Airport Charges to be reduced in shake-up

Airport Charges To Be Reduced In Shake-Up


Airlines are to be charged less by three major airports -
including Heathrow - in a move that could lead to lower ticket prices.


1:13pm UK,
Tuesday 30 April 2013



Video: Regulator: Passengers Come
First
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Douglas McNeill, investment director at Charles Stanley,
talks to Sky News about the aviation regulator's push to limit airport
charges.

Video: Fee Shake-Up: Airlines To
Benefit
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Three London airports have been told to reduce the amount of
money they charge airlines in take-off and landing fees.

The move by the aviation regulator should limit the fare rises imposed on
passengers using Heathrow, Gatwick and Stansted airports.

The Civil Aviation Authority (CAA)'s proposals will see airlines charged much
less for using the airports between 2014 and 2019 than they were between 2009
and 2014.

The regulator said that over the period the charges should be capped at the
RPI rate of inflation minus 1.3%.

This is significantly less than Heathrow’s charges between 2009 and 2014,
which were RPI plus 7.5%.
Heathrow's rise in profit was boosted by an
increase in its airline fees
The airport's bosses had proposed an increase in fees from £19.33 per
passenger in 2012/13 to as much as £27.30 in 2018/19.

It comes after Heathrow - which is controlled by Spain's Ferrovial - reported
a 12% rise in profit in 2012 to £1.3bn - driven mostly by an increase in the
fees it charges airlines.

But the CAA said it had "found clear evidence of substantial market power" at
Heathrow and "after a decade when prices have risen ... is now looking to
encourage further investment whilst improving value for passengers in other
ways".

The regulator proposed a more flexible system for Gatwick, but said that if
the airline did not make acceptable proposals itself, charges would be capped at
RPI plus 1%.

This is lower than the RPI plus 2% regime that has been in place at the West
Sussex airport between 2009 and 2014.

And at Stansted, the CAA said its regulation would take the form of
monitoring charges and service quality - but would become stricter "unless
prices at Stansted reduce over time".
Gatwick bosses said the CAA's proposals were
"too demanding"
The chief executive of CAA, Andrew Haines, said protecting consumers was the
"core focus" of the proposals.

"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," he said.

"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."

But Heathrow bosses questioned whether the proposals were "a risk worth
taking".

"To stay competitive with overseas hubs like Amsterdam, Paris, Frankfurt and
Dubai, Heathrow has invested £11bn over the last 10 years ..."

"Over the same period returns to shareholders have fallen well below the
level anticipated by the regulator," a company statement said.
British Airways' Willie Walsh said the
proposals did not go far enough
"Our first impression is that a 5.35% return on capital will put passenger
service at risk by not attracting the necessary investment in Heathrow for the
short, medium and long term."

Gatwick said the suggested RPI plus 1% formula was "too demanding and based
on unrealistic assumptions".

"The CAA must not hold us back through imposing heavy-handed regulation, red
tape in the form of a licence and an inflexible price control, but should allow
us to build on this success (of the last three years)," chief executive Stuart
Wingate said.

Stansted said it would study the details of the CAA's plans before
responding.

The proposals - to be finalised next year - were broadly welcomed by
airlines, which have been arguing against what they see as excessive
charges.

The Board of Airline Representatives - which represents 80 airlines - said it
was encouraging that the CAA has listened to industry concerns over the need for
a more flexible approach.

"We are cautiously optimistic that the final regulation will better meet the
needs of consumers and the airline industry," chief executive Dale Keller
said.

But Willie Walsh, the chief executive of British Airways parent company IAG,
said the proposals did not go far enough.

"Heathrow airport is over-priced, over-rewarded and inefficient and these
proposals, which will result in an increase in prices, fail to address this
situation," he said.

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