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Wednesday 06 March, 2002

Civil Aviation Auth.

Re Airport Charge Controls

Civil Aviation Authority
6 March 2002


The Civil Aviation Authority today published its advice to the Competition
Commission on how charges to airlines levied by the BAA London Airports and
Manchester Airport should be regulated for the five years from 1 April 2003. The
CAA's proposals would strengthen incentives for increased infrastructure
investment and introduce measures to improve service quality, while lightening
the regulatory burden.

On the basis of latest market information, the policies recommended to the
Competition Commission would result in the price caps increasing on average by
RPI+6 per annum for Heathrow, RPI+5 at Gatwick and RPI+6 at Stansted. At
Manchester Airport the price cap would be broadly maintained in real terms.

This implies real increases in the maximum allowed charges to airlines by the
end of 2003/08 of £2 per passenger at Heathrow (current charge £5.23), £1 at
Gatwick (£4.06), and £1.70 at Stansted (£4.36). Manchester Airport's maximum
charge would remain at about £6.60 in real terms. The recommended price caps
could change as newer information becomes available following the September 11
terrorist attacks and the economic slowdown.

The CAA recommends an end to the so-called 'single till' approach to regulation
where profits from airport retail activities are used to reduce airport charges.
It considers the single till approach involves excessive regulation and fails to
promote effective airport operation and development. The CAA has proposed to the
Competition Commission that regulation should focus on only the monopoly
services provided by the airports to users.

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 the three BAA-
owned London airports - Heathrow, Gatwick and Stansted - and Manchester Airport
which is owned by a consortium of local authorities. The CAA sets the maximum
charges at the airports following recommendations from the Competition

The Airports Act requires the CAA to set the price cap most likely to further
reasonable user interests, to promote efficient and profitable airport
operation, and to encourage timely investment while imposing minimum

The review timetable is now as follows:

•   End August - Competition Commission reports to the CAA

•   End September - CAA publishes Competition Commission reports and its own 
    proposals on charges and any public interest matters

•   October - CAA considers written representations and holds hearings with 
    main parties

•   End November - CAA announces final decision on price caps and public 
    interest matters

•   April 2003 - New price caps take effect.

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 formula for Heathrow and Gatwick taken together is RPI-3
per cent and for Stansted, RPI+1 per cent. For Manchester it is currently RPI-5
per cent. Charges per passenger for 2000-01 were: Heathrow £5.23, Gatwick £4.06,
Stansted £4.36, Manchester £6.73.

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

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