CAA increases BAA price controls

Source: Supply Chain Digital

Date :20/11/2007 10:45:06

The Civil Aviation Authority (CAA) will raise landing charges at Gatwick and Heathrow to allow airport operator BAA to finance service quality improvements to passengers and airlines.

The proposals, informed by the recommendations of the UK's Competition Commission, build on agreements reached between the airports and airlines, as well as over two years of consultation.

The CAA will make its final price control decisions in March 2008.

Price caps

The CAA said it supported the Competition Commission's recommendation that BAA's return on capital at Heathrow should be capped at 6.2 percent and 6.5 percent for Gatwick, from April 2008.

The CAA said it was proposing maximum charges subject to two months' further consultation of £11.97 per passenger in 2008/9 at Heathrow - a 15.6 percent like-for-like increase from the current price cap.

At Gatwick, the CAA said it was proposing £6.07 per passenger in 2008/9-representing a like-for-like 8.2 percent rise in real terms from the current price cap.

Under the present deal, BAA is allowed to make a return on investment of 7.75 percent at both airports.

Enhancing service

The CAA claimed that its proposed price controls recognised the increased cost of security operations at airports, and the challenge of raising finance in the current market conditions.

Dr Harry Bush, CAA Group director, Economic Regulation, said passengers and airlines deserved better than they had been provided with at Heathrow and Gatwick in recent years, but needed to recognise improvements have to be funded.

'These proposals go a long way to strengthening the incentives on BAA to continue to enhance facilities and service performance at each airport,' he said.

November 20, 2007