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CAA set to fly in the face of airline anger over passenger duty

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Mar 11, 2008

The Civil Aviation Authority (CAA) is expected to bow to pressure today from BAA to increase the amount the airport operator can charge passengers.

The higher charges are likely to anger airlines, which are said to be considering a boycott of the new system in an attempt to provoke a showdown with the airports regulator and the Government.

The CAA will announce today how much BAA, which owns Heathrow and Gatwick, can make from the passengers travelling through its facilities.

The regulatory structure, which is designed to prevent BAA abusing its monopoly control over London's airports, will set the pricing regime for the next five years.

In a provisional announcement last year, the CAA said it would cut the rate of return that BAA can make at its airports from 7.75 per cent to between 6.2percent and 6.5 per cent.

This rate of return determines BAA's revenues and the cut would have reduced the company's annual cashflow by about ÂŁ150 million at a time when it is struggling with debt of ÂŁ10 billion.

Virgin Atlantic, easyJet, Ryanair and bmi have called a joint press conference for today in what is expected to be a show of unity against the CAA's decision on charges.

The airlines have repeatedly complained that the regulatory structure rewards BAA for its poor service and poor infrastructure.

BAA and its Spanish owner, Ferrovial, have been lobbying the CAA to increase the amount the airports operator can make in order to cover debt repayments and encourage investment.

BAA has said that it may not be able to afford new buildings and facilities if it does not get a better regulatory settlement.

The Spanish infrastructure group has been trying to refinance its BAA debt for the past six months. Analysts have cautioned that if the refinancing is not agreed soon, Ferrovial could be forced to sell one of the London airports to reduce debt. Ferrovial said last month that its total annual debt repayments have nearly doubled to €1.9 billion (£1.4 billion).

business.timesonline.co.uk

CAA set to fly in the face of airline anger over passenger duty
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