BAA told to cut further pounds 150m from airport fees

Charges at Heathrow, Gatwick and Stansted are to be cut by a further pounds 150m over the next five years under proposals from the Civil Aviation Authority yesterday, reinforcing their position as some of the world's cheapest airports for airlines and passengers alike.

The CAA is recommending that the owner of the three airports, BAA, limit increases in landing charges levied on airlines to inflation less 3 percentage points from 1997 to 2002. The formula is based on Heathrow Terminal 5 being given the go-ahead once the current public inquiry is complete.

The CAA's recommendations followed a six-month inquiry by the Monopolies and Mergers Commission, which also concluded that there was no case for breaking up BAA's monopoly over the three south-east airports on public interest grounds.

The new formula will reduce the landing charge per passenger at Heathrow from pounds 4.64 to pounds 4.02 over the next five years and represents a further softening of the price curbs on BAA's monopoly over airports in the south- east.

Under the existing five-year price control formula, which ends in April next year, the increase in charges has been capped at RPI-4. The charges account for 28 per cent of BAA's pounds 1.25bn revenues.

However the CAA has also recommended that BAA be allowed to raise its charges by 15 per cent over the two years from 1991-2001 to recover pounds 55m of revenue that could disappear if intra-EU duty-free sales are abolished.

In a market dragged sharply lower by fears of a Wall Street crash BAA shares were the star performer, rising 15p to 493p as the City gave the thumbs up to the new pricing proposals.

However, Sir John Egan, BAA's chief executive, said the new formula, which is in line with the recommendations of the Monopolies and Mergers Commission, was "clearly very challenging".

He said that BAA had asked to be allowed to raise its charges annually in line with inflation and recoup all the duty-free profits it stands to lose if the concession is abolished in 1999.

"It is less than we asked for and could have implications not just for BAA but for our customers, both airlines and passengers, and also our suppliers, not least because of the difficulties it poses for our construction programme."

The view among City analysts, however, was that the new formula would not jeopardise BAA's pounds 4.4bn investment programme over the next 10 years, the centre-piece of which is Heathrow's Terminal 5.

There will now be a one-month public consultation period, with the CAA announcing its final decision at the end of October or early November.

Airlines that gave evidence to the MMC overwhelmingly backed BAA's call that it should be allowed a price control formula that enabled it to fund major investments such as T5.

But local authorities and local resident groups wanted wider environmental issues to be considered.

Arts and Entertainment
Judi Dench appeared at the Hay Festival to perform excerpts from Shakespearean plays
tvJudi Dench and Hugh Bonneville join Benedict Cumberbatch in BBC Shakespeare adaptations
Arts and Entertainment
Exhibition at the Centre Pompidou in Metz - 23 May 2012
Is this how Mario Balotelli will cruise into Liverpool?
Ronahi Serhat, a PKK fighter, in the Qandil Mountains in Iraqi Kurdistan
Arts and Entertainment
Alfred Molina, left, and John Lithgow in a scene from 'Love Is Strange'
ebooksAn evocation of the conflict through the eyes of those who lived through it
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Soft Developer (4.0, C#, Windows Services, Sockets, LINQ, WCF)

£65000 - £75000 per annum: Harrington Starr: .NET Developer (4.0, C#, Windows ...

C# Developer -Winforms, VB6 - Trading Systems - Woking

£1 per annum: Harrington Starr: A leading financial software house with its He...

C #Programmer (.Net 4.0/4.5/ C#) -Hertfordshire-Finance

£45000 - £50000 per annum: Harrington Starr: C #Developer (.Net 4.0/4.5/ C#, A...

JQuery Developer JQuery, UI, Tomcat, Java - Woking

£1 per annum: Harrington Starr: JQuery Developer JQuery, UI, Tomcat, Java - Tr...

Day In a Page

Middle East crisis: We know all too much about the cruelty of Isis – but all too little about who they are

We know all too much about the cruelty of Isis – but all too little about who they are

Now Obama has seen the next US reporter to be threatened with beheading, will he blink, asks Robert Fisk
Neanderthals lived alongside humans for centuries, latest study shows

Final resting place of our Neanderthal neighbours revealed

Bones dated to 40,000 years ago show species may have died out in Belgium species co-existed
Scottish independence: The new Scots who hold fate of the UK in their hands

The new Scots who hold fate of the UK in their hands

Scotland’s immigrants are as passionate about the future of their adopted nation as anyone else
Britain's ugliest buildings: Which monstrosities should be nominated for the Dead Prize?

Blight club: Britain's ugliest buildings

Following the architect Cameron Sinclair's introduction of the Dead Prize, an award for ugly buildings, John Rentoul reflects on some of the biggest blots on the UK landscape
eBay's enduring appeal: Online auction site is still the UK's most popular e-commerce retailer

eBay's enduring appeal

The online auction site is still the UK's most popular e-commerce site
Culture Minister Ed Vaizey: ‘lack of ethnic minority and black faces on TV is weird’

'Lack of ethnic minority and black faces on TV is weird'

Culture Minister Ed Vaizey calls for immediate action to address the problem
Artist Olafur Eliasson's latest large-scale works are inspired by the paintings of JMW Turner

Magic circles: Artist Olafur Eliasson

Eliasson's works will go alongside a new exhibition of JMW Turner at Tate Britain. He tells Jay Merrick why the paintings of his hero are ripe for reinvention
Josephine Dickinson: 'A cochlear implant helped me to discover a new world of sound'

Josephine Dickinson: 'How I discovered a new world of sound'

After going deaf as a child, musician and poet Josephine Dickinson made do with a hearing aid for five decades. Then she had a cochlear implant - and everything changed
Greggs Google fail: Was the bakery's response to its logo mishap a stroke of marketing genius?

Greggs gives lesson in crisis management

After a mishap with their logo, high street staple Greggs went viral this week. But, as Simon Usborne discovers, their social media response was anything but half baked
Matthew McConaughey has been singing the praises of bumbags (shame he doesn't know how to wear one)

Matthew McConaughey sings the praises of bumbags

Shame he doesn't know how to wear one. Harriet Walker explains the dos and don'ts of fanny packs
7 best quadcopters and drones

Flying fun: 7 best quadcopters and drones

From state of the art devices with stabilised cameras to mini gadgets that can soar around the home, we take some flying objects for a spin
Joey Barton: ‘I’ve been guilty of getting a bit irate’

Joey Barton: ‘I’ve been guilty of getting a bit irate’

The midfielder returned to the Premier League after two years last weekend. The controversial character had much to discuss after his first game back
Andy Murray: I quit while I’m ahead too often

Andy Murray: I quit while I’m ahead too often

British No 1 knows his consistency as well as his fitness needs working on as he prepares for the US Open after a ‘very, very up and down’ year
Ferguson: In the heartlands of America, a descent into madness

A descent into madness in America's heartlands

David Usborne arrived in Ferguson, Missouri to be greeted by a scene more redolent of Gaza and Afghanistan
BBC’s filming of raid at Sir Cliff’s home ‘may be result of corruption’

BBC faces corruption allegation over its Sir Cliff police raid coverage

Reporter’s relationship with police under scrutiny as DG is summoned by MPs to explain extensive live broadcast of swoop on singer’s home