Air passengers will be hit by a decision today to alter what airlines can be charged for using one of the UK's busiest airports, according to low-cost airline Ryanair.
Just three UK airports - Heathrow, Gatwick and Stansted - are "regulated", in that the amounts the airports' bosses can charge airlines for using them is capped by the Civil Aviation Authority (CAA).
Ryanair said today that a CAA final decision on regulation for the three airports for the five years from April 2014 has revealed that Stansted is now being deregulated.
The budget Irish carrier said this decision would mean Stansted would increase charges resulting in "yet more damage to UK consumers and competition".
Ryanair said the CAA was "falsely claiming" that Stansted did not have substantial market power and that therefore there was no need to further regulate charges at the Essex airport.
Ryanair said: "Against evidence and its own earlier findings, the CAA now inexplicably claims that airlines are able to exert buyer power on Stansted in circumstances where Stansted was allowed by the CAA to double its charges in 2007, which caused a five-year, 27 per cent traffic collapse at Stansted while Heathrow and Gatwick were growing.
"Even easyJet moved flights to Southend to avoid Stansted's high charges."
The budget airline went on: "Today's deregulation decision by the CAA will allow Stansted to increase charges in future and will result in yet more damage to UK consumers and competition.
"This decision confirms yet again that the CAA's regulatory regime is 'inadequate', as previously found by the Competition Commission in its 2009 decision to break up the BAA (formerly British Airports Authority) airport monopoly."
Ryanair's legal and regulatory affairs director Juliusz Komorek added: "Today's decision is an example of the CAA's regulatory failure which will again harm consumers as Stansted will be able to further increase airport charges whenever it wishes, without any reference to competitive price levels.
"Effective regulation with aggressive price caps is the only way to ensure that consumers are protected and that Stansted can grow its traffic on a sustained basis. Ryanair condemns the CAA's continuing failure to effectively regulate Stansted."
Ryanair has been a constant critic of the CAA and the airport charges it sets.
Publishing its ruling on the three main London airport today, the CAA said: "We have completed our assessment for Stansted's passenger market, taking into account the long-term contracts the airport now has in place with its main airline customers, and determined that the airport does not have substantial market power.
"This means the airport will not be economically regulated by the CAA from April 2014 onwards."
On Heathrow, the CAA has ruled that for the five years from April 2014 airline charges will fall in real terms by 1.5 per cent per year meaning they will be set at RPI minus 1.5 per cent.
This is a change from the CAA's final proposals published in October, which suggested prices rising in line with inflation. The CAA said the changes have been made as passenger traffic forecasts have strengthened since October, and the cost of capital has been revised.
The CAA has said that Gatwick will remain regulated for the 2014-19 period but it added it was supporting "more diversity in what Gatwick offers to its various airlines, so passengers receive a tailored service".
Therefore, the CAA is basing its Gatwick regulation on the airport operator's own commitments to its airline customers. It added that there commitments and various airport-airline contracts covered price, service quality, investment and other issues normally covered by a regulatory settlement, and "should enable a more flexible and commercial approach".
The CAA is backing the commitments with a licence, to allow the CAA to step in to protect users, for instance if there are reductions in service quality that are against the passenger interest.
The CAA will monitor the application of the new framework to ensure that prices are fair and that service quality is sustained. The licence will also provide for CAA scrutiny of most second runway costs before they can be passed on to airlines and passengers.
The airport licences under the new five-year deal will ensure that issues like cleanliness, queuing times, seating availability and information provision are addressed in the passenger interest.
The CAA said that for the first time, there will be a requirement for Heathrow and Gatwick airports to put in place robust plans to ensure they are better prepared for disruption and can manage it effectively when it does occur.
CAA chairman Dame Deirdre Hutton said: "Today's decisions are good news for air passengers. They will see prices fall, while still being able to look forward to high service standards, thanks to a robust licensing regime.
"London's airports have benefited from substantial investment over the past decade, which has created world-class facilities for passengers. But prices have risen substantially in that time, with service quality sometimes failing to match the standards passengers have every right to expect."
She went on: "We have focused on putting the passengers' interest at the heart of our decisions and today's announcement means passengers can look forward to lower prices and high service quality from London's busiest airports."
Serious flooding which caused a power outage at Gatwick led to severe disruption to flights on Christmas Eve.
Earlier this week Gatwick chief executive Stewart Wingate, appearing before the House of Commons Transport Committee, apologised for the problems saying more "could and should have been done" to help passengers.
Today, responding to the CAA ruling, Mr Wingate said he was disappointed "at the intrusive nature of the CAA's monitoring requirements" and that the CAA view that Gatwick still needed to be regulated.
Mr Wingate said: "I am delighted in the progress that the airport is making to bring more competition to the London aviation market through the commercial arrangements currently being negotiated with its airlines.
"These discussions have only been possible under our contracts and commitments framework, which has latterly been supported by the CAA."
He went on: "However, I am disappointed that the CAA's final decision appears not to acknowledge the importance of these ground-breaking commercial negotiations and has concluded, under its new definition, that the airport does have market power and requires an economic licence.
"We are also disappointed at the CAA's view of a fair price, as well as the intrusive nature of their monitoring requirements. The airport will need to review the detail of the CAA final decision and consider its position."
Gatwick said airport charges per passenger at Gatwick are currently £8.80 (2014 prices) and would remain unchanged (2014 prices) for seven years under Gatwick's contract and commitments framework.
Gatwick added that the CAA's price assessment at RPI minus 1.6 per cent per year would equate to airport charges per passenger in 2018/19 of £8.07 (at 2014 prices).
Heathrow bosses were also unhappy at the CAA ruling for the west London airport.
Heathrow said the new charge formula would mean Heathrow's per-passenger airline charges would fall in real terms from £20.71 in 2013/14 to £19.10 in 2018/19. Heathrow's own alternative business plan would have seen charges rise to £25.72 in 2018/2019.
Heathrow chief executive Colin Matthews said: "We are concerned by the degree of change since the CAA's final proposals just a short while ago. In October the CAA accepted the need for changes to their April proposals, but has now reverted to a draconian position.
"We want to continue to improve Heathrow for passengers. We will review our investment plan to see whether it is still financeable in light of the CAA's settlement."
Heathrow said the CAA's final decision included "aggressive operational, commercial and passenger forecasts" which left "little spare resource available to manage the consequences of potential disruption at Heathrow".
Charlie Cornish, chief executive of MAG which runs Stansted, said: "The CAA's decision today to step back from regulating Stansted is a welcome endorsement of the changes we've made, and a positive recognition by the CAA that, in Stansted's case, competition rather than regulation will deliver the best outcomes for passengers and airlines.
"Stansted is flourishing in a competitive environment, as we build long-lasting commercial partnerships with airlines and deliver excellent service to our customers."
More follows- PAReuse content