Civil Aviation Auth.

CAA Statement

Civil Aviation Authority
24 February 2006


The CAA is aware of a possible offer for BAA plc, through the announcement made
on 8 February 2006 by Grupo Ferrovial SA, and subsequent press reports.

The CAA is the regulator of UK airports that have been designated by the
Secretary of State for price controls and certain public interest issues under
the Airports Act 1986 and is currently undertaking a review of caps on airport
charges at BAA's three designated airports (Heathrow, Gatwick and Stansted) for
the period 2008-13.  It issued a consultation document1 'Airports Regulation:
Price Control Review - Consultation on Policy Issues' in December 2005 which
sets out the CAA's current thinking and identifies a range of issues that it
intends to address prior to making a statutory reference to the Competition
Commission.  It is for the current or any future owner of designated airports to
ensure that they take account of this ongoing review, which is currently at an
early stage.

The CAA will set caps on airport charges in accordance with its statutory
duties2 and not in order to accommodate any particular financing arrangements
adopted.  In this context, it is particularly important that in making financing
arrangements airport operators recognise the significant near- and medium-term
investment required to upgrade airport facilities and accommodate a continuing
increase in the demand for air travel in the south east of England. This is
likely to require the maintenance of credit quality sufficient to ensure the
cost-effective financing of future investment.

Under the Airports Act 1986, at the end of the price control review, the CAA
sets such conditions as it considers appropriate for regulating the maximum
amounts that may be levied by way of airport charges.  Moreover, in accordance
with the process set out in the Airports Act 1986, as part of the price control
review the CAA is required to ask the Competition Commission to consider whether
an airport operator has pursued a course of conduct that operates or might be
expected to operate against the public interest. It is open to the CAA to
specify in such a reference any course of conduct, including any that might
relate to or arise from financial transactions, that in the view of the CAA has
operated or might be expected to operate against the public interest.  The
Competition Commission could then recommend to the CAA conditions necessary to
remedy any adverse effects identified by the Competition Commission, in which
case the CAA would be required to impose appropriate conditions.

The CAA will continue to keep these matters under review.


1.  The CAA's December 2005 consultation document is available at:

2.  Legislation relating to the Economic Regulation of UK Airports is set out
under Part 4 of the Airport Act 1986.  Section 39 of the Airports Act 1986
specifies that the CAA must perform its regulatory functions, including setting
price caps, in the manner which it considers best calculated:

•      to further the reasonable interest of users of airports within the UK;

•      to promote the efficient, economic and profitable operation of such 

•      to encourage investment in new facilities at airports in time to satisfy 
       anticipated demands by the users of such airports; and

•      to impose the minimum restrictions that are consistent with the
       performance by the CAA of these functions.

The CAA must also take account of such of the UK's international obligations as
have been notified to it by the Secretary of State.

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