Civil Aviation Auth.

Current Thinking on Dual Till

Civil Aviation Authority
13 August 2002

Competition Commission Current Thinking on Dual Till - CAA statement on process

Following extensive consultation with airports and their users, the CAA referred
the four airports designated under the Airports Act 1986 (Heathrow, Gatwick,
Stansted and Manchester) to the Competition Commission in February 2002. In its
recommendations to the Commission the CAA set out its detailed analysis and
views on the appropriate basis for setting the controls on airport charges at
these airports for 2003-2008 against the statutory objectives of the Airports
Act.  As part of its recommendations the CAA advocated the introduction of a
Revised Regulatory Cost Base (RRCB) for setting charges, generally referred to
as the 'dual till'.

On 11 July 2002 the Commission published notes in respect of the BAA and
Manchester reviews setting out its current thinking on the dual till proposals
(1) ahead of the submission of its final reports to the CAA. It takes the view
that 'the arguments and current evidence for moving to the dual till are not
persuasive.' The Commission indicated, however, that it has not yet reached a
final view and remains open to further representations on the point but it
wished to concentrate on other key issues raised by the CAA proposals.

The CAA will not reach a definitive view on the appropriate basis for setting a
cap on maximum airport charges until after it has received and studied the
Commission's final reports and recommendations and developed and consulted on
its own proposals.  In developing its proposals the CAA will have regard to the
Commission's analysis and recommendations as it is required to do.  The CAA's
final decision will need to be that which, in its judgement, is best calculated
to meet the statutory objectives of the Airports Act.   The CAA does not
consider that the Commission's statements of 11 July provide a sufficient basis
for ruling out any particular approach to setting charges at this stage nor were
they intended to do so.  Accordingly the CAA proposes to continue to develop its
modelling of the price caps under a range of policy scenarios, including the
RRCB, consistent with its statutory objectives and in discussion with relevant
parties as appropriate.

The CAA has separately agreed to extensions to the periods within which the
Commission has to submit its reports.  The final date for the reports has been
put back from 27 August to 31 October 2002 for the BAA London airports and to 29
November 2002 for Manchester.  The CAA has, however, encouraged the Commission
to complete its reports as soon as possible within these extended periods. The
CAA will then consider the Commission's recommendations for the new price caps
before publishing the reports. The CAA would publish at the same time its own
proposals on the price caps for consultation. Following consultation the CAA
would plan to make its final decision on the price caps within around three
months of receiving the Commission's reports.  If the Commission were to take
the full amount of time allowed by the extensions, the CAA would aim to make a
final decision in respect of BAA by around the end of January 2003 and for
Manchester Airport by around the end of February 2003.

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(1) Competition Commission, 11 July 2002 Competition Commission's Current
Thinking on Dual Till Proposals for BAA London Airport and Competition
Commission's Current Thinking on Dual till Proposals for Manchester Airport.


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