Heathrow Airport will be forced to cut its airline charges by 1.5% as the Civil Aviation Authority (CAA) looks at ways to balance competition at London’s airports.
Charges will fall from GBP20.71 in 2013/14 to GBP19.10 in 2018/19, with the drop expected to provide cheaper airfares.
With the reduction in income Heathrow would have to reduce its operational expenditure by more than GBP600 million and will stretch commercial revenue targets from retail and car park charges.
However the airport’s chief executive Colin Matthews said it will also be forced to review its investment plans.
“We are concerned by the degree of change since the CAA’s final proposals just a short while ago. In October the CAA accepted the need for changes to their April proposals, but has now reverted to a draconian position,” said Colin Matthews, chief executive of Heathrow Airport.
“We want to continue to improve Heathrow for passengers. We will review our investment plan to see whether it is still financeable in light of the CAA’s settlement,” he added.
Airlines argued the move by the CAA was not enough after seeing prices triple in the last 10 years.
“We were baffled at the CAA’s decision in October to increase the Heathrow settlement from their original recommendation. Today’s decision is a far cry from the reduction needed to mitigate the incredibly steep price rises customers have seen in Heathrow airport charges in the last few years,” said Craig Kreeger, CEO of Virgin Atlantic. “We will be carefully considering our right to appeal on behalf of our passengers who will ultimately pay the price for the CAA’s decision.”
What about the other airports?
Gatwick: Although the CAA has continued to accept the airport’s contracting framework it is disappointed that it is still seen as having substantial market power and needs an economic licence from the CAA. Charges at Gatwick are currently at GBP8.07 and have been assessed to drop RPI -1.6%.
Stansted: The Essex airport will be removed from economic regulation from April this year after the CAA found it has not substantial market power. Owners MAG said the CAA announcement was a ‘welcome endorsement’ to initiatives in the 10 months that aim to turn its fortunes around.