Aviation regulator to review Heathrow’s financial model ahead of third runway
The UK aviation watchdog is to review Heathrow Airport’s financial model after stakeholders raised concerns over how it intends to fund a third runway.
Some of Heathrow’s biggest airlines submitted a request to the Civil Aviation Authority (CAA) in February demanding “an urgent and fundamental review” into the way the airport is regulated amid soaring passenger costs and sub-par service.
In an open letter to stakeholders on Thursday, the CAA said it intended to respond to these requests to “support capacity expansion and protect the interests of consumers.”
The review will explore options to ensure Heathrow’s regulatory model, which has been described as monopolistic, provides “strong incentives for the efficient delivery of the substantial costs involved in expansion.”
It will also “consider the potential impact on the regulated asset base and airport charges,” which have sparked criticism from airlines for being some of the most expensive in the world.
“We will consult widely on these issues and where it is appropriate will work jointly with
the Department for Transport on these matters,” the letter reads.
Heathrow’s long-delayed, highly controversial third runway will be financed entirely by the private sector should it receive planning approval.
The boss of Emirates, Sir Tim Clark, warned in February that any further hikes to landing charges to pay for construction would raise the possibility of legal challenges.
Heathrow has repeatedly clashed with its airlines over the level it sets landing charges, with the dispute previously going all the way to the Competition and Markets Authority (CMA).
Airlines say they are being forced to shell out £1.1bn more per year on landing charges than rival European hubs.
Since the third runway returned to the agenda, hotel operators, business travel groups, and the aviation industry’s global trade body, the International Air Transport Association (IATA), have joined calls for a re-assessment of Heathrow’s regulatory model.