BAA set for showdown on charges

The Competition Commission and the Civil Aviation Authority are set to lock horns over the future of airports operator BAA, in a battle that could end up in the courts.

Last Thursday, the Commission gave the CAA the recommendations of an inves- tigation into how much money BAA should charge the airlines to access its airports at London and Manchester.

The document – which will remain confidential for at least a month until Transport Secretary Alistair Darling has studied it – recommends that BAA should not be allowed to raise its charges substantially.

However, the CAA, which has the final say on the matter, is set to ignore the recommendations and raise the cap on BAA's charges. The airlines have argued that any increases would have to be passed on to the consumer though higher ticket prices. In particular, the low-cost airlines have told the Commission that increases at Stansted may force them to cut routes.

Usually, a company unhappy with its regulator has the right to appeal to the Commission. But in line with regulations laid down when BAA was privatised in 1986, the airlines can't follow that route.

Instead, some airlines, including Virgin Atlantic, are considering whether to seek a Judicial Review should the CAA decide to allow BAA to increase its charges.

BAA, which is tomorrow expected to post half-year pre-tax profits of between £315m and £325m, has argued that it needs to raise charges to fund its £8.1bn investment programme. This includes the £3.7bn fifth terminal at Heathrow.