CMA supports CAA decision that Heathrow price cap must fall to £25.43 by 2024
The UK’s Competition and Markets Authority (CMA) has issued a verdict largely supporting the Civil Aviation Authority’s (CAA) pricing decision concerning Heathrow Airport. The CAA had previously mandated that Heathrow reduce average passenger charges from the current £31.57 per passenger to £25.43 by 2024, maintaining this sort of price until the end of 2026. Heathrow had sought to increase these charges to £40 per passenger, while British Airways, Delta Air Lines, and Virgin Atlantic Airways lobbied for charges below £20 per passenger. In its announcement last month, the CMA endorsed the CAA’s pricing strategy but highlighted the need for further consideration of minor pricing-related issues. The CMA’s final verdict was officially confirmed on October 17th. It was seen as a fair level, enabling Heathrow to encourage investors, but not over-charge passengers. Neither Heathrow nor the airlines are happy with the decision. There may be inadequacies in the regulatory framework, including the formula used to set fees at Heathrow.
.
Tweet
Heathrow Airport must reduce passenger charges rules UK CMA
Heathrow must reduce average passenger charges says UK’s Competition and Markets Authority (CMA).
19.10.2023 (International Airport Review)
The UK’s Competition and Markets Authority (CMA) has issued a verdict largely supporting the Civil Aviation Authority’s (CAA) pricing decision concerning Heathrow Airport. The CAA had previously mandated that Heathrow reduce average passenger charges from the current £31.57 per passenger to £25.43 by 2024, maintaining this sort of price until the end of 2026. See May 2023 link
Heathrow Airport had sought to increase these charges to £40 per passenger, while British Airways, Delta Air Lines, and Virgin Atlantic Airways lobbied for charges below £20 per passenger.
In its announcement last month, the CMA endorsed the CAA’s pricing strategy but highlighted the need for further consideration of minor pricing-related issues. The CMA’s final verdict was officially confirmed on Tuesday, October 17 2023.
Kirstin Baker, Chair of the group making the decisions on the appeals, said: “Having considered these appeals, we found that the CAA’s Heathrow price control struck broadly the right balance between ensuring prices for passengers are not too high and encouraging investors to maintain and improve the airport over time.
“There are a handful of smaller issues we have ordered the CAA to look at again and it has agreed to do this swiftly.”
Both Heathrow Airport and the concerned airlines expressed disappointment with the CMA’s final decision on their appeals and called for a revision of the regulatory framework governing airport charges.
A Heathrow spokesperson described the outcome as “disappointing”, but said that they would strive to deliver for their customers. They did say that the CAA must take more consideration of the views of customers so that the airport can enhance the experience for passengers and not just enable higher profits for airlines.
Airlines have spoken out regarding the decision saying that Heathrow Airport’s charges still remain one of the highest in the world making is noncompetitive. It has also been said that this issue has exposed inadequacies in the regulatory framework, including the formula used to set fees at the airport.
.
CMA issues final determination in Heathrow Airport appeals
The CMA has found that the CAA was not wrong on most of the issues that were appealed to it, but has ordered the CAA to reconsider 3 parts of its pricing decision.
The CMA is the appeal body for pricing decisions taken by the CAA meaning those affected, such as airlines and airports, can challenge decisions directly to the CMA. The CMA’s role in such appeals is not to re-take the CAA’s decisions, but to decide whether the regulator has made specific errors in its evaluation.
While the CMA has broadly found in favour of the CAA, there are 3 aspects of its pricing decision that were remitted to the CAA for reconsideration. In making its final determination, the CMA will issue an order requiring the CAA to ensure that these are considered promptly.
Kirstin Baker, Chair of the group making the decisions on the appeals, said:
Having considered these appeals, we found that the CAA’s Heathrow price control struck broadly the right balance between ensuring prices for passengers are not too high and encouraging investors to maintain and improve the airport over time.
There are a handful of smaller issues we have ordered the CAA to look at again and it has agreed to do this swiftly.
Details on the final determination can be found on the CMA’s dedicated webpage: H7 Heathrow Airport Licence modification appeals.
https://www.gov.uk/government/news/cma-issues-final-determination-in-heathrow-airport-appeals
.
.
See earlier:
Heathrow vs airlines – dispute continues as parties given permission to appeal CAA ruling on price cap
Heathrow Airport and separately 3 major airlines (Virgin Atlantic, British Airways and Delta Air Lines) have been granted permission to appeal the Civil Aviation Authority (CAA)’s decision on the Heathrow price cap. The airlines have been locked in a fierce dispute with Heathrow over the amount the airport can charge per passenger. Both sides launched rival appeals in April against the CAA’s decision to lower the cap; the appeal process was then passed to the Competition and Markets Authority (CMA). The appeals followed the CAA’s confirmation in March that the levy would remain fixed at the same rate as set out earlier in the year – not allowing Heathrow to charge a higher rate. The CAA had announced in January that the 2023 cap would be raised to £31.57 per passenger, up from £30.19. It will then fall about 20% to £25.43 per passenger in 2024 and will remain there until 2026. The airlines argue that Heathrow has played down its recovery from Covid, and used “knowingly undercooked and self-serving passenger forecasts,” to attempt to keep the cap, which is set based on passenger numbers, higher. Heathrow argue that the rate should be greater, to boost investment in the airport.
Click here to view full story…
.