Civil Aviation Auth.


Civil Aviation Authority
23 March 2001

                                             23 March 2001


A consultation paper covering issues surrounding the setting of airport charge
controls to apply from April 2003 at Heathrow, Gatwick, Stansted and
Manchester Airports was published today by the CAA.

Entitled Pricing Structures and Economic Regulation, it covers further key
areas which the CAA considers need to be addressed in its review of airport
charge controls. In particular it covers a variety of questions relating to
the form of price caps and invites responses from the industry and other
interested parties. It is available on the CAA website:

It follows the publication of eight other discussion documents since last
July. They are:

  * July 2000: Issues for the Airport Reviews - Consultation Paper

  * October 2000: The CAA Approach to Economic Regulation and Work Programme
    for the Airport Reviews

022.01  /contd...

  * December 2000: The Use of Benchmarking in the Airport Reviews, Quality
    of Service Issues, and The Single Till and Dual Till Approach to the Price
    Regulation of Airports

  * January 2001: Economic Regulation and Capital Expenditure

  * February 2001: Direct Contracting Between Airports and Users: A Default
    Price Cap; Competitive Provision of Infrastructure and Facilities Within
    Airports; Economic Regulation and Incremential Costs.

The CAA plans to refer the four airports to the Competition Commission in
December 2001 in order to set new conditions relating to airport charges for
the five years from April 2003.

Notes to Editors:

The CAA is required by the Airports Act 1986 to set limits on user charges at
designated airports every five years. The designated airports are Heathrow,
Gatwick, Stansted and Manchester. As part of the process the CAA is also
required to refer the airports to the Competition Commission.

The CAA last referred BAA's London Airports (Heathrow, Gatwick and Stansted)
to the Commission in December 1995 and in October 1996 set a price cap from 1
April 1997 to 31 March 2002. Manchester was referred a year later, in December
1996, and a price cap was set for the five years from 1 April 1998 to 31 March


In May 1999 the CAA extended the price cap for BAA's London Airports one year
to 31 March 2003 to allow it to take into account the Government's final
decision on BAA's planning application for Terminal 5 at Heathrow on the
assumption this

would be published in late 2001. This means that the CAA will review all four
airports and refer them to the Commission at the same time. New price caps
will be set for the five years for each of the four airports from 1 April 2003
to 31 March 2008.

The present charging formulae for Heathrow and Gatwick taken together is RPI-3
per cent and for Stansted, RPI+1. For Manchester it is currently RPI-5 per