Letter: Handout to airlines from airport shops

Letter: Handout to airlines from airport shops

Sir: Terence Conran ("What is an airport for?", 17 August) is quite right to point out that BAA's retailing activities are an unregulated monopoly and that BAA is seeking every way possible to boost this side of its business. The shopping element in its Terminal 5 application is the size of 12 superstores.

It is sometimes argued that BAA's retailing profits are acceptable because they finance the airports' infrastructure. But this is not what happens. Retailing profits subsidise airlines.

The way BAA is regulated is that its retailing profits are lumped together with its profits from airport charges - the "single till" approach. The Airports Act 1986 only gives BAA's regulators (the Monopolies and Mergers Commission and the Civil Aviation Authority) the power to regulate airport charges - retailing profits are exempt unless these activities are against the public interest. However, the MMC does not share Terence Conran's definition of the public interest. Therefore, the more BAA earns from retailing the more its regulators cap or reduce airport charges.

Airport charges at Heathrow are, as a result of this perverse regulatory regime, amongst the lowest in the world, leading to an insatiable demand for landing slots, endless expansion of the airport and the cause of such environmental damage to London.

The undercharging (and hence the subsidy) to profitable UK airlines and unprofitable foreign airlines is estimated to amount to between pounds 250m and pounds 500m a year - an amount which should accrue to the public purse. The Government cannot allow this subsidy to continue and must urgently review the regulatory regime and at the same time impose an environmental limit on the number of flights into Heathrow.

GIDEON NELLEN

London W1