CAA proposals to limit airport charges at Heathrow, Gatwick and Stansted over next 5 years

Proposals by the CAA on changes to the regulatory regime for Heathrow, Gatwick and Stansted are the most significant reform of airport regulation since the 1987. Heathrow is likely to be prevented from raising its charges to airlines as much as it had hoped.  The CAA plans could mean cheaper air fares from Heathrow, though the airport had wanted to be allowed to raise charges by 5.9% per year in real terms between 2014 and 2019  – to pay back to shareholders. The CAA wants a rise only in line with inflation, at the most.  The CAA will be consulting on its proposals and make its final decision in October. Heathrow’s charges are higher than those of Amsterdam, Frankfurt and Hong Kong, because airlines like to fly there and there is little spare capacity – hence the market would allow the cost to rise. In the past, the CAA allowed Heathrow to rise its charges, to pay for infrastructure like T5. The CAA is now considering removing caps on aeronautical charges at Gatwick and Stansted from next year. They would then be able to agree aeronautical charges with the airlines, but the CAA would retain the right to intervene if it regards the agreements as unacceptable.  The civil aviation act in 2012 gave the CAA  new powers over airport regulation.

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London airfare rises to be limited over the next five years

Take off: charges to airlines for using Heathrow, Gatwick and Stanstead are to be changed
Staff/Agencies (Evening Standard)

30 April 2013

London’s air travellers received a welcome lift today after aviation regulators proposed changes that would limit the amount ticket prices could rise.

The proposals from the Civil Aviation Authority (CAA) will mean airlines will be charged far less for using Heathrow, Gatwick and Stansted Airports from 2014-19 than they were for the 2009-14 period.

This will, in turn, limit the fare rises that would be imposed on passengers at these airports.

The CAA proposals, to be finalised next year, also provide cheer for the airlines which have been arguing against what they see as excessive charges.

Heathrow, Gatwick and Stansted are the only airports regulated by the CAA, which can cap the amount airport bosses can impose on airlines in take-off and landing fees.

For 2014-19, the CAA has proposed that airline charges at Heathrow should be capped at the RPI rate of inflation minus 1.3%.

This is far less than the figure of RPI plus 7.5% for Heathrow for 2009-14.

It is also far less than the 2014-19 charge figure proposed by Heathrow bosses, which would have seen charges increase at the west London airport from the equivalent of £19.33 per passenger for 2012/13 to as much as £27.30 for 2018/19.

For Gatwick, where bosses had pressed for complete deregulation, the CAA today proposed a much more flexible system but still underpinned by a licence from the CAA.

The CAA said this new approach would require effective airport-airline collaboration, and that so far “the airport has not yet made acceptable proposals along these lines”.

If nothing can be sorted out, the CAA said charges for 2014-19 at Gatwick would be capped at RPI plus 1% which is lower than the RPI plus 2% regime that has been in place at the West Sussex airport for 2009-14.

At Stansted, where Ryanair chief executive Michael O’Leary has long complained about the level of charges, the CAA’s regulation will take the form of monitoring charges and service quality.

The CAA said this would ensure passengers at the Essex airport were protected while minimising the regulatory burden on airport and airlines.

But the CAA said it might impose more detailed regulation “unless prices at Stansted reduce over time”.

http://www.standard.co.uk/business/business-news/london-airfare-rises-to-be-limited-over-the-next-five-years-8596729.html

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Passenger fare rises to be limited as airlines see regulatory charge fall

Heathrow bosses had proposed a rise in airline charges. Picture: Steve Parsons/PA Wire

Heathrow bosses had proposed a rise in airline charges. Picture: Steve Parsons/PA Wire

April 30, 2013 (London 24)

Airlines are to be charged less for using London’s airports than they have in previous years, it was announced today, limiting the fare rises passengers will face.

The charges imposed on airlines from 2014-2019 will be less than for the 2009-2014 period. The Civil Aviation Authority has proposed that, over coming years, charges at Heathrow, Gatwick and Stansted airports should be capped at the RPI rate of inflation minus 1.3 per cent – which is far less than the previous rate of RPI plus 7.5 per cent.

