UK aviation regulator hits Heathrow with lower price cap

Friday 10 January 2014 18.25
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Heathrow had submitted a plan to the CAA seeking to raise tariffs for airlines by 4.6% above inflation
Heathrow had submitted a plan to the CAA seeking to raise tariffs for airlines by 4.6% above inflation
Ryanair with happy with CAA's decision on Stansted
Ryanair with happy with CAA's decision on Stansted

London's Heathrow Airport will have to cap the prices it can charge airlines from April 2014 ,at a lower than expected 1.5% below inflation.

This is according to a final ruling from the UK industry regulator, the Civil Aviation Authority.    

The CAA had proposed capping prices at the UK's busiest airport in line with inflation for five years from 2014, but today said it would lower this further.
              
The regulator had been reviewing the market power of the big airports and whether this needed to be curbed by price caps following complaints from the airlines.

It said it would base its regulation for Gatwick airport on the airport's own plans, and would not impose any caps on the smaller Stansted airport.

Instead it reserved its harshest regulations for Heathrow, the busiest airport in Europe and the third busiest globally.
              
It also said it would ensure Heathrow and Gatwick were better prepared for disruption and could manage it effectively when it does occur.
              
Heathrow had originally submitted a plan seeking to raise tariffs for airlines by 4.6% above inflation, as measured by the retail prices index (RPI).
              
The CAA said it had toughened the regulation after seeing passenger traffic forecasts strengthen and the cost of capital revised at the airport.
              
Heathrow, whose owners include Spain's Ferrovial and the sovereign wealth funds of Qatar, China and Singapore, said the new prices would likely limit the amount it could invest in the airport.
              
"We are concerned by the degree of change since the CAA's final proposals just a short while ago," Heathrow chief executive Colin Matthews said.
              
"We want to continue to improve Heathrow for passengers. We will review our investment plan to see whether it is still financeable in light of the CAA's settlement," he added.
              
Ryanair, Europe's largest airline by passenger numbers, condemned the CAA decision not to regulate Stansted, one of its biggest bases.
              
"Today's decision is an example of the CAA's regulatory failure which will again harm consumers as Stansted will be able to further increase airport charges whenever it wishes, without any reference to competitive price levels," Ryanair's Director of Legal and Regulatory Affairs, Juliusz Komorek said.

Ryanair said the CAA was "falsely claiming" that Stansted did not have substantial market power and that therefore there was no need to further regulate charges at the Essex airport.

Meanwhile, Ryanair announced yesterday that it had wound up its defined pension scheme at the end of December 2013. The pension scheme has 121 members and had a deficit of €9.7m which will be fully funded by Ryanair, while it will also receive a top-up of up to €2.8m. 

Ryanair said that the 121 members of the defined benefit scheme will be able to join the airline's defined contribution scheme.