New price cap threatens growth, says Heathrow

January 11, 2014 - 2:37:40 am

LONDON: London’s Heathrow warned it could struggle to grow its business after accusing the industry regulator of imposing a “draconian” cap on the prices Britain’s biggest airport can charge airlines.

Britain’s Civil Aviation Authority (CAA) said yesterday it would insist that Heathrow set its prices at 1.5 percent below inflation from April 2014 after finding that the airport — Europe’s busiest — had too much market power. 

Heathrow said it might appeal the cap, which was much lower than expected for the next five years, but airlines said the move did not go far enough as the hub still had some of the most expensive charges in the world. 

The cap is well below an interim suggestion made by the regulator for prices in line with inflation. It is also well below Heathrow’s original request for a rise in tariffs of 4.6 percent above inflation, as measured by the retail prices index (RPI).

The previous five-year tariff was RPI plus 7.5 percent.

“We want to continue to improve Heathrow for passengers,” Chief Executive Colin Matthews said. “We will review our investment plan to see whether it is still financeable in light of the CAA’s settlement.”