Q6 Full Business Plan - Heathrow Airport

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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. Page 40 Heathrow Q6 Full Business Plan - Public version | Chapter 5 © Heathrow Airport Limited 2013
5. Aeronautical charges Table 5.1: Q6 prices for 5-year Q6 and Q7 £ million, 2011/12 prices 2014/15 2015/16 2016/17 2017/18 2018/19 Total Q6 2019/20 2020/21 2021/22 2022/23 2023/24 Total Q7 'X' 0% 5.9% -5.8% Yield per passenger 7 21.97 23.25 24.50 25.81 27.30 24.56 8 25.76 24.32 22.95 21.67 20.45 23.03 Passengers 69.5 70.3 71.0 71.8 72.6 355.2 73.4 73.9 74.4 74.9 75.5 372.1 'X' 10% 2.6% -3.6% Yield per passenger 23.33 23.94 24.47 25.00 25.65 24.48 24.75 23.89 23.06 22.26 21.49 23.09 Passengers 69.5 70.3 71.0 71.8 72.6 355.2 73.4 73.9 74.4 74.9 75.5 372.1 Figure 5.2: Price profile over Q6 & Q7 29 27 Yield per passenger (£) 25 23 21 19 17 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 Yield per passenger Q6 and Q7 Yield per passenger Q5 + 1 Yield per passenger Q6 and Q7 P 0 Adjustment 7 Yield per passenger is profiled by RPI-X price cap formula 8 Arithmetic average of profiled yields © Heathrow Airport Limited 2013 Heathrow Q6 Full Business Plan - Public version | Chapter 5 Page 41
Page 1 and 2: Q6 Full business plan Public versio
Page 3 and 4: Executive summary Passenger experie
Page 5 and 6: Introduction and context Passengers
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Page 9 and 10: 1. Introduction and context 1.7 Inv
Page 11 and 12: Our transformation to date Since 20
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Page 17 and 18: Our vision and priorities for Q6 Ou
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Page 21 and 22: 3. Our vision and priorities for Q6
Page 23 and 24: Our proposition for Q6 In this chap
Page 25 and 26: 4. Our proposition for Q6 Courteous
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Page 39: Aeronautical charges This chapter o
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Page 47 and 48: Dependencies and risks This chapter
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Page 53 and 54: Conclusion This Full Business Plan
Page 55 and 56: Terminal 1 Departure lounge extensi

Q6 Full Business Plan - Heathrow Airport

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