Plan for Stansted second runway slips back

10.12.2008   (Financial Times)

By Kevin Done, Aerospace Correspondent

A second runway at London Stansted airport will not be built until the second
half of the next decade at the earliest
, it emerged on Tuesday.

The Civil Aviation Authority, airport economic regulator, has followed recommendations
from the Competition Commission to exclude the £2.3bn ($3.4bn) project at Stansted
from the price control regime for the next five years to March 2014.

The CAA’s decision means BAA, Stansted’s owner, will have no funding from higher charges to finance development
work until a new price regime is introduced in six years.

The competition watchdog last month questioned the urgency of the expansion at
Stansted against a background of "deteriorating economic and financial conditions".    
Monthly traffic volumes at the UK’s third-largest airport have been falling year
on year for 12 months in succession.

The Competition Commission said its traffic forecasts indicated a second runway
would not be needed until 2017 at the earliest, two years later than proposed
by BAA.

A planning inquiry is due next year into BAA’s proposal to build the second runway
and a second terminal.  The inquiry could be derailed, however, by a change of
ownership of the airport.  The commission is separately investigating the structure
of BAA and has provisionally recommended the break-up of the group’s airport monopolies
in London and Scotland, including the sale of Stansted. BAA has already started
the process to sell Gatwick.

The CAA said on Tuesday it was proposing to freeze charges – the per passenger
levy on airlines – in real terms at Stansted for both 2009-10 and 2010-11.    It
proposed small increases of 1.6 %   above inflation in the subsequent three years,
taking the charge to £6.65 per passenger in 2013-14.

BAA said it was "disappointed" that a significant element of its spending to
date on preparing for expansion at Stansted had thus been ruled out.     "We will
continue to press for a regulatory framework which reflects the full cost of bringing
forward the second runway proposals at Stansted," it said.

However, the CAA proposals were welcomed by Ryanair and EasyJet, the biggest operators at the airport, which have been campaigning hard to keep
charges and capital spending at the airport in check.    "Keeping prices broadly
flat over the coming years should ensure consumers continue to be protected from
BAA’s worst monopolistic excesses," said EasyJet.

The CAA said it would also impose a service quality rebate scheme at Stansted
similar to those at Heathrow and Gatwick with financial penalties – up to 7% of
charges – if BAA failed to meet agreed standards.