Heathrow CEO Backs Virgin Plan to Challenge British Airways

(Bloomberg) -- The head of London Heathrow airport favors a shakeup in landing rights that would allow Virgin Atlantic Airways Ltd. to challenge the dominance of British Airways over U.K. skies.

The change would encourage greater competition by giving Virgin more flights once Europe’s busiest hub gets a 16 billion-pound ($20 billion) third runway, John Holland-Kaye said in an interview Wednesday.

“The new runway presents a massive opportunity to lower fares, but we need a scale player that can compete with BA,” he said at Heathrow after meeting with Virgin founder Richard Branson prior to the carrier’s inaugural flight to Tel Aviv. “To do to that there has to be a change in the slot rules.”

A loosening of BA’s hold over Heathrow slots would play into the hands of Virgin, which said last month it aims to launch 84 new destinations and become the U.K.’s second flag carrier. The plan depends on the government agreeing to scrap a system under which airlines are awarded new slots in proportion to current holdings.

Virgin has fewer than 5% of Heathrow flights versus 55% at BA owner IAG SA, though it’s adding more with the purchase of U.K. regional carrier Flybe Group Plc. Yet IAG said Virgin has had opportunities to increase its Heathrow operations in the past.

“IAG welcomes competition but the facts speak for themselves -- Virgin Atlantic’s lack of Heathrow routes is down to its own corporate strategy,” a spokeswoman for IAG said in emailed comments., citing the canceling of some routes the renting of slots to other airlines.

Virgin Atlantic CEO Shai Weiss said separately that his company “is not on a crusade to do harm to BA,” and that its arch-rival would still benefit from the lion’s share of new slots.

Founder Richard Branson was less conciliatory. In an interview aboard the Tel
Aviv flight he said BA had been handed its slots for free when
it was privatized and has “been getting away with it for
years” ever since.

Holland-Kaye said he’s confident Heathrow will still get a new landing strip even though Boris Johnson is a long-standing opponent of the plan. The prime minister sought to block the expansion when he was London mayor, pushing to close the airport and build a replacement hub in the Thames estuary.

“I don’t see any problem,” the airport CEO said. “Boris Johnson is a democrat, and more people back the expansion than oppose it. And we have four to one support in parliament.”

Enlarging Heathrow will be a vital step in beefing up Britain’s trade links beyond the European Union once it leaves the bloc, Holland-Kaye said.

“Like most businesses we want certainty,” he said about the ongoing Brexit debate. “It now seems that we are getting to a moment of clarity on that. We just want to get through this and move on.”

The U.K. economy is perfectly capable of thriving outside the EU, the CEO said, adding: “When our backs are against the wall we come out fighting.”

--With assistance from Siddharth Philip.

To contact the reporter on this story: Christopher Jasper in London at cjasper@bloomberg.net

To contact the editors responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net, Tara Patel, John Bowker

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