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Last Updated: Tuesday, 11 March 2008, 13:45 GMT
BAA to raise airport landing fees
Heathrow airport
There have been calls for BAA to be broken up
Air passengers will face a rise in ticket prices of about 2 after new landing charges for Heathrow and Gatwick airports were announced.

The Civil Aviation Authority (CAA) has allowed airports operator BAA to lift its fees to pay for better facilities and more stringent security measures.

Charges can rise by 23.5% at Heathrow in the year 2008/2009, and increase by 21% at Gatwick, the CAA said.

The increases were criticised by airlines including British Airways.

"When BAA's new owners, Ferrovial, bought them, the CAA said they would not be influenced by Ferrovial's high debt levels," said Paul Ellis, BA's airport policy and infrastructure general manager.

Today's settlement is very good news for the airports operator and its owner
Robert Peston,
BBC News business editor

"In practice, they have ignored their own policy and caved in to intense pressure from BAA by setting excessive price increases.

"Heathrow passengers will pay, on average, 17% more than the Competition Commission recommended in September 2007," he added.

Large scale

However, BAA, which is owned by a group headed by Spain's Ferrovial, said that the changes did not go far enough.

"The review does not recognise sufficiently: the scale of the task we are embarked on; the pressures of handling such large infrastructure projects; the full cost of the increased security requirements; as well as the impact of the credit market turmoil," BAA said in a statement.

Ferrovial is heavily in debt and there have been repeated calls for BAA's monopoly as airport operator to be broken up.

BAA has a monopoly over the big three London airports - Heathrow, Gatwick and Stansted - and its landing charges are fixed by the CAA. It is currently the subject of a Competition Commission inquiry.

BAA believes the increase will not be enough to pay for 6.5bn rebuilding work at Heathrow and ageing facilities at Gatwick.

Also, security costs have spiralled since the 9/11 attacks in the US, and BAA, along with other British airport operators, have to cover the costs themselves.

Blushes

The BBC's business editor Robert Peston said there was clear winner.

"Today's settlement is very good news for the airports operator and its owner, the consortium led by Ferrovial of Spain," he said.

"The airlines will squeal because Heathrow and Gatwick are being allowed to increase what they charge them from 1 April by far more than could have been expected.

"BAA will express disappointment with elements of the settlement, notably that there has been no increase in the cost-of-capital assumptions that underpin the pricing proposals.

"But BAA is largely trying to spare the blushes of the regulator."



SEE ALSO
Q&A: Airport landing fees
11 Mar 08 |  Business
BAA sells World Duty Free shops
10 Mar 08 |  Business
Airport operator boss steps down
27 Feb 08 |  Business
CAA proposes airport charge rises
20 Nov 07 |  Business
Commission outlines BAA inquiry
09 Aug 07 |  Business
BAA to face competition inquiry
30 Mar 07 |  Business

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