Wednesday, October 28, 2009

Heathrow, Gatwick Airport Landing Fees to Increase

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The British Airports Authority (BAA), the operator of London's Heathrow and Gatwick Airports, is set to increase landing charges at the two airports.

The ruling by industry regulator Civil Aviation Authority (CAA) means airlines will have to pay BAA more to use Heathrow and Gatwick from 1st April this year.

During 2008/2009, landing charges will rise by 23.5% at Heathrow and by 21% at Gatwick, the CAA announced.

BAA will be able to charge £12.80 per passenger at Heathrow, and £6.79 per passenger at Gatwick.

The CAA has also permitted BAA to increase charges at the two airports by up to 7.5% more than inflation over the following four years.

The charges inevitably mean that airlines will pass on the charges to passengers in the form of higher ticket prices.

Higher landing fees for London's two main airports were first proposed by the CAA last November. At the time, the regulator said it was planning "significant" charge increases - but the increases are far higher than what was expected.

BAA itself requested higher charges last year in order to help pay for future facility upgrades at the two airports, especially Heathrow where £5 billion of investment is earmarked over the next few years. The company said the higher charges would be used to help pay for the costs of Heathrow's new Terminal 5, opening later this month, and the new Heathrow East Terminal development.

Indeed, the CAA commented that the new charges would allow the airport operator to "deliver genuine service quality improvements" for passengers and airlines.

Airlines Criticise Landing Fee Increases

The charge increases were, unsurprisingly, severely criticised by airlines.

Four of the biggest operators at Heathrow and Gatwick - Virgin Atlantic, bmi, Ryanair and easyJet - issued a joint statement in which they said the charges would "invevitably hurt customers".

Ryanair's Deputy Chief Executive, Michael Cawley, said: "we see this as very detrimental to the UK economy," said Ryanair Deputy Chief Executive Michael Cawley. "The UK is competing for both business and tourism travel with every other country in Europe. Passengers will vote with their feet. They will not come".

The airlines stated that above-inflation increases in landing fee charges had been levied against them for the last five years. They demanded a moratorium on price increases to be imposed.

British Airways said the charges were "overly generous", and accused the CAA of bowing to pressure from BAA to set higher-than-inflation rates.

"The objective of the regulator should be to ensure that BAA provides the infrastructure and services that customers require but in a cost effective and efficient way that does not over-compensate the airport operator financially", the airline said in a statement.

The airline also said that "the CAA must hold BAA to account throughout the five-year period to ensure the airport operator delivers improvements and does not divert funds to pay off [BAA parent company] Ferrovial's debts".

As reported by Airport International last week, BAA has to pay off a £9 billion debt acquired following its acquisition in 2006 by Ferrovial, a Spanish construction company. British Airways believes the higher charges could be used to service this debt, rather than invest it in infrastructure.

For their part, BAA said the changes did not actually go far enough.

A BAA statement said: "The review does not recognise sufficiently: the scale of the task we are embarked on; the pressures of handling such large infrastructure projects; the full cost of the increased security requirements; as well as the impact of the credit market turmoil".

Airlines Want BAA Break-Up

In their joint statement Virgin, bmi, Ryanair and easyJet also said that the CAA had "failed" in its duty to as regulator. They called on the Transport Secretary, Ruth Kelly, to "urgently review the position of the CAA in regulating aviation and to overturn the CAA ruling".

The airlines also said they want BAA broken up and restructured.

They said: "It is clear to us that the regulation of BAA's London airports has failed and needs to be changed. The Airports Act 1986 may have been a suitable framework 20 years ago, but it is no longer fit for purpose - consumers need greater competition and better protection than that currently afforded under the Act".

The airlines said the present Act does not offer a price control regime which protects the interests of the public.

Source - Airport International's London Reporter

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