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Tuesday 04 November, 2008

Civil Aviation Auth.

CC REPORT ON PRICE CONTROLS F

RNS Number : 3448H
Civil Aviation Authority
04 November 2008
 



News Release

4 November 2008


CAA publishes Competition Commission Report on quinquennial review of price controls for Stansted Airport


The Civil Aviation Authority (CAA) is today publishing the Competition Commission's report on the price controls for Stansted Airport for 2009 to 2014. The Commission's report follows a six-month inquiry, which was initiated by the CAA's reference to the Commission in respect of Stansted Airport in April this year, as required under the Airports Act 1986.


The Commission recommends that maximum airport charges at Stansted rise to £6.56 per passenger in 2009/10, with charges subsequently increasing by no more than retail price index (RPI) inflation plus 1.75 per cent each year, reaching a maximum of £7.05 per passenger in 2013/14. This compares with projected charges for 2008/09 of £6.34 per passenger. (All figures quoted in 2008/09 prices.)


Under the Airports Act 1986, the CAA is required to have regard to the Commission's recommendations in respect of setting the level of price controls for the coming five-year price control period. However, subject to that requirement, the CAA's final proposals are its own responsibility and must be made within the statutory powers and duties given to the CAA.


Under the Airports Act, it is the Competition Commission rather than the CAA that decides on matters of airport conduct at Stansted as part of its wide-ranging quinquennial review. The Commission has found that Stansted Airport has pursued a course of conduct which has operated against the public interest in three respects in the period February 2002 to April 2008, and the Commission recommends that the CAA impose conditions to remedy the effects of those courses of conduct, as follows:

 

With regard to consultation relating to the strategic development of the airport and its capital expenditure proposals, it recommends improvements to the information which is provided by BAA to its airline customers and to the process of consultation.


With regard to the quality of service, in particular the processing of passengers through security, it recommends a service quality rebate scheme similar to the scheme in operation at Gatwick. (The Competition Commission had not made such a finding in respect of Stansted at previous reviews.)


With regard to the structure of prices affecting cargo aircraft, it recommends that the aircraft in the heaviest band should benefit from the same percentage discount for off-peak landing charges as applies to aircraft in the second heaviest band.


The Commission did not agree with Ryanair's claim of excessive pricing; it concluded that BAA's conduct with regard to airport charges in 2008/09 had not operated against the public interest.


Following a public interest finding made by the Commission, the CAA is required to have regard to the conditions (or modifications to existing conditions) specified by the Commission and to put in place conditions (or modifications) that the CAA considers appropriate for the purpose of remedying or preventing the adverse effects specified by the Commission. The CAA will be discussing further with the airlines that use Stansted and BAA in the coming weeks the implications of the Commission's public interest findings and the regulatory options available to the CAA that might best address the Commission's findings, and that meet the CAA's own statutory duties. The CAA will frame its proposals in light of these discussions and having regard to the conditions specified by the Commission.


The CAA will consider the Commission's report and then issue, for consultation, its own price control and other proposals for Stansted Airport by Tuesday 9 December. Thereafter, all parties will be able to submit further written evidence to the CAA during an eight-week consultation period. There will also be an opportunity for those with the most direct interest to make any further representations at oral hearings, which the CAA plans to convene in early February 2009. The CAA remains on track to make its final price control decisions in respect of Stansted in March 2009, in order to allow for new price controls to come into effect at the airport for the five-year period starting 1 April 2009.


The Competition Commission's report is available here: 

http://www.caa.co.uk/default.aspx?catid=78&pagetype=90&pageid=10232


For further media information telephone the CAA Press Office on 020 7453 6030.


  


Notes to Editors

1. The Competition Commission issued its full report to the CAA on 23 October 2008, following its six-month inquiry, which was initiated by the CAA's mandatory price control reference on 29 April 2008. The Commission's report, which the CAA is publishing today, has been excised of commercially confidential information at the direction of the Secretary of State.


2. Under the Airports Act 1986 the CAA must now proceed to impose price controls on Stansted's airport charges for the five years from 1 April 2009 to 31 March 2014 and to impose conditions that remedy or prevent the adverse effects of any course of conduct by the airport found by the Competition Commission to be contrary to the public interest. The CAA cannot make public interest findings of its own.


3. The CAA will not comment on those aspects of the Competition Commission's report which relate to the recommended price controls in advance of publication of the CAA's own firm price control proposals in December. It will be engaging in early discussions with Stansted airlines and BAA during November on the measures which might be put in place to address the Commission's public interest findings. As well as having regard to the Commission's report and recommendations, the CAA will take into account in framing its proposals any relevant new information which may emerge between now and early December. Beyond that, it will treat any written submissions alongside other consultation responses to its firm proposals, and consider them as part of the consultation leading to the CAA's final price control decisions in the first quarter of 2009. The CAA intends that its December proposals will form notice of the conditions and modifications it intends to impose on Stansted Airport, pursuant to Regulation 12 of The Civil Aviation Authority (Economic Regulation of Airports) Regulations 1986.


4. The Competition Commission's report expresses its price cap recommendations largely in 2007/08 prices. In order to assist in understanding the current price implications of the Commission's recommendation, the CAA presents below a comparison of the Commission's recommendations in 2007/08 prices and 2008/09 prices, using the Commission's estimate of 4.8 per cent for 2008/09 retail price inflation to derive the latter numbers:


Maximum airport charge yield per passenger in Q5 (£)


2008/09*

2009/10

2010/11

2011/12

2012/13

2013/14

2007/08 prices

6.05

6.26

6.40

6.51

6.62

6.73

2008/09 prices

6.34

6.56

6.70

6.82

6.93

7.05

* CC estimates of actual charges levied in 2008/09, last year of Q4


5. The Competition Commission's findings and recommendations with regard to public interest issues are set out in chapter 13 of its report (pages 112-122).


6. The Competition Commission's price control inquiry (under the Airports Act 1986) is separate from its continuing market investigation into BAA's airports (under the Enterprise Act 2002). The Commission is required to report by the end of March 2009, but aims to do so earlier by February - any enquiries regarding this investigation should be addressed directly to the Competition Commission itself. The Commission's market inquiry website is:

www.competition-commission.org.uk/inquiries/ref2007/airports/index.htm


7. Three other UK airports are currently subject to price control by the CAA: Heathrow, Gatwick and Manchester. The CAA set price controls for Heathrow and Gatwick in March 2008 for the five-year period starting 1 April 2008, informed by the Commission's price control review and recommendations to the CAA of September 2007. Manchester airport will shortly be removed from the scope of price regulation: following a policy review in 2007 and decision in early 2008, the Government has recently legislated to end price controls at Manchester airport from 1 April 2009.


This information is provided by RNS
The company news service from the London Stock Exchange
 
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