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IAG (LON:IAG) tumbles as airport fees are set to rise

British Airways
Image source: British Airways

Shares of International Consolidated Airlines (LSE:IAG) dropped by around 15% over the past week. But it wasn’t the only airline stock to take a hit. easyJet and TUI saw a similar level of decline in their respective share prices over the same period. So why is the UK airline industry taking a hit?

Rising airport fees at Heathrow Airport

All airlines, including IAG that operate out of Heathrow airport, are facing significantly higher passenger charges. The UK Civil Aviation Authority (CAA) recently approved Heathrow to increase its fees by 53%. This pushes the price from £19.60 per passenger to £30. Airlines are already charging reduced prices to entice people to start travelling again after the pandemic. Therefore this sharp rise in costs is expected to have a drastic impact on already strained profit margins.

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Needless to say, airline companies are not happy with this decision. The CEO of British Airways, owned by IAG, stated: “Heathrow is already the world’s most expensive hub airport. The disproportionate increase compared to other European hubs will undermine its competitiveness even further, and UK consumers will be losing out.”

Shai Weiss, the CEO of Virgin Atlantic, has publicly accused Heathrow airport of “abusing its unique position as the UK’s only hub airport”. And Weiss continued to say that no other airport around the world is seeing increases “on this scale and by becoming unaffordable, competing EU hubs and airlines will benefit”.

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Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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