Airlines attack Heathrow and Gatwick fee increases
12.03.08
Britain's biggest airlines have demanded the Government take action after Heathrow and Gatwick were allowed to increase landing fees by up to £10 per passenger by the Civil Aviation Authority yesterday. Airlines including British Airways and Virgin Atlantic called for an overhaul of airport regulation, claiming the system had failed and the fees would be passed on to travellers.
The CAA, which sets the price the airports can charge airlines, said yesterday that fees at Heathrow would rise nearly 24% next year to £12.80, with promised above-inflation increases then likely to take them to just under £20 by 2013. At Gatwick, the charges will rise 21% next year to £6.79, and reach about £9 in the next five years.
BAA, which owns the two airports, has said the money is needed to upgrade the overstretched airports, which have been plagued with baggage losses, overcrowding, delays and widespread customer dissatisfaction. But a number of leading airlines said the fees would lead to higher ticket prices with passengers left paying more to finance the huge debts incurred by the Spanish buyer of BAA.
British Airways said the decision ‘demonstrates conclusively that the airport regulation system has failed’. Aer Lingus said the hike in charges was excessive, whilst Nigel Turner, bmi chief executive, said airlines faced a struggle to keep down fare inflation following the rises. He said: ‘It reduces our ability to reduce fares. We will try to keep it away from passengers but this is a very large cost for bmi.’
Virgin Atlantic, easyJet and Ryanair and bmi joined together to demand that Ruth Kelly, the Transport Secretary, step in. In a joint statement, the airlines said: ‘These increases, which will inevitably hurt consumers, follow a substantial increase in charges at Heathrow and Gatwick in the past five years and a doubling of charges at Stansted in the last year. Stansted charges are also proposed to double in the coming five years.’
‘That these price increases are significantly less than those demanded by BAA is a cause for alarm not celebration, as BAA has demonstrated that it is expecting the travelling public to pick up the bill for Grupo Ferrovial's highly-leveraged speculative acquisition.’
Andrew Harrison, easyJet chief executive, said passengers were paying for the financial problems at BAA, the owner of Heathrow and Gatwick. Ryanair said landing fees were eating into costs at its Stansted base, which is subject to separate price proposals by the CAA, and claimed they could ultimately drive tourists away from Britain.
Flybe demanded the break-up of BAA and the replacement of the CAA as the airport regulator. Mike Rutter, the airline's chief commercial officer, said: ‘To award what are essentially monopolistic profits and a licence to print money to an unproductive and uncompetitive company is nothing short of a national disgrace.' Monarch managing director Tim Jeans said: ‘Only an inefficient monopoly supported by an ineffectual regulator could impose such increases.'
However, the CAA brushed off the airlines' complaints. It said the dramatic adjustment was driven by BAA's argument that further investment at Heathrow and escalating security costs required a more generous settlement than previously envisioned.
Harry Bush, the CAA director who drew up the new pricing regime, said allegations of naïve decision-making were ‘nonsense,’ adding that the per-passenger fee at Gatwick was less than the cost of checking in a bag at the airport with easyJet. He said airlines were in effect requesting a ‘free lunch’ by pushing for better services at airports while refusing to cover the ensuing rise in costs.
Addressing the airline's demands, a spokeswoman for the Department for Transport said the Government played no role in deciding airport charges. He added: ‘We want the price caps set by the CAA to strike the right balance between providing incentives to BAA to invest in its airports to improve the passenger experience, and at the same time protect passengers from excessive charges.’
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