Heathrow sees first profit in four years, but warns of pricing challenges

(Sharecast News) - Heathrow has posted its first adjusted profit in four years after recording its third highest annual passenger numbers in history, but said the Civil Aviation Authority's (CAA) price controls will make it hard to stay remain profitable going forward. The UK's largest airport delivered an adjusted pre-tax profit of £38m for 2023, compared with a loss of £684m in 2022, after a strong performance in the fourth quarter.

Passenger numbers totalled 79.2m for the year, up 29% on 2022, with Heathrow targeting a record 81.4m in 2024.

Revenues in 2023 were up 27% at £3.7bn, while cash generated from operations rose 22% to £2.1bn.

Looking ahead, with airport charges being reduced by 20% in real terms at the start of 2024, Heathrow said maintaining even a small profit will require it to close a £400 million gap with efficiencies and investment trade-offs over the next three years.

Chief executive Thomas Woldbye said 2023 was a "good year for Heathrow from a challenging start to a great finish".

"We are expected to deliver even further improved service to more passengers, but with airport charges cut by 20% in real terms. We will have to pull every lever to become more efficient and make tough choices on where we spend and invest our money to overcome the huge cost challenge set by the CAA and remain profitable over the next three years."

Heathrow is economically regulated by the CAA and had recently appealed against the CAA's maximum airport charges - tariffs airports can change airlines - for the so-called 'H7' period covering 1 January 2022 to 31 December 2026.

While the appeal was unsuccessful, Heathrow still maintains that the calculations "ha[d] been arrived at based on a set of assumptions which has led to a lower tariff than the group believes is appropriate".