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UK CAA decision on Heathrow charges to 'put an end' scenario off prices rising faster than inflation

4-Oct-2013 1:26 PM

UK Civil Aviation Authority (CAA) published (03-Oct-2013) for consultation its final proposals for the economic regulation of Heathrow Airport after Apr-2014. The UK CAA noted that Heathrow has called for a 4.6% annual real-terms increase in its charges over five years. Its airlines have asked for a 9.8% p/a cut. As a result, UK CAA has proposed a propose a price control that will not allow prices to rise by more than inflation (measured by RPI). That compares to initial proposals for RPI minus 1.3%. UK CAA explained, "A key reason for this is due to an increase in the cost of capital driven by higher debt costs, offset to some degree by more challenging targets for operating efficiency. The proposals will put an end to over a decade of prices rising faster than inflation at Heathrow. This has supported significant investment in Heathrow over the last decade and our current proposals will also create a supportive environment for further capital expenditure. Commenting on the final proposal, CCA chair Dame Deirdre Hutton said: “Tackling the upward drift in Heathrow’s prices is essential to safeguard its globally competitive position. The challenge for Heathrow is to maintain high levels of customer service while reducing costs. We are confident this is possible and that our proposals create a positive climate for further capital investment, in the passenger interest". [more - original PR]