Heathrow told to cut charges
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Heathrow Airport has been told to cut charges at the airport in proposed regulations announced by the Civil Aviation Authority (CAA).
The airport has been given a price cap of RPI -1.3% for April 2014-April 2019 after tripling its charges in the last 10 years.
Meanwhile, rival Gatwick is allowed a RPI +1% and a new commercial contract strategy and Stansted will be monitored by the CAA during its expected growth in the next five years due to airport growth constraints elsewhere.
Heathrow made a tentative reaction to the proposals but warned it would lead to less development and higher costs for passengers.
“We will examine the CAA’s proposals for Heathrow’s Q6 regulatory settlement carefully over the coming weeks before responding fully. 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. We, and everyone interested in the health of our country’s transportation infrastructure, must consider whether this is a risk worth taking,” its statement read.
Virgin Atlantic boss Craig Kreeger and IAG’s chief executive Willie Walsh welcomed the reduction in charges but said they didn’t go far enough particularly coupled with rises in Air Passenger Duty (APD).
“Although today’s recommendations from the CAA are a welcome step to address the incredibly steep price rises we have seen in Heathrow airport charges in the last few years, we believe they should have gone even further. This move compounds the huge increases that passengers have endured in recent years with prices at Heathrow already triple the level they were ten 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,” said Kreeger.
“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,” said Walsh.
The Board of Airline Representatives in the UK (BAR UK) agreed the pricing caps could go further but welcomed the mixed approach to the airports.
“It is encouraging that the CAA has listened to industry concerns over the need for a more flexible market based approach than previous regimes and we are cautiously optimistic that the final regulation will better meet the needs of consumers and the airline industry,” said Dale Keller, chief executive of BAR UK.
“Incorporating increased collaboration between airport operators and the airlines within the regulatory framework is particularly welcome since industry agreement is always preferable to excessive regulation. 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,” he added.