London Landing Fees Hiked More Than 20%

Last Updated Mar 15, 2008 2:17 PM EDT

It's good to be an extremely popular airport. When airlines are willing to pay millions of dollars just for the right to land their planes on your runways, you know you can get away with murder. That's exactly what BAA, the group that manages various airports including London/Heathrow and London/Gatwick, are getting away with right now.

OK, maybe it's not literally getting away with murder, but a greater than 20 percent increase in landing fees is going to feel like someone stabbed a knife in the heart of the bean counters around the airlines flying to those airports.

Starting next month, BAA will be able to raise per passengers fees from GBP10.36 to GBP12.80, an increase of 23.5 percent. Each of the next four years will be allowed increases of inflation plus 7.5 percent. Gatwick can rise 21 percent up to GBP6.79 with annual increases of inflation + 2.5 percent. Seems steep, right?

Well, at Heathrow, they do have to pay for that soaring new behemoth known as Terminal 5, the new home of British Airways. Maybe they should have tried to make that terminal a little cheaper instead of attempting to create an architectural masterpiece. For some reason, airport planners love to build monuments of greatness at airports when really, functional yet inexpensive terminals will help lower fares and attract airlines to the airport. With Heathrow bursting at the seams, they don't need to worry about that, I suppose.

For years, people have complained about the privatization of airports in the UK, especially when most London airports have been consolidated under one company. The lack of competition has led to indifferent service and high cost increases. As Chicago's Midway airport gets ready to become the largest US airport to privatize, hopefully lessons from BAA will be taken to heart. With O'Hare maxed out on new flights, Midway needs to think about keeping its costs in line. Otherwise, it could open up an opportunity for a more distant Chicagoland airport like Gary to begin taking more flights (as it did with Mexican startup Viva Aerobus this week).

Remember, assuming supply is greater than demand, low landing fees will equal more airline service. In places like Heathrow where demand exceeds supply, it'll just mean higher fares for passengers.