Business

Heathrow Airport attacks regulator's price-control plan

  • 3 October 2013
  • From the section Business

Heathrow Airport has criticised proposed new price controls on the annual fees it can charge airlines.

The Civil Aviation Authority (CAA) on Thursday said that Heathrow's yearly rise between 2014-18 should not be more than the retail price index (RPI).

But the airport's chief executive Colin Matthews said this could restrict investment and have major consequences for passengers and airlines.

The CAA also proposed capping rises at Gatwick airport to RPI plus 0.5%.

Airports charge airlines for use of their facilities, including landing fees, security and use of terminals.

Heathrow had submitted a plan, rejected by the CAA, seeking to raise annual tariffs for airlines by 4.6% above RPI inflation.

Dame Deirdre Hutton, chairwoman of the CAA, said in a statement: "The proposals will put an end to over a decade of prices rising faster than inflation at Heathrow.

"Tackling the upward drift in Heathrow's prices is essential to safeguard its globally competitive position. The challenge for Heathrow is to maintain high levels of customer service while reducing costs. We are confident this is possible and that our proposals create a positive climate for further capital investment, in the passenger interest."

But Mr Matthews said: "This proposal is the toughest Heathrow has ever faced. The CAA's settlement could have serious and far-reaching consequences for passengers and airlines at Heathrow.

"We want to continue to improve Heathrow for passengers. Instead, the CAA's proposals risk not only Heathrow's competitive position but the attractiveness of the UK as a centre for international investment. We will now carefully consider our investment plans before responding fully to the CAA."

Despite the criticism, the CAA's price control is an improvement on a draft proposal earlier this year that Heathrow's five-year cap should be RPI minus 1.3%.

'Disappointing'

Airlines said that the CAA's final proposals on Thursday were too lenient and that it had bowed to pressure from Heathrow and its shareholders.

Willie Walsh, head of British Airways' parent group IAG, said: "With this settlement, Heathrow will continue to levy charges well above other major hub airports.

"We want a Heathrow that is efficiently run, fairly rewarded and priced comparably with other airports. We will carefully consider our next steps," he said.

Virgin Atlantic said in a statement that the CAA's proposal was "deeply disappointing".

For Gatwick, the CAA's price control will cover seven years from April 2014. The owners of the West Sussex airport gave the proposal a "a cautious welcome".

Gatwick chief executive Stewart Wingate said: "The CAA's proposal to take forward our commitments framework would deliver an improved future outcome for passengers in terms of service quality, facilities and price.

"We will now redouble our efforts to work with our airlines partners to make this work in the best interests of all parties, and in particular for passengers."

A CAA proposal on a charging regime at Stansted for 2014-19 is expected next week, with a final ruling on all three airports due in January.

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