The proposals from the CAA, which regulates London’s three largest airports, will provide cheer for the airlines, which have been arguing against what they see as excessive charges.

The charges suggested are far less than the 2014-19 charge figure proposed by Heathrow bosses, which would have see charges increase at the west London airport from the equivalent of £19.33 per passenger for 2012/13 to as much as £27.30 for 2018/19.

For Gatwick, where bosses had pressed for complete deregulation, the CAA today proposed a much more flexible system but still underpinned by a licence from the CAA.

The CAA said this new approach would require effective airport-airline collaboration, and that so far “the airport has not yet made acceptable proposals along these lines”.

If nothing can be sorted out, the CAA said charges for 2014-19 at Gatwick would be capped at RPI plus 1 per cent which is lower than the RPI plus 2 per cent regime that has been in place at the West Sussex airport for 2009-14.

At Stansted, where Ryanair chief executive Michael O’Leary has long complained about the level of charges, the CAA’s regulation will take the form of monitoring charges and service quality.

The CAA said this would ensure passengers at the Essex airport were protected while minimising the regulatory burden on airport and airlines.

But the CAA said it might impose more detailed regulation “unless prices at Stansted reduce over time”.

CAA chief executive Andrew Haines said: “Protecting consumers and improving their experience is the core focus of our regulatory decision-making.

“Few passengers flying from Heathrow, Gatwick and Stansted fail to notice their differences, so it should be no surprise that our regulatory approach also differs at each airport.

“The proposals we publish today reflect their individual circumstances, ensure passengers are protected when they travel, and allow for continuing improvements in service and competition.”

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EASYJET STATEMENT ON CAA Q6 PRICE PROPOSALS

30.4.2013  (EasyJet)

easyJet welcomes the CAA’s announcement that it views Gatwick as a monopoly airport.
Continued regulation of Gatwick will protect the interests of all passengers who use the airport.

easyJet’s preference is always to engage constructively with airports to reach commercial agreements which are in both parties interests – and the interests of passengers – and so agrees in principle with the CAA’s new approach to regulation at Gatwick.

However, despite easyJet’s efforts to achieve such an agreement with Gatwick we were unable to reach a mutually agreeable commercial deal.

This reflects the market power which Gatwick wields and shows the need for continued regulation.

easyJet is disappointed with the proposed charges of RPI +1% which appears to be driven by capital expenditure that doesn’t provide value for money for passengers and an unreasonably high cost of capital.

easyJet will respond to the CAA asking for it to reduce the proposed charges.

http://corporate.easyjet.com/media/latest-news/news-year-2013/30-04-2013-en.aspx?sc_lang=en

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Ryanair supremo launches huge broadside over Stansted charges

JOHN MULLIGAN – 30 APRIL 2013 (Belfast Telegraph)

RYANAIR boss Michael O’Leary has again lashed out at the Civil Aviation Authority (CAA), claiming it’s been “sitting on its hands” while charges climb at Stansted, the airline’s biggest base.

Mr O’Leary was incensed earlier this year when the former owners of Stansted secured approval for a 6% increase in landing charges just days before the airport was sold for £1.5bn to Manchester Airports Group (MAG).

He has just written a fresh complaint to the CAA. Stansted was sold by Heathrow Airport Group, formerly BAA, which is majority controlled by Spanish construction group Ferrovial.

It was forced to sell Stansted after a ruling by the UK’s Competition Commission.

The watchdog ordered the sale of Stansted and either Glasgow or Edinburgh airport in order to boost competition.

Ryanair is Stansted’s biggest customer, accounting for about 70% of its business.

While Mr O’Leary initially welcomed the sale of Stansted, he was later angered when it emerged the price hike had been approved prior to a sale.

That increase was pushed through despite traffic at Stansted being in decline.

Mr O’Leary accused it of being a “sweetener” to encourage Manchester Airports to buy Stansted and urged the CAA to investigate.

