BA calls for Heathrow to curtail charges

British Airways is calling for airport charges at London Heathrow to rise by no more than inflation between 2008 and 2013 and for safeguards to be introduced to allow the Civil Aviation Authority to ringfence revenue to improve airport facilities.The airline wants the CAA to challenge BAA to run its business more efficiently to reduce costs and to take account of the full retail earning potential of the airport operator so that charges can be reduced to the benefit of customers.

It also wants safeguards in place to ensure that BAA’s new owners, Grupo Ferrovial SA, cannot divert money for improved airport facilities and services to pay off its debt.

The airline’s views are detailed in its response to the CAA’s consultation on its preliminary prices proposals for charges at BAA London airports.

The CAA’S preliminary proposal is to raise charges at London Heathrow by inflation plus 4-8 per cent each year between 2008 and 2013. It has proposed a lower cost of capital at 6.2 per cent, down from 7.75 per cent currently, and assumed that BAA can achieve a one percent operating efficiency each year.

British Airways believes that a 50 per cent rise in charges over the next five years is unjustified on top of the 50 per cent increase during the current charging period between 2003-8.

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Paul Ellis, British Airways general manager airport policy, said: “While the CAA has told Ferrovial that it won’t allow them to increase charges to pay off debt or acquisition costs, it is vital that sufficient measures are put in place to ensure this does not happen. Revenue from the regulated parts of the business must be ringfenced to protect the airport’s operational integrity and secure Heathrow’s future.”

The airline is calling on the CAA to set BAA’s cost of capital at 5.5 per cent and target the airport operator with a three per cent a year operating efficiency improvement. Achieving this would enable charges to increase by no more than inflation.

Paul Ellis said: “The opening of Terminal 5 in March 2008 will be a catalyst for change at BAA. The cost of investing at Heathrow can be cut by five per cent because terminal congestion will be reduced, lowering building costs and making it easier to modernise the airport.

“Also, an improved operating efficiency target is achievable. By opening a brand new terminal and redeveloping older facilities such as Terminal 2, there is an opportunity for better working and operational practices to be introduced.”
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