CAA urges price controls reform

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The Civil Aviation Authority, the economic regulator for the three leading London airports, is urging reform of the system for setting price controls at Heathrow, Gatwick and Stansted to put the interests of passengers first.

Harry Bush, CAA director of economic regulation, said: “The regulatory regime could be improved by placing the interests of consumers unambiguously at the heart of the CAA’s duties and by encouraging competition between airports and between airlines for their business.”

At the moment, the pricing regime must seek to reflect the often conflicting interests of airlines, airport operators and passengers.

But in a clear warning to airlines angered by the scale of price increases at Heathrow and Gatwick, Mr Bush said it was “clear that regulatory reform is no magic bullet – airport investments and service quality will still need to be paid for”.

The CAA call for reform comes as it has fallen under heavy attack from leading airlines for what they claim is its failure to regulate effectively the monopoly that BAA, the airports operator owned by Ferrovial of Spain, holds over London’s airports.

The attacks intensified last week as the CAA announced a big increase in the charges BAA, the airport operator, can set for the next five years at Heathrow and Gatwick, and just as the £4.3bn Terminal Five at Heathrow is due to start operations.

Leaders of four of the largest airlines operating from the UK, BMI British Midland, EasyJet, Ryanair and Virgin Atlantic, are due to meet Ruth Kelly, transport secretary, on Monday to press for reform.

They joined forces last week to demand a complete overhaul of the regulatory system, a break-up of the BAA London monopoly and government intervention to resolve the CAA’s failings and impose a moratorium on price increases.

The CAA has already submitted a report, due to be published on Monday, to the Competition Commission putting forward the case for reform, but also stressing the necessity for higher charges to pay for increased investment and higher service standards.

The submission to the Commission, made as part of the competition authority’s investigation into the structure of BAA, says there is a “clear case” for regulatory reform, given that the framework has remained largely unchanged for 20 years since the privatisation of BAA in the 1980s.

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