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 year of political gossip, levity and intrigue from the sharpest pen in Westminster
Sport
Ashley Barnes of Burnley scores their second goal
footballMan City vs Burnley match report
News
news
News
Sir James Dyson: 'Students must be inspired to take up the challenge of engineering'
i100
Life and Style
Apple showed no sign of losing its talent for product launches with the new, slightly larger iPhone 6 making headlines
techSecurity breaches and overhyped start-ups dominated a year in which very little changed (save the size of your phone)
Arts and Entertainment
Catherine (Sarah Lancashire) in Happy Valley ((C) Red Productions/Ben Blackall)
TV
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

Selby Jennings: VP/SVP Credit Quant- NY- Investment Bank

Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...

Selby Jennings: Quantitative Research | Equity | New York

Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...

Selby Jennings: SVP Model Validation

Not specified: Selby Jennings: SVP Model Validation This top tiered investment...

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

Day In a Page

A timely reminder of the bloody anniversary we all forgot

A timely reminder of the bloody anniversary we all forgot

Who remembers that this week we enter the 150th anniversary year of the end of the American Civil War, asks Robert Fisk
Homeless Veterans appeal: Former soldiers pay their respects to a friend who also served

Homeless Veterans appeal

Former soldiers pay their respects to a friend who also served
Downfall of Dustin 'Screech' Diamond, the 'Saved By The Bell' star charged with bar stabbing

Scarred by the bell

The downfall of the TV star charged with bar stabbing
Why 2014 was a year of technological let-downs

Why 2014 was a year of technological let-downs

Security breaches and overhyped start-ups dominated a year in which very little changed (save the size of your phone)
Cuba's golf revolution: But will the revolutionary nation take 'bourgeois' game to its heart?

Will revolutionary Cuba take 'bourgeois' golf to its heart?

Fidel Castro ridiculed the game – but now investment in leisure resort projects is welcome
The Locked Room Mysteries: As a new collection of the genre’s best is published, its editor Otto Penzler explains the rules of engagement

The Locked Room Mysteries

As a new collection of the genre’s best is published, its editor explains the rules of engagement
Amy Adams on playing painter Margaret Keane in Tim Burton's Big Eyes

How I made myself Keane

Amy Adams hadn’t wanted to take the role of artist Margaret Keane, because she’d had enough of playing victims. But then she had a daughter, and saw the painter in a new light
Ed Richards: Parting view of Ofcom chief. . . we hate jokes on the disabled

Parting view of Ofcom chief... we hate jokes on the disabled

Bad language once got TV viewers irate, inciting calls to broadcasting switchboards. But now there is a worse offender, says retiring head of the media watchdog, Ed Richards
A look back at fashion in 2014: Wear in review

Wear in review

A look back at fashion in 2014
Ian Herbert: My 10 hopes for sport in 2015. Might just one of them happen?

Ian Herbert: My 10 hopes for sport in 2015

Might just one of them happen?
War with Isis: The West needs more than a White Knight

The West needs more than a White Knight

Despite billions spent on weapons, the US has not been able to counter Isis's gruesome tactics, says Patrick Cockburn
Return to Helmand: Private Davey Graham recalls the day he was shot by the Taliban

'The day I was shot by the Taliban'

Private Davey Graham was shot five times during an ambush in 2007 - it was the first, controversial photograph to show the dangers our soldiers faced in Helmand province
Revealed: the best and worst airlines for delays

Revealed: the best and worst airlines for delays

Many flyers are failing to claim compensation to which they are entitled, a new survey has found
The stories that defined 2014: From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions

The stories that defined 2014

From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions
Stoke-on-Trent becomes first British city to be classified as 'disaster resilient' by the United Nations

Disaster looming? Now you know where to head...

Which British city has become the first to be awarded special 'resilience' status by the UN?