Heathrow condemned “draconian” price cuts ordered by the airport regulator on Friday, which will mean lower fares for passengers, and threatened to cut investment at the UK’s biggest airport as a result.
The Civil Aviation Authority (CAA) ruled that from April take-off and landing fees at Heathrow should fall in real terms by 1.5 per cent per year between 2014 and 2019. That is in stark contrast to the regulator’s last suggestion in October, when it said the airport’s prices could rise in line with inflation.
Heathrow had asked the CAA to let it raise charges by 4.6 per cent above inflation for the five years from April 2014, which would have meant passengers paying as much as £27 extra per flight.
However, the regulator said on Friday that its stance on the charges, which are always passed on directly to passengers, had changed because “passenger traffic forecasts have strengthened since October, and the cost of capital has been revised”.
It ends a decade of rising fees, in which passenger charges have trebled and made Heathrow one of the world’s most expensive airports.
Although the CAA said Heathrow would still receive nearly £3bn for investment, the airport’s chief executive, Colin Matthews, claimed the regulator had “reverted to a draconian position”. He warned: “We will review our investment plan to see whether it is still financeable in light of the CAA’s settlement.”
He also hinted that Heathrow would struggle to cope with weather emergencies, like 2010’s snow chaos, under the new spending plans: “The settlement leaves little spare resources available to manage the consequences of potential disruption at Heathrow.”
Gatwick also condemned what it called the CAA’s “onerous monitoring regime” for the UK’s number two airport, and hit out at “over-optimistic long-term passenger forecasts”.
However, the CAA freed Stansted from the shackles of regulation, saying the Essex airport can set its own charges from April as “the airport does not have substantial market power”. That disappointed Ryanair, Stansted’s biggest customer, which described the regulatory regime as “inadequate” and said it was “putting the foxes in charge of the chicken coop”.
The CAA’s Heathrow decision follows a campaign by airlines, with British Airways supremo Willie Walsh claiming the airport was “ripping off passengers” and calling for Mr Matthews to be ousted.