Says Airport Has Too Much Influence On The Airfare Market

Britain's Civil Aviation Authority (CAA) has told Heathrow Airport that it must cut the increases in fees it charges airlines in an effort to slow the rise of airfares charged by carriers operating there.

Heathrow is the world's third busiest airport measured by the number of passengers served. The CAA says that it must limit the fee increases for takeoffs and landings to an amount less than inflation for five years beginning in 2014. The authority has capped the amount that fees can be increased at inflation (RPI) minus 1.3 percent. The U.K. newspaper The Guardian reports that the most recent fee increases have been RPI plus 7.5 percent each year since 2009, making for an increased profit of over $2 billion.

The Spanish infrastructure group Ferrovial that operates the airport says that limiting the amount of fee increases will jeopardize a planned long-term capital improvement program that it says will improve the passenger experience at the airport. They said the resulting reduction in investment would translate to cuts in passenger services.

The CAA said in publishing its proposal that it "found clear evidence of substantial market power and is proposing a traditional price control mechanism."

Willie Walsh, the president of IAG Group which owns British Airways, says that the proposal would not solve the problem. He said Heathrow was "over-priced, over-rewarded, and inefficient," adding that the plan would still allow price increases and fail to address the situation.

FMI: CAA Proposal