Buster the Bear
13th Nov 2003, 03:18
12 November 2003
BAA admits LHR/LGW would have to help fund STN runway
Airlines have reacted angrily to BAA’s admission that a new runway at Stansted would have to be funded by cross-subsidies from Heathrow and Gatwick.
The Daily Telegraph reports that in its response to the Government’s consultation on airport capacity in the south east, BAA said: ‘We currently believe that the option for one new runway at Stansted would be financially viable…but the charges needed to remunerate the investment would need to be shared across users of the London system as a whole rather than applied to Stansted users only.’
The maximum charges BAA is permitted to levy on airlines operating from Heathrow, Gatwick and Stansted are set on a five-yearly basis by industry regulator the Civil Aviation Authority. BAA’s submission goes on to say that to fund a £4bn runway at Stansted on a ‘stand alone’ basis, the CAA would have to allow it to raise the current maximum per passenger charge at the airport by 120% to £9.39.
According to the Telegraph, in reality this would mean Stansted’s fees would actually treble, because to date BAA has kept them artificially low, at more than £1 below the permitted maximum, to attract budget airlines such as easyJet and Ryanair. The airport operator claims, however, that using a system of cross-subsidies would necessitate per passenger charges at Stansted rising by just 35% to £5.79.
But the CAA is opposed to cross-subsidisation between airports. Earlier this year, it told the Government: ‘It is less clear that allowing cross-subsidy from charges at one airport to finance capacity enhancement at another would be desirable or justifiable. Airlines based at Heathrow are likely to question why they should pay for capacity enhancement at Stansted, when they would receive little or no benefit…and indeed could be improving the ability of airlines at Stansted to increase market share at their expense.’
On Monday, at the release of British Airways’ second quarter results, the airline’s chief executive Rod Eddington said if BAA tried to ‘milk’ Heathrow to expand Stansted to the benefit of low cost rivals ‘we will fight it tooth and nail’. And yesterday a Virgin Atlantic spokesman told the Telegraph: ‘There will be a massive row [if a new runway is built at Stansted] and frankly we think it would be difficult to push through.’
Meanwhile TBI, the operator of Luton Airport, where easyJet also has a base, claimed cross-subsidisation was an abuse of BAA’s monopoly power. The paper quotes TBI chief executive, Keith Brooks, as saying: ‘We have to compete with Stansted. The cross-subsidy thing is exercising everyone. The airlines are crying foul and so are we.’
The Department for Transport said Tuesday no firm decision had been taken on the new runway’s location. The Government plans to publish the aviation white paper close to the centenary of the Wright brothers’ first flight on 17 December.
Separately, BAA announced 11.9m passengers used its seven UK airports in October, 4% more than during the same month of last year.
Traffic in all major markets continued to improve, with the North Atlantic recording its first monthly gain (+1% year-on-year) since February 2003, while Heathrow had its strongest month since January, reporting passenger numbers up 2.6% at 5,636,400.
BAA admits LHR/LGW would have to help fund STN runway
Airlines have reacted angrily to BAA’s admission that a new runway at Stansted would have to be funded by cross-subsidies from Heathrow and Gatwick.
The Daily Telegraph reports that in its response to the Government’s consultation on airport capacity in the south east, BAA said: ‘We currently believe that the option for one new runway at Stansted would be financially viable…but the charges needed to remunerate the investment would need to be shared across users of the London system as a whole rather than applied to Stansted users only.’
The maximum charges BAA is permitted to levy on airlines operating from Heathrow, Gatwick and Stansted are set on a five-yearly basis by industry regulator the Civil Aviation Authority. BAA’s submission goes on to say that to fund a £4bn runway at Stansted on a ‘stand alone’ basis, the CAA would have to allow it to raise the current maximum per passenger charge at the airport by 120% to £9.39.
According to the Telegraph, in reality this would mean Stansted’s fees would actually treble, because to date BAA has kept them artificially low, at more than £1 below the permitted maximum, to attract budget airlines such as easyJet and Ryanair. The airport operator claims, however, that using a system of cross-subsidies would necessitate per passenger charges at Stansted rising by just 35% to £5.79.
But the CAA is opposed to cross-subsidisation between airports. Earlier this year, it told the Government: ‘It is less clear that allowing cross-subsidy from charges at one airport to finance capacity enhancement at another would be desirable or justifiable. Airlines based at Heathrow are likely to question why they should pay for capacity enhancement at Stansted, when they would receive little or no benefit…and indeed could be improving the ability of airlines at Stansted to increase market share at their expense.’
On Monday, at the release of British Airways’ second quarter results, the airline’s chief executive Rod Eddington said if BAA tried to ‘milk’ Heathrow to expand Stansted to the benefit of low cost rivals ‘we will fight it tooth and nail’. And yesterday a Virgin Atlantic spokesman told the Telegraph: ‘There will be a massive row [if a new runway is built at Stansted] and frankly we think it would be difficult to push through.’
Meanwhile TBI, the operator of Luton Airport, where easyJet also has a base, claimed cross-subsidisation was an abuse of BAA’s monopoly power. The paper quotes TBI chief executive, Keith Brooks, as saying: ‘We have to compete with Stansted. The cross-subsidy thing is exercising everyone. The airlines are crying foul and so are we.’
The Department for Transport said Tuesday no firm decision had been taken on the new runway’s location. The Government plans to publish the aviation white paper close to the centenary of the Wright brothers’ first flight on 17 December.
Separately, BAA announced 11.9m passengers used its seven UK airports in October, 4% more than during the same month of last year.
Traffic in all major markets continued to improve, with the North Atlantic recording its first monthly gain (+1% year-on-year) since February 2003, while Heathrow had its strongest month since January, reporting passenger numbers up 2.6% at 5,636,400.