UK airport regulation will be reviewed by the government following today”s (22 April) Competition Commission report in which the system was criticised as a feature which could ”prevent, restrict or distort competition.”
”I am today announcing a review of the economic regulation of the UK airport system, supported by a panel of experts,” said Secretary of State for Transport Ruth Kelly. ”This recognises the points made by the Competition Commission together with those of the aviation industry and other key stakeholders, about the potential shortcomings of the current regulatory system.
”It has been over 20 years since the Airports Act 1986 put in place the current regime of regulation and as such it is one of the oldest systems in the country.”
This morning”s report criticised operator BAA for a ”lack of responsiveness to the interests of airlines” and said its control of airports in the south east in particular seems to be hampering competition.
”Economic regulation can play an important role in maximising the effectiveness of scarce capacity at airports in the south east, for example by providing the right incentives to deliver necessary investment and ensure that the owners of UK airports are able to finance that investment,” said Kelly.
However, she added that even if legislation is required following the review, it would be looked at ”in a future legislative session” and therefore there will be no changing the current price caps at Heathrow, Gatwick and the cap set for Stansted from 1 April 2009.
Airlines have come together in recent months in unprecedented shows of unity ” easyJet, Ryanair, Virgin and bmi held a joint press conference ” railing against what they saw as extortionate price rises at BAA airports.
EasyJet CEO Andy Harrison said today in response to the Commission”s report: ”We need a fundamental overhaul of UK airport regulation which will introduce more competition and tougher regulation. Transferring ownership of our major airports from one highly indebted monopolist to another will benefit no one apart from the City deal-makers.
”The UK needs to introduce as much competition into the system as possible by separating the ownership of airport terminals from runways; allowing differential pricing within airports so that efficient airlines do not cross-subsidise the high-cost airlines; breaking BAA”s monopoly on airport investment; and developing a much more effective, customer-orientated regulatory framework.”
Yesterday, BAA chief executive Colin Matthews announced a management shake-up at the company ” effective from 1 June - to focus more directly on improving Heathrow operations.
”Before I joined BAA I believed that the key priority for passengers and the company was to make Heathrow work effectively as the UK”s only global hub airport. Recent events at T5 have reinforced that view.
”Only as we make Heathrow work more effectively will we earn the right to be heard on the wider issues that affect our business ” the need for investment and the need to modernise the regulatory framework.”