Today the CAA has published its final proposals for the economic regulation of Heathrow, saying airport charges should be subject to a real terms price freeze (RPI +0%) from 2014-2019.
The CAA’s figure is derived from its forecasting of future passenger numbers, retail revenues, operational efficiencies, and the cost of financing capital investment.
Since the publication of its Initial Proposals in April, Heathrow has argued that the CAA has fundamentally underestimated the cost of raising capital to invest in new facilities.
Heathrow Chief Executive Colin Matthews said: “This proposal is the toughest Heathrow has ever faced. The CAA’s proposed cost of capital of 5.6% is below the level at which Heathrow’s shareholders have said they are willing to invest. The CAA’s settlement could have serious and far-reaching consequences for passengers and airlines at Heathrow.
“We want to continue to improve Heathrow for passengers. Instead, the CAA’s proposals risk not only Heathrow’s competitive position but the attractiveness of the UK as a centre for international investment. We will now carefully consider our investment plans before responding fully to the CAA.”
Heathrow has invested £11 billion over the last ten years in new facilities such as Terminal 5. Next year the new £2.5bn Terminal 2 will open.