CAA wants to cap Heathrow

The UK’s Civil Aviation Authority has proposed new limits on how much Heathrow Airport can charge airlines.

The regulator has proposed a below-inflation cap for Heathrow, at the rate of inflation minus 1.3% for the five years from April 2013. This is significantly below the current rate of inflation plus 7.5%, and below the inflation plus 5.9% requested by the airport’s operators, reports the BBC.

They propose a less punitive cap at Gatwick – inflation plus 1% – and to monitor prices at Stansted. They say the controls could lead to lower air fares. They could of course also affect the airport’s ability to invest in improvements.

A Heathrow spokesperson said of the proposal: “We will examine the CAA’s proposals for Heathrow’s Q6 regulatory settlement carefully over the coming weeks before responding fully. As the UK’s only hub airport Heathrow is a strategically important national asset. To stay competitive with overseas hubs like Amsterdam, Paris, Frankfurt and Dubai, Heathrow has invested £11 billion over the last ten years in new facilities such as Terminal 5 and the new Terminal 2 and passengers say they notice the difference. Over the same period returns to shareholders have fallen well below the level anticipated by the regulator.”

“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. We, and everyone interested in the health of our country’s transportation infrastructure, must consider whether this is a risk worth taking.”

The CAA will now consult on the plans before making its final decision early in 2014.

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