British Airways chief attacks Heathrow boss for 'ripping off passengers'

http://www.theguardian.com/business/2013/sep/24/british-airways-chief-attacks-heathrow-boss

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The boss of Britain's biggest airline has accused Heathrow of ripping off passengers and employing too many overpaid staff, calling for the airport's chief executive to be replaced.

Willie Walsh, chief executive of British Airways' parent company IAG, said the airport was planning to raise prices by £600m over five years while cutting spending on facilities.

In a strident denunciation of the London airport's "abusive monopoly", Walsh said that Heathrow's boss, Colin Matthews, had been "pathetic" in trying to make a political argument linking higher airport charges to Britain's need for more overseas investment.

With the Civil Aviation Authority (CAA) scheduled to rule on the fees that Heathrow can charge airlines, Walsh warned the regulator not to be "hoodwinked" again, and to correct its mistakes of the recent past which Walsh said involved Heathrow being "grossly over-rewarded".

Walsh said Heathrow's management seemed "incapable of running their business efficiently within a routine cost-control environment". He added: "What we see is an airport that has too many people; those people are paid too much."

The CAA is due on October 3 to set fees that the airport can charge from 2014. It has proposed raising charges below inflation, at RPI -1.3%, over the next five years – a level some way below Heathrow's demands. Airlines led by BA, the airport's biggest customer, have demanded a real-terms cut of almost 10% after five years in which charges rose by RPI +7.5%.

Walsh insisted the CAA was "not being robust enough". He added: "If the CAA does not take a stronger line on this it will continue to be inefficient and that will be at the expense of passengers."

According to BA's calculations, increased landing fees will mean every passenger journey costs £7 more than the airline believes is reasonable.

Matthews had provoked Walsh's ire by saying that lower charges gave no incentive for shareholders to invest and that Britain would not be able to attract foreign capital.

Heathrow's major shareholders are the sovereign wealth funds of Qatar, Singapore and China, as well as a Canadian pension fund and Spanish construction giant Ferrovial.

Walsh said: "Passengers are paying more than they should and the benefits of that are going to higher-than-average rewards for the shareholders.

"If Colin Matthews is incapable of running the airport and making the investment that's necessary, and requires an excessive return to justify that investment, then he should be replaced.

"If he was the CEO at a listed entity and came out with the statements he's come out with, I suspect shareholders would take a completely different view because of the impact on the share price."

Walsh feared the regulator was succumbing to external pressure to adjust its proposal in Heathrow's favour. "It makes London, certainly Heathrow, less competitive than the rest of Europe."

He admitted BA could not leave Heathrow, but vowed to appeal if the CAA did not cut its charges.

Heathrow has said that the CAA's current proposed charges would mean less maintenance of the airport, and the curbing of planned improvements to baggage facilities and other aspects affecting passengers.

A Heathrow official said: "We have put forward plans for more than £400m of cost savings over the next five years. We want to continue the investment that has been improving Heathrow for passengers.

"Airlines' proposals for 40% price cuts can't be achieved without risking under-investment and a return to the out-dated Heathrow of the past."

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