But Iain Osborne, the CAA’s group director of regulatory policy and a former Northern Ireland Utility Regulator, refused to initiate such a probe. He told Ryanair that the price increase was in line with the permitted price cap and that there was “no reason” for the CAA “to question the airport’s motives”.

“It is inconceivable that any regulator, charged with protecting the reasonable interests of airport users, would not investigate why Ferrovial, on the week before they handed over Stansted to MAG, imposed a 6% price increase … which will clearly be of no benefit to Ferrovial,” Mr O’Leary said in a letter to the CAA this month.

Ryanair has scaled back its presence at Stansted due to the increased charges.

Passenger numbers at Stansted have fallen from about 24m in 2007 to 17.5m in 2012.

http://www.belfasttelegraph.co.uk/business/business-news/ryanair-supremo-launches-huge-broadside-over-stansted-charges-29230209.html

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April 27, 2013 (Financial Times)

Heathrow faces order from regulator to cut charges to airlines

By Andrew Parker

……The Civil Aviation Authority’s proposals for Heathrow could potentially produce lower air fares and contrast starkly with plans for lighter touch regulation at Gatwick and Stansted airports…….  Stansted will be offered the freedom to strike deals with airlines relating to aeronautical charges at the airport, with the CAA having the right to intervene if it regards the agreements as unacceptable. ……   Similar arrangements could be put in place at Gatwick if it can reach agreements with airlines but should this prove impossible, the CAA is expected to say it would still cap the airport’s charges.
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Full FT article at

http://www.ft.com/cms/s/0/db92797e-ae52-11e2-bdfd-00144feabdc0.html#axzz2RqGLgY1x

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See earlier:

 

Heathrow, Gatwick and Stansted face regulatory shake-up by CAA and pricing changes

Date added: April 21, 2013

The CAA has the responsibility of setting the maximum level of airport charges, every 5 years, for Heathrow, Gatwick and Stansted -the 3 “designated” airports. On 30th April the CAA is expected to announce its initial plans. It will make a final decision in January 2014. The landing charges generally rise a bit faster than the rate of inflation and the RPI (retail price index) and charges are passed on to passengers, increasing air fares. Since the last 5 yearly review, the three airports now each has a different owner, whereas before all three were BAA owned. The CAA is not expected to allow Heathrow to increase its landing charges of 5.9% a year above inflation – which it has requested – and which have enraged the airlines. Gatwick airport has been campaigning to be permitted to strike commercial deals with major customers such as easyJet, which it says would reduce its fares. Gatwick already has different landing charges in summer and winter. The CAA’s announcement is expected to trigger intense lobbying by airports and airlines over the regime for Heathrow, Gatwick and Stansted.

Click here to view full story…

 


Gatwick Airport wants freedom from regulation on prices by the CAA

14.2.2013

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.”   http://www.airportwatch.org.uk/?p=576

 

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Heathrow Airport produces its 5 year business plan with large rise in landing charges to pay for £3 billion investment

12.2.2013

Heathrow Airport has  produced its business plan for Q6 (which is the 6th period of 5 years, from April 2014 -2019). It plans to spend some £3 billion on infrastructure, like work on Terminal 2.  As Heathrow and the CAA over-estimated the number of passengers using Heathrow over the past 3  years, their income  has been lower. Therefore Heathrow plans to raise its landing charges per passenger, by as much as 30 -40% by 2019 – much more than inflation.  It said its prices “inevitably” had to rise in order to ensure a “fair return” to its investors. The CAA will publish its final decision on whether it has approved Heathrow’s proposals in January 2014.  Launching the investment plans,  Colin Matthews said the airport envisaged passenger numbers increasing from just under 70m now to around 72.6m by 2018-19.  Heathrow’s 5-year plan is separate from any decision on whether a 3rd runway is built.  Maximum airport charges allowed by the CAA are calculated using a complex formula taking into account the total value of Heathrow’s assets, return on capital invested and forecast number of passengers.  http://www.airportwatch.org.uk/?p=592,


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