Civil Aviation Auth.


Civil Aviation Authority
9 May 2001

News Release

9 May 2001


A position 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 Civil Aviation Authority.

Entitled Practicalities of Implementing a Dual Till, it sets out the CAA's
position on how the costs, revenues and assets of an 'aeronautical till' should
be identified, if the decision is taken to move away from the current 'single
till' approach to setting airport charges. However, it makes clear the CAA has
yet to reach a decision as to whether a move to dual till is desirable.
Published alongside the paper is a report commissioned by the CAA from Europe
Economics entitled Airport Cost Allocation. Europe Economics was commissioned in
October 2000 to advise on the feasibility and implementation of a cost
allocation system to operate under the dual till should it be decided to pursue
such an approach. Both documents are available on the CAA website:

The position paper follows the publication of nine 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

*       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 Incremental Costs

*       March 2001: Pricing Structures and Economic Regulation.

The CAA plans to refer the four airports to the Competition Commission in
January 2002 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

Single till/Dual till

The 'single till' approach to regulation, which is currently
applied, takes into account all services and facilities provided by the
airport when setting the regulatory price cap. The level of airport charges is
therefore heavily dependent on the profits (or losses) from the airport's
'non-aeronautical' commercial revenue such as rents, shop and catering
concessions. The dual till approach to regulation would require a distinction to
be made between aeronautical revenue, such as charges for landing and parking
aircraft, and non-aeronautical services when setting the price control.

Europe Economics is a London-based economic consultancy. Also involved in the
preparation of the report were the accountants Mazars Neville Russell and Mr
Tom Carter, an aviation industry specialist.