CAA unveils new charge plan for London airports

The UK Civil Aviation Authority has confirmed plans to treat London’s three airports differently with regards to airline fees.

At Heathrow, the CAA is to cap charges for five years after it found clear evidence of substantial market power.

At Gatwick and Stansted it is proposing more flexible price controls to reflect their weaker market power.

But it warned that if Gatwick did not come up with acceptable proposals along these lines, it would also face a five-year price cap.

It said although Stansted shows the weakest evidence of market power today, it it is likely to grow stronger between 2014 and 2019 as capacity around London becomes even more constrained.

Therefore, the CAA may impose "more detailed regulation unless prices at Stansted reduce over time".

"Protecting consumers and improving their experience is the core focus of our regulatory decision making," said Andrew Haines, CAA chief executive.

"Few passengers flying from Heathrow, Gatwick and Stansted fail to notice their differences, so it should be no surprise that our regulatory approach also differs at each airport.

"The proposals we publish today reflect their individual circumstances, ensure passengers are protected when they travel, and allow for continuing improvements in service and competition."

IAG chief executive Willie Walsh was not happy with the proposals.

"Heathrow airport is over-priced, over-rewarded and inefficient and these proposals, which will result in an increase in prices, fail to address this situation," he said.

"In the past the CAA has rewarded Heathrow for inefficiency and it is now the most expensive hub airport in the world. Its charges have tripled in the last 11 years with inflation busting increases year-on-year.

"The Gatwick proposals, which will result in a significant increase in charges, are completely unjustifiable, totally unacceptable and directly contravene the CAA’s new remit to represent customers’ interests."

Virgin Atlantic chief executive Craig Kreeger agreed that the CAA’s proposals should have gone even further at Heathrow.

"This move compounds the huge increases that passengers have endured in recent years with prices at Heathrow already triple the level they were 10 years ago. Coupled with ever increasing Air Passenger Duty, passengers flying to and from the UK are facing some of the highest travelling charges in the world," he said.
 
Meanwhie, EasyJet said it welcomed the CAA’s announcement that it views Gatwick as a monopoly airport,

"Continued regulation of Gatwick will protect the interests of all passengers who use the airport," it said.

Airline body BAR UK said it was cautiously optimistic.

"Whilst we believe that the pricing caps do not go far enough to drive the level of efficiency gains at airports that airlines and their passengers are seeking, the proposals are a step in the right direction," said chief executive Dale Keller.

Gatwick said it still believes it should be free from any regulation.

"We believe economic regulation is bad for passengers, airlines and the airport. It adds significant cost, which in turn gets passed onto our passengers through higher charges. It also focuses too much on what buildings should be constructed rather than concentrating on creating a better passenger experience," said chief executive Stewart Wingate.

"Crucially, it does not sufficiently reward innovation and growth by airlines at the airport."

Heathrow Airport issued a statement saying it fears the cap could impact customer service.
"Our first impression is that a 5.35% return on capital will put passenger service at risk by not attracting the necessary investment in Heathrow for the short, medium and long term," it said.

"We, and everyone interested in the health of our country’s transportation infrastructure, must consider whether this is a risk worth taking."

An overview of the CAA’s consultations for all three airports can be seen here