Q6 Full Business Plan - Heathrow Airport

5. Aeronautical charges
Table 5.1 shows the indicative price profile for delivering
the outcomes we describe above. Using the same
methodology as for the Q5 calculation, the value of ‘X’
in Q6 is 5.9%.
The investments Heathrow makes have lives well beyond
Q6, and so it is important to look also at the implications
of the Q6 plans for future quinquennia. We have not
attempted any detailed modelling over this longer term
time horizon, but Table 5.1 gives illustrative projections,
assuming capital expenditure of just over £4.5 billion in
Q7. Although tentative, these projections do illustrate
that real aeronautical charges will fall between Q6 and
Q7, from an average £24.56/passenger in Q6 to £23.03/
passenger in Q7. The change in the value of ‘X’ is even
more pronounced from X=5.9% in Q6 to X=-5.8% in
Q7, due to the ‘over-shooting’ property of the ‘X’
calculation where below/above returns at the beginning
of a quinquennia need to be profiled by above/below
returns at the end of the period.
Alternatively, the price could be adjusted by using an
initial adjustment (known as a P 0
adjustment) to address
the shortfall in passenger numbers in Q5, leaving the
value of ‘X’ to account for Q6 factors only. Table 5.1 also
shows this alternative price path where an initial
adjustment of 10% is made to prices at the start of Q6
(roughly the amount needed to adjust for the lower than
anticipated passenger numbers at the start of Q6),
followed by a lower level of ‘X’ of 2.6% in subsequent
years. The value of ‘X’ is lower under this profile because
it no longer needs to absorb the impact of the resetting
of the passenger forecast. The price profile for both
these options is shown in Figure 5.2.
Heathrow is also considering the potential to realign
regulatory and financial years. This would significantly
enhance transparency between regulatory and statutory
accounts. The implications of this are to reduce the Q6
value of ‘X’ from 5.9% to 5.4% due to the cash flow
benefit of bringing forward price revisions from April to
January.
In the following sections we describe the major factors
that influence the aeronautical charge level and profile.
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