Airport charges to spark fares rise

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The rises are inevitable after airlines learned, to their fury, of a Civil Aviation Authority (CAA) ruling that will allow airport operator BAA to impose huge hikes in landing charges at Heathrow and Gatwick from next month until March 2013.

The CAA price formula means that, taking annual inflation into account, airlines could be paying nearly twice as much in landing charges at Heathrow in five years' time than now and around 50% more at Gatwick.

Some of the increases are sure to be passed on to passengers in the form of higher ticket prices.

The CAA said the higher charges were "essentially paying for the modernisation of Heathrow and Gatwick" and that Spanish-owned BAA would need to meet strict improvement targets.

But British Airways said the CAA had "caved in to intense pressure from BAA by setting excessive price increases". And in a joint statement, four airlines - Virgin Atlantic, bmi, Ryanair and easyJet said the CAA was "not protecting the interests of consumers", that the BAA monopoly of major London airports should be broken up and that the CAA regulatory role needed overhauling.

While being able to increase landing charges by more than the CAA had originally proposed last year, BAA was still unhappy with the overall CAA package.

This was because BAA had sought a rate of return on its investments of 7.75%, but the CAA ruled that rates should be no more than 6.2% at Heathrow and no more than 6.5% at Gatwick.

BAA said that the CAA had "not recognised sufficiently" the amount of work it was engaged in at Heathrow and Gatwick.

Charges airlines have been paying at Heathrow this financial year are the equivalent of £10.36 per passenger. The CAA have allowed this figure to rise to 23.5% in real terms to £12.80 per passenger in 2008/09, while the increase at Gatwick will be 21% to £6.79 per passenger.