Shares of International Consolidated Airlines (LSE:IAG) dropped by around 15% over the past week. But it wasnât the only airline stock to take a hit. easyJet and TUI saw a similar level of decline in their respective share prices over the same period. So why is the UK airline industry taking a hit?
Rising airport fees at Heathrow Airport
All airlines, including IAG that operate out of Heathrow airport, are facing significantly higher passenger charges. The UK Civil Aviation Authority (CAA) recently approved Heathrow to increase its fees by 53%. This pushes the price from ÂŁ19.60 per passenger to ÂŁ30. Airlines are already charging reduced prices to entice people to start travelling again after the pandemic. Therefore this sharp rise in costs is expected to have a drastic impact on already strained profit margins.
Needless to say, airline companies are not happy with this decision. The CEO of British Airways, owned by IAG, stated: âHeathrow is already the worldâs most expensive hub airport. The disproportionate increase compared to other European hubs will undermine its competitiveness even further, and UK consumers will be losing out.”
Shai Weiss, the CEO of Virgin Atlantic, has publicly accused Heathrow airport of âabusing its unique position as the UKâs only hub airportâ. And Weiss continued to say that no other airport around the world is seeing increases “on this scale and by becoming unaffordable, competing EU hubs and airlines will benefitâ.