Competition Commission recommends higher Heathrow and Gatwick charges

Charges to airlines using Heathrow and Gatwick should rise at higher levels than those recommended by industry regulator the Civil Aviation Authority.

The Competition Commission also found that the airports, in failing to manage security queuing and queue times to avoid unacceptable delays to passengers, crew and flights, have “acted against the public interest”.

The Commission has proposed that these effects can be remedied through a broadening and strengthening of existing service quality regulations.

The CAA cannot reject a public interest finding made by the Commission and will be making proposals that remedy the adverse effects of the airports’ conduct.

The suggestion to raise charges has come from the Competition Commission and is separate to a wider review of BAA-owned UK airports including Heathrow, Gatwick and Stansted.

But any move towards a rise in charges at the two key London airports is sure to result in protests from airlines already unhappy at service standards at BAA airports.

The Commission recommends that maximum airport charges at Heathrow rise to £10.96 in 2008/09, with charges subsequently increasing by no more than retail price index (RPI) inflation plus 7.5% each year.

For Gatwick, the Commission recommends maximum airport charges rise to £5.48 in 2008/09, with charges subsequently increasing annually by no more than RPI inflation minus 0.5%.

This compares with projected charges for 2007/08 of £9.28 per passenger at Heathrow and £4.91 at Gatwick.

The CAA’s central case recommendations to the Commission in March were for maximum Heathrow charges of £10.29 in 2008/09 and annual increases of RPI plus 5.8% thereafter, and maximum Gatwick charges of £5.19 in 2008/09 and annual increases of RPI plus 1.0% thereafter.

A CAA statement said: “The main reasons for the differences between the Commission’s and the CAA’s price cap projections are the larger capital investment programmes now in prospect at each airport and the costs of delivering more stringent security processing and improving service quality in this area.”

The authority stressed that the Commission’s pricing suggestions, which have emerged following a six-month inquiry, are “advisory” rather than binding on the CAA.

The CAA is to issue for consultation its own firm price control proposals for Heathrow and Gatwick by November 20.

All parties will be able to submit further written evidence to the CAA during a two-month consultation period.

There will also be an opportunity for those with most direct interest to make any further representations at oral hearings, which the CAA plans for the end of January 2008.

The CAA remains on track to make its final price control decisions for Heathrow and Gatwick in February/March 2008, in order to allow for new price controls to come into effect at each airport for the five-year period starting on April 1, 2008.

by Phil Davies

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