Gatwick Airport wants freedom from regulation on prices by the CAA
With Heathrow and Stansted, Gatwick is one of only 3 UK airports that is subject to a price regime set by the CAA. It is arguing that should be allowed to negotiate landing charges directly with airlines, rather than being regulated, through entering into individual commercial agreements with airlines. Gatwick says such deals, which would be struck under a legally-binding framework, could incentivise airlines to offer more routes. Gatwick says even for airlines that didn’t strike commercial agreements, charges would still be lower, increasing by 1.3% above the RPI over the next 7 years. By comparison, under continued regulation, charges would increase 3.3% above RPI over 5 years – which would mean landing charges rising from £8.80 per passenger in 2014, to £11.45 by 2018/19. But Virgin Atlantic is not keen on the idea, and nor is easyJet. Virgin says “The CAA must continue to regulate to ensure that Gatwick delivers services our passengers need at a price which is good value for money.”
Gatwick Airport pleads for freedom from regulation
Gatwick Airport has pledged a better deal for passengers and airlines if it is freed from price regulation.
14 Feb 2013 (Telegraph)
The London airport, which is one of only three in the country that is subject to a price regime set by the Civil Aviation Authority, has argued that it should be allowed to negotiate landing charges directly with airlines.
Stewart Wingate, Gatwick’s chief executive, claimed the airport could offer airlines much better deals if it was able to enter into individual commercial agreements.
Such deals, which would be struck under a legally-binding framework, could incentivize carriers to offer more routes out of Gatwick, the airport said.
For those airlines that didn’t strike commercial agreements, charges would still be lower, Gatwick claimed, rising by 1.3% above the retail prices index (RPI) measure of inflation over the next seven years.
Under continued regulation, charges would increase 3.3% above RPI over five years, the airport said, taking charges from £8.80 per passenger in 2014, to £11.45 by 2018/19.
However, the plan was met with scepticism by Virgin Atlantic, which warned the airport continues to hold “significant market power”.
“The CAA must continue to regulate to ensure that Gatwick delivers services our passengers need at a price which is good value for money,” a spokesperson for the airline said.
“Around £1bn has been invested in the airport experience at Gatwick in recent years. Instead of repeating that level of expenditure, the airport should be looking at making smart investment decisions to further improve passenger services in a cost effective way.”
Low cost airline easyJet also urged the CAA to keep Gatwick within the regulatory system to protect passengers.
“All the evidence shows that Gatwick is a monopoly airport and therefore should continue to be regulated. Without regulation passengers face the risk of higher charges,” the carrier said, adding that it believed there was scope for cutting charges by 9pc below the rate of inflation.
Gatwick’s proposals, revealed as part of a business plan that will see it invest £1bn over five years, will likely heap further pressure on rival Heathrow, which earlier this week faced a backlash from airlines after it set out plans to raise prices by almost 6pc above RPI.
The rivalry between the two airports has increased after Gatwick said it wanted to build a second runway that would allow it to better compete with Heathrow.
Currently Gatwick, Heathrow and Stansted negotiate with the CAA over charges every five years before the regulator sets a maximum fee they are permitted to charge per passenger.
Charges are paid by the airlines but are usually passed on to passengers through higher ticket prices.
Gatwick, which was bought in 2009 by Global Infrastructure Partners (GIP), said it would be able to offer lower charges after a one-off 10.7pc price increase due to a passenger numbers undershooting CAA forecasts over the last five years.
The CAA had forecast 37.7m passengers would pass through Gatwick’s doors by April 2014 but traffic is more likely to be in the region of 33.8m.
A CAA spokesperson said: “We will carefully consider Gatwick’s proposal, alongside their customers’ responses, as we go through the process of setting our regulatory approach for the period after April 2014.”
The regulator will publish its own proposals in April.
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See also
Gatwick Airport produces new Business Plan to 2024 with prices based on customer contracts
Date added: February 14, 2013
Gatwick Airport has produced its Revised Business Plan to 2024 (the last one went to 2020) which sets out their proposals for the coming years. They are putting forward a new deal that would allow Gatwick and its airline customers to develop bilateral, tailored contracts to replace the current system of regulation. The CAA invited Gatwick to propose such a framework in October 2012. Gatwick says this would give better levels of quality, price and service to airlines and passengers. Gatwick says this will promote competition between airports, and mean lower charges for airlines and passengers. Under the deal, passenger fees will rise from £8.80 in 2014 to a maximum of £10.68 in 2020/21. This means an increase of RPI+1.3% over a 7 year period rather than RPI +.3.3%. Gatwick claimed that if it stays within the current regulatory framework, the maximum per passenger fee would rise to £11.45 in 5 years. The CAA will come to a decision on the initial proposal on the airline contracts framework on 30 April 2013 and make a final decision in January 2014. Gatwick is planning to invest a further £1 billion in the airport between 2014 and 2019.
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Airlines object to Gatwick pricing proposals
easyJet, British Airways and Virgin Atlantic have all issued statements urging the Civil Aviation Authority to continue regulating Gatwick Airport’s charges.
The carriers were responding to Gatwick’s business plan for 2014-2019, published yesterday, in which the airport called to be taken outside the regulatory framework, whereby a price cap is set by the CAA on a five-yearly basis.
Gatwick’s ‘new deal’ proposes that, following a one-off price adjustment, the maximum average price level would rise by the retail price index (RPI) +1.3% over a seven-year period. This equates to an increase in its per passenger fee from £8.80 in 2014 to a maximum of £10.68 in 2020/21.
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BA said: ‘We believe that Gatwick Airport should remain a regulated business due to its substantial market power.
‘The airport’s charges over the past five years have risen by 56% and such relentlessly rising fees cannot continue in the coming years.
‘The charges should be reduced significantly and we hope that the Civil Aviation Authority ensures a fair settlement that works in the best interests of passengers using Gatwick Airport.’
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Virgin Atlantic said it believed the airport continued ‘to hold significant market power and the CAA must continue to regulate to ensure that Gatwick delivers services our passengers need at a price which is good value for money’.
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http://www.e-tid.com/airlines-object-to-gatwick-pricing-proposals/72831/