London Heathrow Airport has criticised new airline pricing controls proposed by the Civil Aviation Authority (CAA) as it believes they could affect passengers, airlines and investors.
The CAA has released its final proposals which said that the airport charges should be subject to a real terms price freeze (RPI +0%) from 2014-2019, a move which will allow prices to rise in line with inflation.
According to Heathrow, the proposal could restrict investment by providing no incentive for investors on the global stage to fund upgrade projects at the airport, along with having ‘serious and far-reaching consequences’ for passengers and airlines.
Heathrow Chief Executive Colin Matthews said that 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.
"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," Matthews noted.
According to Heathrow, the authority’s proposed rate of return for the airport had dropped over the last ten years, a discouraging trend for international shareholders to make upfront investments in UK infrastructure.
"We will now carefully consider our investment plans before responding fully to the CAA," Matthews added.
Defending its proposals, the CAA said that the settlement is an improvement on a draft proposal made in April this year in which it said the airport’s five-year cap should be RPI minus 1.3%.
Meanwhile, the airline criticised the CAA saying that the pressure from Heathrow and shareholders have influenced it to make the final proposals too lenient.
Image: 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. Photo: courtesy of LHR Airports Limited.