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Airlines threaten legal action over landing charges

Danny Fortson,Business Correspondent
Wednesday 12 March 2008 01:00 GMT

Airlines will launch legal action against the Civil Aviation Authority if they fail to convince the Government to overturn "unprecedented" and "appalling" increases to landing charges for Heathrow and Gatwick airports.

The airlines called yesterday for an immediate one-month moratorium on a new pricing regime issued by the CAA, the aviation regulator, that will see fees per passenger increase by 86 per cent at Heathrow – infamous for long security queues, crumbling infrastructure and lost baggage – over the next five years. Gatwick fees will jump by 49 per cent.

Several airlines, including BMI, easyJet, Virgin Atlantic, and Ryanair, will meet Ruth Kelly, the Secretary of State for Transport, next week to request the moratorium and to push for the break-up of BAA, which controls London's three principle airports and, they argue, is being rewarded for failure. If they are unsuccessful, they could take the CAA to court. "Judicial review is clearly one option," said Tim Bye, the deputy chief executive of bmi. "It's certainly something the airlines are talking about. There is not a precedent for this, but these are unprecedented rises."

In its decision, the CAA seems to have largely accepted BAA's argument that the massive increases are needed to pay for major improvements at both airports. The ruling is the culmination of a two-year consultation with the airlines and BAA. The airlines yesterday accused the CAA of allowing the airport operator to "game the system" by requesting major additional hikes just weeks before the consultation deadline last year, leaving them insufficient time to respond. The £4.79bn investment programme for Heathrow, for example, represents a jump of £1bn over the sum the CAA had approved just three months ago.

The CAA was also accused of creating a regime that will see the flying public dig Ferrovial, which bought BAA for £10.1bn a year and half ago, out from under the mountain of debt it took on to buy the company. The Spanish group's shares jumped 6.6 per cent to €46.54 on the news.

The CAA's Harry Bush said those charges were "simply not true". He also dismissed the airlines' complaints over the fee rises. "Prices are not the problem," he said. "The problem has been the quality of service and infrastructure, and the airlines buy into that, but they don't want to pay for it."

From April, landing charges at Heathrow will increase by nearly a quarter to £12.80 this year, while Gatwick rates will jump a fifth to £6.79. Thereafter, rates will rise annually in line with inflation, plus 7.5 per cent and 2 per cent, respectively. Heathrow East, which was expected to replace terminal two and much of terminal one in time for the Olympics, will now not come into service until well after the games.

The CAA was at pains to point out that some of the fees, albeit a small fraction, will be based on much more stringent performance targets. Currently, if 95 per cent of security queues are not 10 minutes or less, then BAA gets fined a nominal amount – it paid about £2m in fines last year. Under the new regime, 95 per cent will have to be 5 minutes or less, and failure could lead to fines of up to £80m annually at Heathrow and Gatwick. The CAA will also conduct a full audit of how queue waiting times are measured. Previously, it relied solely on data provided by BAA.

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