BAA faces hefty fines if Stansted customer service fails to improve

Airport operator BAA could faces fines of up to £9m a year if customer service levels at Stansted do not improve, the Civil Aviation Authority (CAA) said yesterday.

Under the CAA's financial incentive regime, BAA Stansted could be ordered to pay rebates of up to 7 per cent of its total airport charge revenues if it does not meet prescribed targets for passenger security queues, cleanliness, baggage reclaim and other services. Under similar procedures at Heathrow and Gatwick, BAA has already been fined £4.3m and £3.6m respectively.

Details of the Stansted scheme were published alongside the CAA's five-year price controls laying out what BAA can charge airlines for the use of the airport. Price caps will be set at £6.34 per passenger for the first two years from 2009, and will rise to £6.65 by 2013/14.

Stansted's pricing regime has caused controversy because BAA was asking for major increases – from £6.05 this year to approaching £9 by 2013/14 – to cover the cost of building a second runway, a plan derided as a "gold-plated Taj Mahal" by some airlines.

But the Competition Commission (CC), which makes recommendations prior to the CAA's final decision, ruled that passenger number predictions push the investment out towards 2017, so it is not relevant to the current review. In fact, the CAA price caps came in even lower than the CC's proposals, having taken account of revenues from non-passenger flights.

But critics of the second runway cannot infer support for their cause. The CAA intends the price rise in the later years to signal its support for expansion. Harry Bush, director of economic regulation at the CAA, said: "The price control will enable charges to increase in coming years to allow Stansted or competing airports to build new capacity as and when warranted to meet passenger demand."