LONDON – The United Kingdom’s Civil Aviation Authority (CAA) has warned London Heathrow (LHR) that it could face nationalization if no fresh funding is found.
This comes following the continued struggles of the airport during the COVID-19 pandemic. It is understood that the sovereign wealth funds of Singapore and Qatar are not injecting the funding the airport needs to weather the storm of the pandemic.
Heathrow Desperate for Options?
Such developments of a state takeover warning also come following the CAA’s decision to reject demands from LHR to increase airline and passenger charges by £1.7bn in order to fund any losses made. The CAA expanded on this in a statement.
“Heathrow’s request set out a solution that would involve consumers bearing a significant proportion of the costs associated with the pandemic and providing additional protection for shareholders. We have considered Railtrack as a relevant example of when a regulated company has faced severe financial issues.”
Railtrack was a FTSE-100 listed rail company that went under in 2001 due to having debts exceeding £3.5 billion. The airport is currently trialling several ideas in order to get air travel back to some level of normality.
Just this month, it has announced plans to both trial a new ‘Coronavirus Passport’, which encourages testing of passengers so then self-isolation isn’t an option as well as launching a one-hour COVID-19 testing facility in the airport too.
Heathrow’s Main Market Collapsing
LHR is struggling in particular due to the lack of transatlantic travel (TATL) being conducted by passengers due to ongoing travel restrictions imposed by the United States. According to data from OAG, the TATL market will decrease by $7.2bn this winter to just $2.3bn compared to the same period last year.
On top of this, the organization expects airlines to be significantly weaker going into the Summer 2021 season, meaning that the high frequencies that the industry would have experienced before the pandemic came about will not be the same, citing a 2024 recovery target.
This month, the airport’s passenger numbers have dropped by a staggering 82%, and has called on the government to implement further airport testing around the country to get the industry back on its feet.
BREXIT to Follow As Well
On top of this, the airport also has to deal with the impending withdrawal of the United Kingdom from the European Union, which is due to occur in January 2021.
As the UK Transport Secretary Grant Shapps acknowledged, flights may be grounded if no agreement is made between the UK and Brussels (BRU), which would put LHR into further financial predicaments.
This same point is also mentioned in an article from Airways that was released earlier today discussing Flybe (BE) and its re-emergence back into the market, especially with the focus on both domestic and international markets.
Unless the UK Government comes up with an agreement, then the CAA may have to nationalize the airport anyway whilst it copes with any potential disruption beyond January 2021.
A Difficult Road Ahead
Overall, it remains clear that LHR is on a very difficult road ahead. It so urgently needs to find the fresh funding needed to weather this storm, as the CAA will not provide funding at the expense of the passenger or the taxpayer.
This coming winter, the UK air industry will continue to follow the two themes of BREXIT and COVID-19, as the two coming together could prove to be disastrous for the UK market and beyond.
All eyes will be on LHR and the UK Government to determine what the next steps will be as well as for the findings of the task force on airport testing due at the start of December.
Featured Image: London Heathrow Airport (LHR). Photo Credit: London Heathrow.