot share at Heathrow to 19.7 per cent by buying slots but it chose not to do so.
‘The airline has failed to create more competition at the airport – it closed Little Red on domestic routes, pulled off long haul routes and rents out the slots it owns to other airlines to fly.’