Smaller airports in the UK are subject to trigger regulation At present they

Smaller airports in the uk are subject to trigger

This preview shows page 29 - 31 out of 70 pages.

Smaller airports in the U.K. are subject to trigger regulation. At present they are unregulated. However, upon complaint or on the initiative of the Government, the price cap regulation regime may be applied. Currently there is some consideration of extending regulation to some of the smaller airports. The UK regulatory regime for airports is characterized by the following: 24 A regulatory determination is made once every five years, at the beginning of the five year period. Once the determination is made, airports have complete pricing freedom, provided they stay within the cap. 25 The regulatory determination is a public process conducted by the Monopolies and Mergers Commission (now the Competition Commission). Any interested party may make representation to the MMC. The MMC makes recommendations to the Civil Aviation Authority. It is the CAA which actually regulates the prices of the airports. The CAA may accept, reject or vary the MMC recommendations. In practice, the CAA has made some variations in the MMC recommendations. 24 Note that the CAA also is empowered to impose conditions on airport companies on any matter on which the MMC finds an airport has acted against the public interest. 25 The requirement for price regulation by the CAA after review by the MMC is contained in the Airports Act of 1986.
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Tretheway: Airport Ownership and Management 27 Draft: 14 March 2001 The price cap is set at the Retail Price Index less an adjustment for productivity. In recent years, the productivity adjustment (the X in RPI-X) has been quite large and exceeds the inflation rate. This results in a requirement for the airports to lower prices. At the five year review the airports are allowed special price increases to deal with a) new capital and b) other extraordinary items. Thus when a new terminal or runway is planned, the CAA allows the airport to increase its prices above RPI-X to reflect the increased cost of the new facilities. An example of an extraordinary adjustment is an upward adjustment in prices to compensate BAA when intra- Europe duty frees sales are no longer allowed. The price cap only applies to airfield and terminal charges. Retail, land rents, etc. are not regulated during the five year period. However, when the five year reviews are done, non-aeronautical revenues are considered. This means that during the five year period, the airport company is free to charge what it will for concessions, parking, etc., and it is allowed to keep any and all profits. At the end of the five years, if non-aeronautical revenues have grown, then there will be a downward adjustment in aeronautical fees for the next five years. In other words, non-aeronautical fees are never regulated, but if they are profitable, once every five years landing fees will be reduced by the amount of increased profits from non-aeronautical activities.
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  • Summer '15
  • JenniferO'Bryon
  • Government, ........., Airport Authority

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