Heathrow owners told to boost funding or risk nationalisation
The airline watchdog has warned the owners of Heathrow that the airport may be nationalised if they do not provide fresh funding to help it weather the pandemic.
The Civil Aviation Authority (CAA) has said that without emergency cash from Heathrow’s shareholders, including the sovereign wealth funds of Singapore and Qatar, the airport may face a state takeover to save it from collapse.
The CAA rejected the airport’s demand to hike airline and passenger charges by £1.7bn to cover costs incurred by the pandemic, and instead urged it to shore up cash from its owners, including the Spanish infrastructure company Ferrovial and a Chinese sovereign wealth fund.
The watchdog warned Heathrow shareholders that without intervention, the airport’s fate would be similar to Railtrack, the FTSE-listed rail company that collapsed in 2001 with debts of £3.5bn.
The regulator said: “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.”
British Airways’ owner IAG said it was “staggered” by the airport’s demands, adding that Heathrow is “a wealthy, privately owned company, which should seek funds from its shareholders”.
But Heathrow yesterday hit back at the claims, accusing the CAA of sending a “terrible” message to foreign investors and threatening legal action if regulators do not allow charge hikes.
Javier Echave, the airport’s finance chief, said: “You are breaking the principle of the UK being a safe haven for investors’ money.”
A Heathrow spokesman told the Telegraph the airport was “completely different” to Railtrack and there were “a number of important differences in circumstances” between the two.
It comes after the airport saw debts rise to £17bn during the pandemic, as quarantine measures hammered demand by almost 70 per cent between January and September, with little hope of an immediate rebound.
Heathrow’s warning that it may need to axe upwards of a thousand jobs due to coronavirus-related uncertainty caused trade union Unite to threaten industrial action.
Unite cited claims that the airport is planning to “fire and rehire” employees and place them on inferior contracts in order to slash wage costs.
The CAA has ruled out a direct government bailout for the airport, and is instead consulting the industry on its proposed rejection of higher charges.