Economic regulation of tier one UK airports

UK's Department for Transport announced plans (13-Oct-2009) to introduce the following measures to improve the resilience of its major airports, after publishing its consultation on reforming the economic regulation of airports plan:

• A new duty on the Civil Aviation Authority (CAA) to ensure airports can finance their licensed activities;
• A package of licence conditions to introduce financial ring-fencing;
• A licence condition requiring airport operators maintain a minimum creditworthiness;

The department added it will also consult further before the end of year on the following additional measures:

• Possible introduction of a licence condition requiring airport operators produce and maintain a Continuity of Service plan;
• A mechanism for CAA to 'switch on' and 'switch off' ring-fencing provisions. [more - Department for Transport] [more - Civil Aviation Authority]

These measures replace the introduction of a Special Administration regime proposed in the consultation document, that would have ensured airports stayed open even if their owners went bankrupt (Reuters, 13-Oct-2009). Industry members were opposed to the original regime as they believed investors in airport development projects would have requested higher returns, increasing development costs.

BAA welcomed the decision, stating the changes will remove uncertainties for the airport owner and its creditors, and ensure airport operators will have the necessary resources to complete development plans and invest in airports.