BAA angers airlines with subsidy plan for Stansted

The airports operator BAA was facing a battle with some of Britain's leading airlines last night after indicating that the £4bn cost of a new runway at Stansted would be met partly by passengers using other London airports.

Current regulatory rules governing airport expansion say that any increases in capacity should be self-financing and based on what airlines and passengers using that airport are prepared to pay.

But Mike Clasper, BAA's chief executive, said yesterday that passengers using Heathrow and Gatwick could have to pick up part of the tab to reflect the benefit that air travellers across the south-east would derive from a second runway at Stansted, due to be in operation by 2011-12.

"The people who should pay are the airlines who use Stansted but we also believe that passengers across London will also benefit from a new runway at Stansted," he said.

He added that BAA would work with the regulator, the Civil Aviation Authority, to get the "right balance" between what Stansted's passengers and those at other airports should pay.

The CAA said in a statement that it would be prepared to depart from so-called "stand-alone regulation" of each of the three south-east airports only if there was "compelling evidence to demonstrate that users in aggregate were genuinely better off as a result and that the impact was not unduly distortionary or discriminatory as regards other airports in the South East."

But airlines at Heathrow, already smarting from a 40 per cent increase in landing charges to fund the new Terminal Five, warned they would oppose cross-subsidies fiercely. Sir Michael Bishop, chairman of bmi British Midland, Heathrow's second-biggest user, said: "We do not believe BAA can fund such investment without cross-subsidy from its Heathrow operations. But I can promise that we will fight such a threat every step of the way."

He added that if cross-subsidy did look likely then bmi would call for the break-up of BAA's south-east monopoly.

Sir Richard Branson, chairman of Virgin Atlantic, also warned that he remained "totally opposed to cross-subsidisation between London's airports", saying he would look to the CAA to make sure those who benefited from Stansted's expansion also paid for it.

Stansted made an operating profit of £42m on revenues of £132m last year, and although its passenger numbers have grown from 7 million five years ago to 19 million this year, there are severe doubts about whether it could finance the huge investment needed to grow to 80 million passengers by 2030 under its own steam.

Mr Clasper said BAA had learned the lessons of the past when it attempted to expand Stansted too quickly. He said the new expansion of the Essex airport would be carried out in a phased manner to ensure that capacity kept pace with demand. The initial phase will involve investment of about £2bn on the new runway and associated terminal, apron and parking to increase Stansted's capacity to 50 million passengers - 35 million using the existing runway when it is operating at full tilt and 15 million from the new runway. Only when the 50 million figure was reached would BAA increase investment to the full £4bn.

Mr Clasper also rejected fears that an increase in landing charges would undermine the business models of the low-cost carriers such as Ryanair and easyJet. By 2008 landing charges would rise by only £2 a passenger to £5, and even further rises after that would not be enough to make a big impact on ticket prices.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Software Development Manager

£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Product Manager - (Product Marketing, Financial Services)

£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Day In a Page

As in 1942, Germany must show restraint over Greece

As in 1942, Germany must show restraint over Greece

Mussolini tried to warn his ally of the danger of bringing the country to its knees. So should we, says Patrick Cockburn
Britain's widening poverty gap should be causing outrage at the start of the election campaign

The short stroll that should be our walk of shame

Courting the global elite has failed to benefit Britain, as the vast disparity in wealth on display in the capital shows
Homeless Veterans appeal: The rise of the working poor: when having a job cannot prevent poverty

Homeless Veterans appeal

The rise of the working poor: when having a job cannot prevent poverty
Prince Charles the saviour of the nation? A new book highlights concerns about how political he will be when he eventually becomes king

Prince Charles the saviour of the nation?

A new book highlights concerns about how political he will be when he eventually becomes king
How books can defeat Isis: Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad

How books can defeat Isis

Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad
Judith Hackitt: The myths of elf 'n' safety

Judith Hackitt: The myths of elf 'n' safety

She may be in charge of minimising our risks of injury, but the chair of the Health and Safety Executive still wants children to be able to hurt themselves
The open loathing between Barack Obama and Benjamin Netanyahu just got worse

The open loathing between Obama and Netanyahu just got worse

The Israeli PM's relationship with the Obama has always been chilly, but going over the President's head on Iran will do him no favours, says Rupert Cornwell
French chefs get 'le huff' as nation slips down global cuisine rankings

French chefs get 'le huff' as nation slips down global cuisine rankings

Fury at British best restaurants survey sees French magazine produce a rival list
Star choreographer Matthew Bourne gives young carers a chance to perform at Sadler's Wells

Young carers to make dance debut

What happened when superstar choreographer Matthew Bourne encouraged 27 teenage carers to think about themselves for once?
Design Council's 70th anniversary: Four of the most intriguing prototypes from Ones to Watch

Design Council's 70th anniversary

Four of the most intriguing prototypes from Ones to Watch
Dame Harriet Walter: The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment

Dame Harriet Walter interview

The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment
Art should not be a slave to the ideas driving it

Art should not be a slave to the ideas driving it

Critics of Tom Stoppard's new play seem to agree that cerebral can never trump character, says DJ Taylor
Bill Granger recipes: Our chef's winter salads will make you feel energised through February

Bill Granger's winter salads

Salads aren't just a bit on the side, says our chef - their crunch, colour and natural goodness are perfect for a midwinter pick-me-up
England vs Wales: Cool head George Ford ready to put out dragon fire

George Ford: Cool head ready to put out dragon fire

No 10’s calmness under pressure will be key for England in Cardiff
Michael Calvin: Time for Old Firm to put aside bigotry and forge new links

Michael Calvin's Last Word

Time for Old Firm to put aside bigotry and forge new links