London's Heathrow Airport has been told by the UK Civil Aviation Authority (CAA) it must reduce passenger charges for airlines by around 6% over the next five years.
In its final proposals published today, the regulator said the average maximum price per passenger that airlines will pay Heathrow will fall from £30.19 today to £26.31 in 2026.
The decision follows a dispute between the airport and the airlines over the price cap. Heathrow had reportedly called for the cap to range from £32 to £43 per passenger.
Although the charges are paid by airlines, they can be passed onto passengers via airfares.
The CAA said the charges reflect expected increases in passenger numbers as the recovery from the Covid-19 pandemic continues and the higher level of the price cap in 2022, which was put in place in 2021 to reflect the challenges from the pandemic.
It said its proposals will enable the airport to deal with uncertainty over passenger numbers, while also allowing it to invest.
"We have listened very carefully to both Heathrow Airport and the airlines who have differing views to each other about the future level of charges,” said CAA chief executive Richard Moriarty.
“Our independent and impartial analysis balances affordable charges for consumers, while allowing Heathrow to make the investment needed for the future."
But Heathrow chief executive John Holland-Kaye said the regulator "continues to underestimate what it takes to deliver a good passenger service, both in terms of the level of investment and operating costs required and the fair incentive needed for private investors to finance it".
"Uncorrected, these elements of the CAA's proposal will only result in passengers getting a worse experience at Heathrow as investment in service dries up," he said.