UK airport regulator and Heathrow clash over charges

Heathrow Airport hits out at 'draconian' CAA, criticising price cap on airline fees.

by Elizabeth Anderson
Last Updated: 10 Jan 2014

Heathrow airport has slammed a move by the Civil Aviation Authority to cap how much it can charge airlines to use the west London site.

From April 2014, Heathrow Airport will have to cap the price it can charge airlines at 1.5% below inflation, under a final ruling from the industry regulator. The CAA had previously proposed capping prices in line with inflation for the next five years, so today’s announcement came as a surprise to Britain’s busiest airport.

‘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,’ Heathrow Chief Executive Colin Matthews said in a statement. As if he didn't have enough on his plate wrangling with the government and regulators defending its plans to build a third runway...

‘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.

However, the CAA said that today’s decision to reduce fees means passengers will benefit from lower prices and higher service standards, due to ‘a robust licensing regime.’

Dame Deirdre Hutton, Chair of the CAA, said: ‘London’s airports have benefited from substantial investment over the past decade, which has created world-class facilities for passengers. But prices have risen substantially in that time, with service quality sometimes failing to match the standards passengers have every right to expect.’

Heathrow, owned by a consortium led by Spain's Ferrovial, has some of the highest landing charges in the world and they have been rising above the rate of inflation since 2003. The airport had previously asked the CAA for a rise of 4.6% above the RPI inflation rate over the five years to 2019. Heathrow said it has invested £11 billion in the airport over the last ten years, but has previously hinted that it may scale back on investment if the CAA imposed a tough decision.

The CAA also drew conclusions on London's other major airports – Stansted and Gatwick. Stansted will no longer have its prices regulated as the airport does not have ‘substantial market power’, and airlines have the freedom to move elsewhere if prices become too high, the CAA concluded.

However, this statement hit a nerve with Ryanair, one of Stansted’s major customers, which said this decision would mean Stansted would increase charges resulting in ‘yet more damage to UK consumers and competition’.

Gatwick has already promised to maintain prices in line with inflation, and the CAA says it will monitor this decision. Along with Heathrow, Gatwick will be required to put in place ‘robust plans’ to ensure it is better prepared for disruption from extreme weather and technical faults.

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