Heathrow Airport's record-breaking 40 million passengers couldn't shield it from a £129m tax bill hike, which has left the West London hub reeling with a five per cent profit decline to £69m. The sharp increase in taxation, triggered by government business rates and National Insurance changes, has significantly impacted Heathrow's finances.
The airport has been buoyed by significant growth in traffic to and from Asia Pacific (up 7.9 per cent) and North America (1.6 per cent), but these gains were partially offset by a 25 per cent fall in passenger volumes to the Middle East, due to flight cancellations and reduced bookings as a result of ongoing conflict.
Despite modest revenue growth of 0.3 per cent, reaching £1.7 billion, Heathrow's reliance on passenger charges has helped mitigate the impact of the Middle East situation.
The higher tax burden comes despite a £900m business rates discount benefiting Heathrow, with the airport warning previously that without transitional relief, government overhauls would lead to increased fares for passengers – potentially exceeding £1.5 billion in business rates over three years. The National Insurance hike continues to exert pressure on wage costs.
The financial results reignite debate about Heathrow's regulatory model, which some airlines argue makes it the most expensive airport of its kind. Calls are growing for an overhaul ahead of potential expansion plans, including the third runway project, with critics arguing that a revised model could reduce operational costs and keep passenger charges affordable.