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Spending cap for airports

Gatwick airport last week warned that it will have £200M less to spend on capital projects between 2014 and 2019 if Civil Aviation Authority (CAA) proposals for aircraft landing charges are carried through.

The CAA wants to limit Gatwick’s capital spend to £800M over the five year regulatory period.

Based “on the degree of market power each airport holds”, the CAA wants to cap Gatwick’s charges at 1% above the Retail Price Index (RPI) and peg Heathrow’s charges at 1.3% below the RPI, and put Stansted on a “watching brief”.

Gatwick Airport

Gatwick: Landing charge cap could hamper investment plan

But a Gatwick spokesman said the limits on landing charges would hamper its ability to spend even to the limits imposed by the CAA.

“In our business plan we were not only looking for [capital expenditure at] nearly the £1bn mark but we actually do not think we can raise £800M from [a landing charge increase of] RPI of plus 1%.

“The reason for this is that we do not agree with the CAA’s assessments of how much our passenger traffic is likely to grow, the amount of efficiency savings they suggest we can make and also their assessment of our financing,” added the spokesman.

The CAA wants to cap landing charges at Heathrow and Stansted too, as well as limiting the airports’ capital expenditure.

The regulatory body has the power to restrict airport capital expenditure at Heathrow, Gatwick and Stansted.

Heathrow and Stansted refused to comment on the proposed capital expenditure limits.

Gatwick has around 160 engineers as permanent members of staff with many more working as consultants and contractors. Ongoing schemes include the £183M demolition and rebuild of the airport’s Pier One by Vinci,which is due to finish in 2015.

“In terms of staffing it is much too early to say what the effect will be, but for any projects started in this regulatory period, it’s business as usual,” said the spokesman.

“The next stage of regulation (between 2015 and 2019) will decide on levels of investment and plans going forward for Gatwick.”

Since Gatwick was sold by BAA in 2009, its new owner, a consortium led by Global Infrastructure Partners, has invested £900M on projects including a new stand for Airbus A380 aircraft, the refurbishment of the north and south terminals, and £45M of new security facilities at the latter.

Over the last decade, Heathrow, the UK’s largest airport, has spent £11bn on upgrades and new facilities, including a new Terminal 5 and the reconstruction of Terminal 2, due to open next year.

The CAA wants to peg spending at Heathrow to £3bn between 2014 and 2019. The CAA said the figure was roughly in line with Heathrow’s own projections.

Consultants said they were unconcerned about the pressure from the CAA on capital spending and landing charges.

Mott MacDonald aviation practise leader Chris Chalk said engineers working at these airports had nothing to fear.

“There is no cause for concern for people working at the airports. These are positive proposals that move the industry forward. They offer more flexibility and strengthen operating resilience,” he said.

Chalk also said positives could be drawn from the fact that none of the UK’s engineering giants were working as advisors to the CAA: “If you are involved at an airport you obviously can’t be an advisor, so from that point of view I think it’s a good indicator that the industry is healthy.”

But Chalk expressed surprise that the CAA business plan had not referred to the Airport Commission inquiry into capacity in the South East, led by Howard Davies, to consider the case for expanding airport capacity.

 

Airports ‘inefficient’

The London Assembly’s Transport Committee has recommended ruling out the expansion of Heathrow airport and questioned the need for a new hub airport.

The committee also concluded that London’s airports could increase capacity if they were used more efficiently.

The report, which will be fed into Sir Howard Davies’ Airports Commission, also recommended that improved transport links from central London to the airports would encourage people to travel to the underused airports. Stansted said shaving 15 minutes off the 45 minute journey time would bring in an extra 1.5M passengers a year.

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