BA fury at increase in airport fees
The UK's biggest airline today reacted with fury to a new price regime that will drive up fares at Britain's two busiest airports.
The Civil Aviation Authority (CAA) announced that airport operator BAA can substantially increase the landing fees it charges airlines at Heathrow and Gatwick over the next five years.
The settlement is bound to lead to airlines passing some of the increase on to passengers in terms of increased ticket prices.
British Airways said the CAA's decision "to allow BAA to ramp up airport charges significantly demonstrates conclusively that the airport regulation system has failed".
Paul Ellis, BA's airport policy and infrastructure general manager, added: "When BAA's new owners, Ferrovial, bought them, the CAA said they would not be influenced by Ferrovial's high debt levels.
"In practice, they have ignored their own policy and caved in to intense pressure from BAA by setting excessive price increases. Heathrow passengers will pay, on average, 17% more than the Competition Commission recommended in September 2007."
Today's announcement covers the period from April 2008 to the end of March 2013. The CAA said BAA could increase charges at Heathrow in 2008/09 by 23.5% compared with the charges over the last five years, while the increase at Gatwick will be 21%.
Then, for the period from April 2009 to the end of March 2013, Heathrow charges will be allowed to rise by no more than 7.5% a year above the retail price index inflation, while the Gatwick annual rise will be no more than inflation plus 2.0% a year.
The CAA also ruled that BAA's rate of return on its investments should be no more than 6.2% at Heathrow and no more than 6.5% at Gatwick.
This compared with a figure of 7.75% for both airports that BAA had requested.
Four other airlines - Virgin Atlantic, bmi, Ryanair and easyJet - echoed BA's view that airport regulation was failing.
In a joint statement, the four carriers said:
* A complete overhaul of the regulatory system was needed;
* BAA's London airports needed to be restructured;
* Transport Secretary Ruth Kelly must step in to resolve the CAA's failings;
* A moratorium was needed on price proposals;
* BAA's "failing finances" should be made public.
The airlines said of the CAA announcement: "This clearly demonstrates that the system is broken and needs to be changed. Over the next five years, the regulator will allow charges (based on the number of passengers) at Heathrow to increase from £10.36 to £19.31 - a rise of 86% - while at Gatwick charges will increase by 49% from £5.61 to £8.36.
"These increases, which will inevitably hurt consumers, follow a substantial increase in charges at Heathrow and Gatwick in the past five years and a doubling of charges at Stansted in the last year. Stansted charges are also proposed to double in the coming five years."
The airlines continued: "That these price increases are significantly less than those demanded by BAA is a cause for alarm not celebration, as BAA has demonstrated that it is expecting the travelling public to pick up the bill for Grupo Ferrovial's highly-leveraged speculative acquisition.
"This was financed through £1.59 billion of its own money against £8.72 billion of borrowings. During its bid defence in 2006, the previous BAA management explicitly used the assumption of a lighter regulatory regime in order to dramatically increase the value of the company. This resulted in BAA being sold for a premium of around 49% above its previous long-term market."
The airline statement went on: "BAA's ability to cynically 'game' the system has been aided by an outdated regulatory regime and a regulator that is failing to fulfil its statutory duties. In fact, since the sale of BAA, the regulator (the CAA) has consistently skewed decisions in favour of BAA and to the detriment of the airlines and the travelling public."