the CAA said - Heathrow Airport

CAP 1027
Chapter 2: Context for the CAA's initial proposals
• While a ‘dual till’ approach may improve efficiency in terms of
capacity utilisation the gains are likely to be marginal even at
capacity constrained Heathrow. 11 The CAA further notes that
airports facing a single till are setting their charging structures
flexibly so as to incentivise efficient capacity usage.
• The single till recognises the complementarities that are present
across airport operation.
• Through the single till there are currently benefits that arise to
users. Through the offsetting of commercial revenues, aeronautical
charges to airlines are reduced and this is likely reflected in lower
average airfares for passengers. Moving away from this would
mean a substantial transfer of income ultimately from users to the
airport.
2.19 There are benefits in terms of regulatory efficiency, transparency and
simplicity. Under dual till regulation the CAA would need to consider
in detail the scope for regulation over non-aeronautical activities.
There would also need to be significant effort expended in allocating
cost, revenues and capex to the various baskets of products that
would be formed. Both of these are likely to significantly increase the
regulatory burden placed on the operator and other stakeholders. It
could also make the regulatory process less transparent for users.
2.20 The CAA has undertaken a ‘minded to’ assessment of the market
power that HAL holds for airport operation services 12 in the core
airport area. The core airport area is defined by the Act as the “land,
buildings and other structures used for the purposes of the landing,
take off, manoeuvring, parking, and service of aircraft at the airport,
the passenger terminals and the cargo processing areas”. 13 This
includes airport charges and other aeronautical services the detail of
which is set out in the product bundle of the HAL market power
assessment. 14 If an airport operator has SMP over the core airport
11
Competition Commission report, BAA Ltd: A report on the economic regulation of the London
airport companies (Heathrow Airport Ltd and Gatwick Airport Ltd), November 2007, available at
http://www.caa.co.uk/default.aspx?catid=5&pageid=8779.
12
As defined in section 68(1) and section 68(3)(a) of the Act.
13
Section 5(4).
14
The CAA’s summary of its ‘minded to’ view on whether HAL passes the MPT can be obtained
from the CAA’s website: www.caa.gov.uk.
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