Gatwick allowed contracts deals in new CAA rules
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Gatwick Airport is to be allowed to settle its own airline contracts in new rules announced by the Civil Aviation Authority (CAA) today.
The airport welcomed the acceptance of what it calls the ‘Contracts and Commitments’ strategy, which will see the airport make contracts between itself and the airlines under a CAA licence. A price cap of RPI +1% stands if necessary for its charges.
The new regulation, which now go into a consultation period, would help the London airport to make more commercial deals against rival Heathrow, although Gatwick slammed comments from the CAA which said “substantial market power persists” at the airport despite breaking away from the BAA monopoly.
“London Gatwick’s transformation over the last three years has shown that separate ownership and the competition that this has brought, has been good for passengers and airlines. The CAA must not hold us back through imposing heavy handed regulation, red-tape in the form of a licence and an inflexible price control, but should allow us to build on this success,” said Stewart Wingate, chief executive at Gatwick.
“Our Contracts and Commitments framework gives a clear legally-binding pathway from economic regulation at Gatwick. It will remove the costs of regulation, improve incentives and speed up investment. It will also allow us to incentivise those airlines that choose to grow at the airport,” he added.
Gatwick user easyJet agreed with the CAA over its view of Gatwick, saying it prefers to reach commercial agreements with airports.
A statement from the airline read: “easyJet welcomes the CAA’s announcement that it views Gatwick as a monopoly airport. easyJet’s preference is always to engage constructively with airports to reach commercial agreements which are in both parties interests – and the interests of passengers – and so agrees in principle with the CAA’s new approach to regulation at Gatwick. However, despite easyJet’s efforts to achieve such an agreement with Gatwick we were unable to reach a mutually agreeable commercial deal. This reflects the market power which Gatwick wields and shows the need for continued regulation.”
However easyJet, IAG and Virgin Atlantic criticised the increase in charges from Gatwick, adding that with a rise in charges passengers face less value for money.
“In the current climate most businesses have to deliver the same level of service more efficiently and airports should not be exempt from this economic reality. This makes it all the more baffling to see the Gatwick proposals of an inflation busting increase,” said Craig Kreeger, chief executive of Virgin Atlantic.
A spokesperson from easyJet said: “easyJet is disappointed with the proposed charges of RPI +1% which appears to be driven by capital expenditure that doesn’t provide value for money for passengers and an unreasonably high cost of capital.”
“The Gatwick proposals, which will result in a significant increase in charges, are completely unjustifiable, totally unacceptable and directly contravene the CAA’s new remit to represent customers’ interests,” added Willie Walsh, chief at IAG.