Britain's aviation regulator proposed hiking airline charges at London's Heathrow and Gatwick airports, a move opposed by carriers, even as the regulator recommended scrapping price controls at Stansted airport.
The Civil Aviation Authority (CAA) said yesterday it would raise the amount by which airport operator BAA can increase take-off and landing fees at Heathrow, one of the world's busiest airports, and Gatwick.
BAA is owned by Spain's Ferrovial. The proposed pricing regime for London's regulated airports from 2008 and 2013 come as airlines face calls for higher taxes to offset carbon emissions and debate over whether the government should allow more runways to be built.
"Airport charges will increase by 50 per cent during the current five year charging period yet passengers have yet to see an improvement in facilities and service," British Airways general manager of airport policy Paul Ellis said.
"To advocate another 50 per cent rise over the next five years cannot be justified." The UK government has the final say in setting the charges which are designed to help BAA fund new infrastructure, such as terminals and runways, amid a boom in air travel.
The CAA proposed a cap of RPI (Retail Price Index) plus four to eight per cent each year at Heathrow compared to the current rate of growth in price caps of RPI plus 6.5 per cent.
The CAA recommended a price cap of RPI minus two to plus two per cent each year at Gatwick compared to RPI plus zero per cent currently. Price caps would be abolished at Stansted under the proposals.
"The CAA finds only a limited possibility that Stansted can be expected to enjoy a position of market power that justifies price regulation," the regulator said in a statement.
The CAA also proposed cutting BAA's allowed cost of capital, or the rate of return it can earn on investments, to 6.2 per cent at Heathrow and 6.7 per cent for Gatwick from 7.75 per cent currently. The cut was not as much as airlines had sought.
BA called for a cost of capital, a key factor the CAA uses when it sets the charges, to be set at 5.6 per cent for Heathrow.
BAA is building a £4.2 billion fifth terminal at Heathrow and plans a second runway at Stansted under government-backed plans to cope with growing demand.
BAA is regulated because it effectively has a monopoly as the owner of London's three main airports.
Ferrovial shares were trading 0.1 per cent weaker at €72.40 in Madrid, while British Airways was one per cent higher at 497-1/2 pence in London at 0930 GMT.