BAA and pricing formulae
When the British Airports Authority was privatised 20 or so years ago, the MMC (now the CC) and the CAA imposed a pricing formula on the South-East airports which had the effect at Heathrow of over-stimulating demand at an airport that couldn't grow sensibly at a rate to meet that demand. Thus, Heathrow (and to a lesser extent Gatwick) have a demand far in excess of capacity but no cash with which to properly expand the infrastructure to cope with it. Gatwick is the busiest single-runway airport in the world by a factor of at least 30% and Heathrow is one of the cheapest in Europe with eye-watering overcrowding, both in the Terminals and out on the Apron. An immediate doubling in charges at Heathrow would restore some sense but of course you couldn't do it overnight. Years of RPI -8% and then RPI-5% have done a lot of damage. People who fly in and out of Heathrow are getting the use of the airport at an outragously cheap rate and of course they're now paying the price with chronic overcrowding. T5 will hardly make enough difference here, unless charges go up significantly above inflation to get demand down to sensible levels. I see that it's to be RPI+7.5% at LHR, I'd advocate more but I suppose it's a start. Of COURSE BA would want charges to go down, who would vote for a rent increase? Don't forget, they're getting the massive benefit of BAA's major investment in T5, just as they did 25 years ago with T4. But of course, then both BA & BAA were part of the national infrastructure, owned by the public for the public good, so were helping each other out. (Actually, there was as much animosity between the two then, as now).
At Gatwick, it's not so much a case of seriously overheated demand as being stifled of cash to make proper investment in the infrastructure to make the South Terminal as pleasant a travel experience as the North is. Mind, you, NT is in my view only pleasant because BA have been steadily running down their presence at LGW. not to say anything against BA at LGW per se, just that absence leaves a bit of a gap at times during the day.
Will we still see a BA plane at LGW after T5 opens? Should EZY been moved over there to balance things out a bit? No and yes, I think...
Would an equity buy-out have been possible if BAAplc had been in a sufficiently robust position to resist, with a healthy pre-tax profit for shareholders of 10%, instead of the paltry 5 or 6% imposed by the CAA/CC??
just my view,
TheOddOne
Last edited by TheOddOne; 5th Oct 2007 at 13:27.