Heathrow Airport will have ‘strong incentives’ for the ‘efficient delivery’ of its proposed third runway, the aviation regulator has announced.

The Civil Aviation Authority, CAA, said it will review options for economic regulation of the west London airport.

UK Chancellor Rachel Reeves gave her backing for Heathrow expansion in a speech on growth in January.

The airport responded by saying it would submit plans to the government in the summer.

The cost of the project was estimated at £14 billion in 2014, but this is likely to have risen sharply.

Airlines have warned that the scheme will be unaffordable unless Heathrow’s economic regulation is overhauled.

Currently, the regulatory asset base, Rab, model is used, which allows Heathrow to charge fees to airlines based on infrastructure improvement plans agreed with the CAA and permitted rates of return for investors.

The CAA said in a statement: ‘This review will look at options to ensure the regulatory model provides strong incentives for the efficient delivery of the substantial costs involved in expansion and how to best protect the interests of consumers.’

The regulator also set out its approach for determining the cap on the airport’s charges from 2027 to 2031.

It said it will ensure ‘consumers and airlines face airport charges that are no higher than necessary’.

It will also consider rules for investment in the airport’s resilience, in the aftermath of its closure on Friday March 21 because of a fire at a nearby electricity substation.

A spokesperson for the Heathrow Reimagined campaign, which represents bodies such as British Airways’ owner International Airlines Group, Virgin Atlantic and hotel tycoon Surinder Arora, said: ‘Whilst the CAA’s announcement of a regulatory review for Heathrow expansion is a step forward, it doesn’t go far enough.

‘Heathrow is the most expensive airport in the world and continues to fail passengers and airlines.

‘We are concerned that the priority of the CAA has been to launch the business as usual review of passenger charges for the next five-year period.

‘The current flawed regime will lead to higher passenger charges which is why we urge the CAA to go even further and commit to an urgent and fundamental review of regulation at Heathrow.’

Heathrow was approached for a comment.

By Neil Lancefield, PA Transport Correspondent

Press Association: Finance

source: PA

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