Foreign investors may have to pump cash into Heathrow

Heathrow’s foreign shareholders could be forced to fund cash injection into business as UK’s largest airport battles with ‘uncertain’ future

Heathrow’s foreign shareholders could be forced to fund a cash injection into the business as the UK’s largest airport battles with an ‘uncertain’ future. 

The prospect follows a ruling last month by the Civil Aviation Authority (CAA) which called on Heathrow to reduce its passenger charges. 

Disagreements over the scale of fees triggered a bitter dispute dispute between Heathrow and airlines that use the airport, including British Airways and Virgin Atlantic. 

Right direction?: Heathrow is reeling from Covid setbacks and travel disruption over recent months

The airport is reeling from Covid setbacks and travel disruption over recent months. It has amassed debt of £15billion after shareholders failed to provide any financial backing during the pandemic. 

The regulator wants the average charge per passenger to fall from £30.19 to £26.31 by 2026. Heathrow had been hoping for the cap on passenger charges to be increased to a range between £32 and £43.If the reduced charges are implemented they are expected to pile pressure on Heathrow, which has already forecast another year of losses. 

In its report last month, the CAA said any increased costs could affect Heathrow’s creditworthiness. That coupled with a possible drop-off in passenger traffic could put ‘significant pressure’ on Heathrow’s credit metrics. 

If debt monitoring agencies reduced their recommendation on Heathrow, the CAA said the airport would ‘likely need to rely more on equity finance’. 

In an apparent swipe at Heathrow’s shareholders, the CAA added: ‘We note that during the pandemic, Heathrow airport’s shareholders have not supported the group with additional equity finance, in contrast to the shareholders of many aviation businesses.’ Heathrow’s largest shareholders are Spanish infrastructure firm Ferrovial and the Qatar Investment Authority. Heathrow paid out roughly £4billion in dividends between 2012 and 2020. 

The airport has claimed that the CAA ‘continues to underestimate what it takes to deliver a good passenger service’. Heathrow insisted that the proposed reductions in charges would result in a worse experience for passengers. 

Chief executive of Airlines UK, Tim Alderslade, said he supported the ‘CAA’s stance that Heathrow shareholders should ensure the airport’s financeability’. 

Heathrow said: ‘Private investors will only invest if they can achieve a fair return on their investment. In the absence of a fair return, investment will dry up and the improvements the CAA says it wants delivered will not be financed.’