Airlines are up in arms over "failed" UK airport regulations and BAA's "monopoly tactics"
In a rare display of unity, four of the largest carriers operating from the UK have joined together to brand the country's airport regulatory framework a "failure" and call for a top-to-bottom review of the entire process. The move was prompted by the UK Civil Aviation Authority's decision to allow airports operator BAA to significantly increase charges at London's Heathrow and Gatwick airports, which has also led to renewed calls from the airlines for BAA's monopoly ownership of Heathrow, Gatwick and Stansted to be broken up.
In a joint press conference in London in mid-March, Virgin Atlantic chief executive Steve Ridgway, easyJet chief executive Andy Harrison, Ryanair deputy chief executive Michael Cawley and bmi chief executive Nigel Turner condemned the increased charges at Heathrow and Gatwick and called on UK transport secretary Ruth Kelly to overrule the decision.
The protest centres on the CAA's decision to set the maximum charge for Heathrow at £12.80 ($25.80) per passenger for the year beginning 1 April 2008 - an increase in real terms of 23.5% on the 2007/08 price cap (see chart). The increased cap for each of the following four years has been set at a maximum of 7.5% plus the rate of inflation. At Gatwick the maximum charge has been increased by 21% for 2008/09 to £6.79 per passenger, with the maximum charge for the following four years increased by 2% plus the rate of inflation.
© Robert Clayton
From left to right: Ridgway, Harrison, Cawley and Turner
EasyJet's Harrison expresses "massive frustration" and a "total lack of confidence in UK airport regulation". He says BAA is "highly indebted and unstable" and UK passengers are being "asked to pay the price" for BAA parent Ferrovial's "problems". Harrison says the four airlines will be calling on Kelly to intervene in much the same way as she did earlier this year on price controls at Stansted: "We will ask for a moratorium on the price increases until Ruth Kelly has had a chance to look at them."
Ryanair's Cawley says the CAA has failed to live up to its role as mediator between the airports and airlines: "The key role of the CAA is to protect the airport user. You can't negotiate with a monopoly - you need a regulator in the middlebut the regulator continues to place the interests of BAA ahead of passenger interests." Ridgway of Virgin Atlantic believes leadership is "not coming from the CAA", and says what is needed is "a new regulatory framework that shows leadership and commercial understanding".
British Airways, while noticeably absent from the joint press conference, issued a statement of its own in which the carrier's general manager of airport policy and infrastructure, Paul Ellis, said: "When BAA's new owners, Ferrovial, bought them, the CAA said they would not be influenced by Ferrovial's high debt levels. In practice, they have ignored their own policy and caved in to intense pressure from BAA by setting excessive price increases. These overly generous charges far exceed what is required to upgrade facilities across Heathrow through investment in infrastructure and improved service quality levels." BA says "urgent changes must be made to current UK airport regulation".
Harrison agrees and says a "fundamental root and branch review" of UK airport regulation is needed. EasyJet, Virgin, bmi and Ryanair believe the level of the airport charge hikes - which BAA says still "does not recognise sufficiently the scale of the task we are embarked on" - is indicative of monopoly tactics, and they are calling once again for BAA's "stranglehold" on London's airports to be brought to an end.
Defending its decision, the CAA's group director economic regulation, Harry Bush, says: "Passengers and airlines deserve better than they have been provided with at Heathrow and Gatwick in recent years. However, the resulting improvements in airport facilities and service standards...have to be paid for in increased charges."
The Competition Commission is currently assessing BAA's ownership of Heathrow, Gatwick and Stansted. It is scheduled to release the provisional findings of its investigation this summer.