UK CAA rejects Heathrow’s request for £2.6bn – allows just £300M

The Civil Aviation Authority of the United Kingdom (CAA) announced having implemented a package of new measures on the economic regulation of Heathrow Airport Limited (HAL). Taking into account the airport losses caused by the COVID-19 pandemic, the authority decided to accept the airport‘s request and increase its regulatory asset base. However, the CAA agreed to enhance the asset base by only £300 million instead of £2.6 billion as it was requested.

On April 27, 2021, the UK CAA released an update on the economic regulation of Heathrow Airport regarding the enlargement of the airport’s regulatory asset base (RAB). The authority agreed on an early adjustment to Heathrow’s RAB of £300 million despite the airport requesting £2.6 billion. Paul Smith, the Director at the UK CAA, disclosed that the authority considered Heathrow’s request for a RAB adjustment by £2.6 billion as “disproportionate” and “not in the interests of consumers”. 

“The other issues raised by Heathrow as part of its request will be dealt with during the next price control review. […] We do, however, recognize that these are exceptional circumstances for the airport and there are potential risks to consumers if we take no action in the short term. The decision we have announced today will incentivize and allow Heathrow to maintain investment, service quality and be proactive in supporting any potential surge in consumer demand later this year,” Smith was quoted in the CAA statement.

Meanwhile, a Heathrow spokesperson said: “The CAA accepted the need for it to act in order to meet its duties to consumers and to Heathrow’s financeability – but today it has failed to deliver. At a minimum it needed to immediately restore regulatory depreciation in line with UK regulatory principles – the interim adjustment falls far short. This undermines investor confidence in UK-regulated businesses, and puts at risk the Government’s infrastructure agenda. The CAA will need to address all the issues related to adjustment fully in the upcoming H7 regulatory settlement to attract the investment needed to maintain service, keep prices lower than they would otherwise be and protect resilience through the recovery.”

The CAA outlined that it would provide a further update on Heathrow’s RAB as a part of the next price control, which should come into effect in January 2022.


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