International Airlines Group (IAG), the parent company of British Airways (BA) and Iberia, has asked incoming UK Prime Minister Andy Burnham to cap passenger charges at London Heathrow Airport (LHR) before its £49 billion third runway project moves forward. IAG made the request this week, as first reported by Paddle Your Own Kanoo, shortly before Burnham takes over from Keir Starmer as Labour leader and prime minister. The group wants the government to step into a regulatory process at the Civil Aviation Authority (CAA) that will decide how much Heathrow can charge each traveller who passes through the airport.
The plea centres on money. Earlier in 2026, the Labour government approved Heathrow Airport Limited’s own runway design over a cheaper rival plan backed by IAG and the Arora hotel group. IAG now fears that Heathrow’s financing model will let costs balloon well past the current £49 billion estimate, with passengers picking up the difference through higher fares.
Iag’s Plea Lands as Andy Burnham Prepares to Enter Downing Street
Burnham is due to formally succeed Starmer as prime minister, becoming the UK’s seventh leader in a decade, according to Al Jazeera. Starmer used his final Prime Minister’s Questions this week to pledge support for his successor. The transition gives IAG a narrow window to shape aviation policy before a new administration settles into office.
IAG’s timing is deliberate. A change of prime minister often resets policy priorities, and IAG wants Heathrow’s charging structure on the new government’s agenda from day one. Gallego framed the moment as decisive, saying the incoming Prime Minister now has a defining opportunity to get Heathrow right.
The £49 Billion Third Runway Heathrow Wants to Build Over the M25
Heathrow’s approved plan places a new third runway over the M25 motorway, to the west of the existing airport. The scheme also includes new taxiways and terminal buildings. Heathrow is aiming to secure planning permission by 2029 and wants the runway operating by 2035.
That timeline lost out to Heathrow’s own submission when ministers chose between competing bids earlier this year. The rejected alternative, put forward by the Arora hotel group with IAG’s backing, promised a lower-cost route to the same extra capacity. IAG has kept pushing that argument even after the government’s decision, insisting cost control should still shape how the winning scheme is funded.
Why Iag Says the Current Funding Model Risks A £100 Billion Bill
IAG’s objection targets Heathrow’s regulated asset base funding model. Under this system, Heathrow’s allowed passenger charge rises automatically if construction costs exceed budget. IAG argues this removes any incentive for Heathrow to control spending, because cost overruns simply get passed to travellers.
Gallego has put a number on the risk. He said that without changes, Heathrow’s development costs could climb to £100 billion over the next 25 years, pushing passenger charges to £50 each. Heathrow currently wants to lift charges to £33.80 per passenger for the 2027 to 2031 period, while Heathrow-based airlines are pushing the CAA to hold the cap at £23.
IAG’s proposed fix is narrower than a blanket rejection of expansion:
- A firm cap on what Heathrow can charge passengers
- Competitive tendering for construction work, rather than automatic cost pass-through
- Independent oversight of spending against the £49 billion budget
Heathrow And the CAA Are Split Over Where the Passenger Charge Cap Should Sit
Heathrow has warned that if the CAA blocks its requested fee increases, it will withdraw funding for the third runway and the airport will stay at its current capacity. The CAA appears to share some of IAG’s concerns but has stopped short of endorsing a flat, lower fee. Instead, it is leaning toward letting Heathrow raise charges while imposing new cost-overrun rules and competitive tendering requirements.
The regulator is already midway through a related process. For Heathrow’s next five-year charging period, known as H8, the CAA’s initial proposals set a cap of between £27.20 and £30.50 per passenger, with the exact figure depending on forecast passenger numbers each year. The CAA has finished a public consultation on its broader funding model for the runway and is expected to publish an update by the end of July 2026, with a further update following in the autumn.
Airlines Have Fought This Battle with Heathrow Before
This is not the first time Heathrow’s airline customers have challenged how expansion costs get billed. When the CAA allowed Heathrow to begin recovering pre-construction planning costs from passengers, British Airways argued the arrangement created an imbalance between risk and reward in HAL’s favour, Head for Points reported. Virgin Atlantic (VS) took a harder line, opposing any cost recovery at all until formal planning consent was granted.
The dispute echoes an earlier warning from Gallego. He previously said that under the existing regulatory model, flying through an expanded Heathrow would become significantly more expensive for customers, and cautioned that a costly new runway risked standing underused. BA’s own leadership raised similar concerns last year, warning that long-haul passenger costs could climb sharply once expansion charges take effect.
How This Plea Compares with Iag’s Earlier Push for The Arora-Backed Heathrow West Plan
IAG’s appeal to Burnham builds on a campaign it ran earlier this year alongside Virgin Atlantic in support of the rival Heathrow West proposal. Gallego described that Arora-led scheme as “a credible option with the potential to cap costs for passengers”. Willie Walsh, outgoing director general of the International Air Transport Association (IATA) and a former IAG chief executive, went further, arguing any winning scheme had to be deliverable, financeable and affordable.
Ministers ultimately backed Heathrow’s own design instead of the Arora alternative. That decision has not ended IAG’s campaign. Rather than continuing to argue for a different runway design, IAG has shifted its focus to the charging framework that will govern whichever scheme goes ahead, which is why its latest plea targets the CAA’s regulatory model directly.
What Happens Next at the CAA
The CAA’s next move is an update to its Heathrow funding model, due by the end of July 2026. That will be followed by a second stage of work in the autumn, giving both Heathrow and its airline customers further opportunities to make their case. Burnham’s government will need to decide early in its term whether to intervene directly in a process that has, until now, been left to the regulator.
For passengers, the stakes are concrete. Every pound added to Heathrow’s per-passenger charge tends to be passed straight through into ticket prices on the airlines that fly there. Whether Burnham responds to IAG’s request, and how the CAA balances Heathrow’s investment needs against airline demands for a lower cap, will shape ticket prices at Europe’s busiest airport for years to come.