Victory for airlines as landing-price cap is maintained

Airlines flying out of Stansted scored a victory against the Civil Aviation Authority yesterday when Transport secretary Ruth Kelly accepted their arguments that the airport should not be freed from Government-imposed price caps.

In ruling yesterday that the CAA must continue capping landing charges, Ms Kelly rejected the watchdog's previous reasoning in favour of "de-designating" the airport, which would have freed it to set its own fees. Ms Kelly said: "I have taken into consideration the fact that the airports in the South-east are now operating at [near] capacity." She added that until new runways are built, "the CAA plays an important role in protecting passengers". She did say however that Manchester airport would be de-designated.

The CAA's argument in favour of allowing Stansted to set the fees it charges airlines was based on the assumption that it does not have a dominant market position, making the danger of abuse minimal. But airlines including Ryanair, easyJet and British Airways, called that argument faulty because Heathrow, Gatwick and Stansted are all controlled by BAA, which is owned by Spanish giant Ferrovial. The airlines recently suggested that the CAA be replaced by an alternative regulator better "capable of discharging the economic regulatory function in respect of the UK's airports".

Analysts had expected BAA to raise charges if Stansted had won de-designation. Andrew Fitchie, an analyst at Collins Stewart, said that Ferrovial investors "will have to adjust their targets down for this news". The ruling will help Ryanair keep costs low, he added.