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Friday 20 May, 2005

Civil Aviation Auth.

Airports Regulation Document

Civil Aviation Authority
20 May 2005

News Release

20 May 2005


The Civil Aviation Authority today published details of its new approach to the
economic regulation of BAA's London Airports and Manchester which gives greater
weight to direct engagement between airports and their airline customers.

In May 2004, the CAA launched a consultation to evaluate the reviews of the
airports that culminated in the setting of price caps from 1 April 2003 to 31
March 2008.   It sought views on new proposals to bring about more effective
regulation by encouraging constructive engagement between airlines and airports.

Following formal public consultation and face-to-face meetings with airports and
airlines, sufficient support has been received for the proposed approach.

Today's paper, 'Airport Regulation: The Process for Constructive Engagement',
details the CAA's expectations for the process of airport/airline engagement and
provides guidance on its scope and timing.  However, it does not cover the
institutional structures or individual steps in the negotiation timetable as the
CAA believes the parties involved should agree this between themselves.

The document sets out:

  • the legal and regulatory context for the reviews;
  • the proposed division of responsibilities between the regulator, on the
    one hand, and airport/airlines on the other;
  • guidance on the process which airport/airline negotiations should follow,
    and the expected nature of outputs from the negotiation; and,
  • guidance to the parties in meeting the Section 39 objectives of the
    Airports Act.

Dr Harry Bush, Group Director Economic Regulation, said: 'Today's paper sets out
in more detail the course we have already charted.  We are proposing that a
number of clearly defined aspects of the next airports' reviews should in the
first instance be discussed between the parties directly involved - the airports
and their airline customers.  This is most likely to mean that the investment
undertaken - and services provided - by airports are related to the needs of
airlines and their passengers.'

Feedback will be sought in late summer from the parties on progress in
establishing the structure and workstreams for their discussions.  This
information will be reviewed by the CAA to gauge the potential for meaningful
engagement.  It will publish its conclusions by the end of this year.  Depending
on the circumstances, the CAA reserves the right to revert to a more
conventional price control process at particular airports if the evidence
suggests meaningful engagement is unlikely.  The CAA will also be publishing by
the end of this year its initial views on key regulatory policy issues.

The CAA proposes that the next review of Manchester Airport should be deferred
by a year so it does not coincide with the review of BAA's London Airports.
This has met with broad support.  The CAA will therefore formally consult within
the next month on extending the current price control at Manchester Airport of
RPI-5 per cent by one year.

The CAA expects to hold a briefing seminar on the approach set out in today's
document from 2pm to 3.30pm on 16 June at CAA House, 45-59 Kingsway, London WC2.

The full document is available on the CAA website in the 
'Economic' section.

For further information contact the CAA press office on: 0207 453 6030.

Notes to Editors

The CAA is responsible for economic regulation of BAA's London Airports and
Manchester, in accordance with its statutory duties. Charges at designated
airports (currently Heathrow, Stansted, Gatwick and Manchester) are set by the
CAA as the independent economic regulator.  The CAA's decisions are made under
its duties set out in section 39 of the Airports Act 1986, which require the

(a)  to further the reasonable interests of users of airports within the United

(b)  to promote the efficient, economic and profitable operation of such

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

(d)  to impose the minimum restrictions that are consistent with the
     performance by the CAA of its functions under those sections.

The CAA published in February and March 2003 the results of its Quinquennial
Reviews of BAA's London airports and of Manchester Airport up to March 2008.
The 2004/05 price caps are £7.08 at Heathrow, £4.44 at Gatwick, £5.03 at
Stansted and £6.36 at Manchester.   For Heathrow the maximum increase per
annum is set at RPI plus 6.5 per cent; for Gatwick and Stansted at RPI; and for
Manchester at RPI - 5 per cent.

Under the new regulatory approach, the CAA envisages that there will be a number
of phases in the constructive engagement between the airport and airlines at
each of the designated airports.  These are:

  • A CAA seminar to describe and explain the new approach (June 2005)
  • An opening phase of discussion between airlines and airports on the
    approach they will take to the discussions, including issues of
    representation, institutional structures, workstream definition and
    timetable (Summer 2005).
  • An assessment of progress in relation to the setting up of processes by
    the CAA (late Summer 2005, with the outcome published by the end of 2005).
  • A series of meetings and/or consultations between airports and airlines on
    service and investment requirements.  (These discussions will begin in
    Summer 2005 and will continue through to Summer 2006).
  • The production of a price control business plan which reflects the
    outcomes of the discussions between airports/airlines at each airport (June

                      This information is provided by RNS
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