25-Jun-2013 1:05 PM

London Gatwick submits revised offer to UK CAA, proposes reduction in charge increases

UK's London Gatwick submitted (25-Jun-2013) to the UK Civil Aviation Authority (CAA) what it describes as a "compelling offer" on a new deal for the airport between 2014 and 2021. The improved offer, which the airport said would see a future in which airline-airport relationships are increasingly defined through tailored bilateral commercial contracts, will replace economic regulation with a Contracts & Commitments framework. The CAA confirmed in Apr-2013 they hoped that a commitments and limited licensing framework could be the preferred form of regulation for Gatwick. Details include:

  • Price: Gatwick has lowered the price commitment from RPI + 4% to RPI + 1.5% over a seven year period. This equates to an increase in the per passenger fee from GBP8.80 in 2013/14 to a per passenger fee of GBP9.76 in 2020/21;
  • Capital Investment Programme: Gatwick commits to continue to fully consult with airlines on capital Investment, and commits to substantial capital investment continuing;
  • Service Quality: Gatwick has proposed more passenger-focused targets to ensure passengers continue to enjoy high service standards throughout the airport;
  • Enforceability of the commitments: Gatwick will work with the CAA to ensure that its commitments are legally binding and the interests of passengers are safeguarded.

London Gatwick CEO Stewart Wingate said: “We believe this revised offer will provide a much better future for passengers, the airline community and the airport than would be the case through a continuation of the current system of regulation. The CAA has a window of opportunity to create the conditions for a much more competitive airport market in the South East, which will build on the Competition Commission’s landmark decision to break-up the BAA monopoly. We hope that the CAA will feel sufficiently confident to endorse our deal as the preferred way forward for Gatwick in its October final proposals.” As part of its analysis, Gatwick commissioned Professor Stephen Littlechild to review the issues of regulation in the increasingly competitive airport sector. Professor Littlechild commented: “The CAA might feel that continuing to regulate an airport is a safer course of action. However, in practice greater involvement of regulation in an increasingly competitive market would lead to unintended consequences that can have adverse effects on service quality and price which would not protect the interests of the passenger in the long term. Less, not more, regulatory involvement at this stage would be more conducive to promoting competition and protecting the longer-term interests of customers. If it is not possible to remove regulation now, when will it ever be?” [more - original PR] [more - original PR - Full Gatwick report] [more - original PR - Stephen Littlechild report]

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