Heathrow’s spending per passenger fell but remained on par with 2019 and 2018.
The UK’s only hub, London Heathrow, carried 79.2 million passengers last year, the third-highest number ever, up 29% from 2022, but retail revenue has not kept pace. It rose 24%, with the airport blaming the lackluster commercial performance on the abolition of VAT-free shopping.
Transatlantic routes were particularly strong, with New York’s JFK Airport maintaining its position as the most popular destination. The number of passengers on this route exceeded 3 million for the first time since 2019.
Europe’s most popular gateway was able to post a modest profit of 38 million pounds ($48 million) for the first time since 2019, thanks to a strong final quarter. However, while total revenue was well 20% above pre-pandemic levels, the retail component was still slightly below 2019 (see graph), reaching £698m ($884m) last year. . Avolta (formerly Dufry) is the airport’s primary retail partner.
Retail has not yet reached 2019 levels.
Retail covers many different elements at an airport. For Heathrow Airport, this includes retail kiosks, catering, ‘other retail’, parking and ‘other services’. Of this, concessions accounted for the lion’s share of £257 million ($325 million) in 2023, but the biggest gain came from catering, which grew by 41%.
The 24% growth in total retail was mainly driven by additional departing passengers last year, but passenger spending fell as revenue per passenger fell by 3.8% from £9.16 to £8.81 in 2022. However, this decline may simply be a normalization of spending patterns. Spending per passenger in 2023 is in line with pre-pandemic 2019 and 2018 figures of £8.93 and £8.94 respectively, with revenge spending subdued post-COVID-19.
stand up for britain
Nevertheless, airports believe that the return of duty-free shopping could change these spending levels, and the Spring Budget, due to be published in two weeks’ time on March 6, says: “Stand up for Britain” ” asked the British government. Prime Minister Jeremy Hunt called for the UK to “level the playing field with our European rivals to attract international tourism spending” and to reinstate duty-free shopping.
Despite reports that wealthy shoppers are fleeing London to Paris and Milan for shopping, Mr Hunt was undeterred in 2022. But further evidence since then may persuade Mr Hunt to the idea of reinstating tourist benefits that exist in many other jurisdictions. in the European Union and around the world. The Office for Budget Responsibility has also promised to analyze the pros and cons of abolishing tax-free shopping in the budget. The findings will be important to the prime minister’s final decision.
Heathrow Airport is digesting a busy year while waiting. The new CEO arrived from Copenhagen Airport in October last year, with its main shareholder, infrastructure company Ferrovial, announcing plans to sell a 25% stake, private equity firm Ardian and Saudi Arabia’s Public Investment Fund (PIF). It was decided to open the door to. Further movement.
Regarding the tax exemption decision, Mr. Waldby said in a conference call with investors: We are already seeing brands withdrawing their presence and think this situation should be rectified. ” The airport operator said it was also finalizing an “updated business strategy” that will be shared in the coming months. A push for more commercial revenue could be part of the plan.
Waldby said in a statement: To overcome the enormous cost challenges set by the Civil Aviation Authority and remain profitable over the next three years, we must use every tool at our disposal to increase efficiency and make difficult choices about where we spend and invest. It doesn’t have to be. ”
The CAA is the UK’s aviation regulator and its H7 settlement means Heathrow’s airport charges will be reduced by 20% in real terms from early 2024. This reduction will make it more difficult for hub airports to achieve profitability as airport/aviation revenues will account for a larger share. It accounts for about two-thirds of airport revenue.