COMMENT: London airport charges

The UK Civil Aviation Authority (CAA) has published its final decisions on economic regulation at Heathrow, Gatwick and Stansted after April 2014, claiming that passengers benefit from lower prices and high service standards.  Clearly prices depend on airport to airline fees, but as far as service is concerned it is up to the individual airport.  To be fair, all three airports have improved significantly their offerings to the public since the dissolution of BAA, or are in the process.

The charges are a different story and, rather like the Airport Commission, the answers definitely do not satisfy everyone.

Let us take Stansted first which is easy.  The airport likes the verdict (see Stansted revamp progress below) and naturally Ryanair differs.  Should the CAA have come up with a statutory arrangement regarding figures Ryanair would not have liked that either.  Ryanair seemingly likes nothing – fact of life.  It is virtually a monopoly at Stansted and has now signed a 10-year contract.  Enough said.

With Gatwick and Heathrow the story is more complex.

The move, from April, means charges will be cut in real terms over the next five years at Heathrow, while the CAA will switch from capping fees at Gatwick to policing the deals the airport strikes with airlines.

Naturally Heathrow is far from happy with a veiled threat to reduce investment.  “We will review our investment plan to see whether it is still financeable in light of the CAA’s settlement,” said Chief Executive Colin Matthews.  Around the world Heathrow is seen as a major asset, previous majority shareholder Spanish conglomerate Ferrovial, seemingly having no problems in recently diluting its shareholding to parties in Canada, Malaysia and Qatar.

Stewart Wingate, CEO of Gatwick, said: “I am delighted in the progress that the airport is making to bring more competition to the London aviation market through the commercial arrangements currently being negotiated with its airlines.  These discussions have only been possible under our Contracts and Commitments framework, which has latterly been supported by the CAA.”

“However, I am disappointed that the CAA’s final decision appears not to acknowledge the importance of these ground-breaking commercial negotiations and has concluded, under its new definition, that the airport does have market power and requires an economic licence.  We are also disappointed at the CAA’s view of a fair price, as well as the intrusive nature of their monitoring requirements.  The airport will need to review the detail of the CAA final decision and consider its position.”  Again, whatever the CAA came up with the airports moan.  Why not just accept things and get on sorting out other problems.

British Airways remains largely anonymous following the Willie Walsh attitude to the already mentioned Airport Commission which IAG largely ignores.  Nothing from BA’s Chief Executive, IAG tending to be the mouthpiece for the carrier.  In a quote to The Guardian a BA non-person said the CAA had “made a step in the right direction” over Heathrow charges but that passengers would still be paying more than is warranted.  Back to Mandy Rice-Davies revised:  “They would say that wouldn’t they?”

As for Virgin Atlantic boss, Craig Keeper is at least assertive and makes some points. 

“Prices at Heathrow are already triple the level they were 10 years ago, and coupled with ever increasing Air Passenger Duty, customers flying to and from the UK are facing some of the highest travelling charges in the world.  Virgin Atlantic is totally committed to improving the passenger experience at Heathrow, but we believe this could have been achieved with a more significant reduction in charges.”

As for Gatwick his words are not that different whilst he does get a fee reduction. “We are glad the CAA agrees with us that the airport still holds market power over its airline customers and that safeguards must remain in place.  However, we believe the CAA has not gone far enough and that the passenger experience at Gatwick can be improved with a more significant reduction in charges.  We hope the CAA will properly hold Gatwick Airport and its shareholders to account in order to improve its price offer to its airline customers.”

“If it fails to do so, coupled with looser regulatory controls, we are concerned that the CAA is failing in its statutory obligation to protect passenger interests, and will consider our right to appeal on their behalf.”

Back to the CAA. 

See CAA document CAP 1147.

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