Economic licensing of Heathrow Airport

We have powers under the Civil Aviation Act 2012 for the economic regulation of airport operators that pass the market power test in the Act. In February 2014 we granted a licence to Heathrow Airport Limited (HAL). The licence includes a price control on airport charges for the period 1 April 2014 to 31 December 2018. In December 2016 we have extended, upon consultation, the current price control period for one year, such that it will expire on 31 December 2019.

The licence, an operator determination, our notice granting the licence and supporting documentation, and documents relating to our licensing of HAL are below:

Licence granted to Heathrow Airport Limited (latest version, May 2023)
Economic regulation at Heathrow from April 2014 - notice granting the licence (February 2014)
Heathrow Airport Limited operator determination (January 2014)
Market power determination in relation to Heathrow Airport - statement of reasons (January 2014)

More information on the market power assessment and the initial licence conditions (including the price control condition) are on the market power assessment and price control pages accordingly. More information on our on-going review of the price control at Heathrow can be found on the Heathrow H7 page.

Setting future price controls – review of approach

We are carrying out a review of our approach to setting price controls (including the lessons learnt from H7 and NR23) to inform our overall approach to future price controls. CAP2618 sets out our initial views on the scope of this lessons learnt review and on the key issues we should consider for the next price control reviews for HAL and NERL. We welcome views from stakeholders on these issues.

We have decided to extend the deadline for responses to the consultation on the review of our approach (CAP 2618) to allow stakeholders to provide their views on all parts of the consultation, including the scope of the lessons learnt review, the key issues, the broader strategic issues and next steps. Responses to this consultation should be clearly labelled which area they are responding to and sent to economicregulation@caa.co.uk by 17:00 on 28 March 2024 (previously 20 March 2024 in the consultation document).

Responses

Close Setting future price controls – review of approach

Modifications to the licence

Licence conditions can be modified in two ways:

using a statutory process to modify set out in the Civil Aviation Act 2012
using a self-modification process in which HAL and its airline community can modify certain specified parts of the service quality statement of standards and rebates in Schedule 1 of the licence

Public register of modifications to the Heathrow licence

Date of modification	Effective date of modification	Type of modification	Modified condition(s)	Effect of modification	Links
22 December 2021	2 February 2022	Section 22 of Civil Aviation Act 2012	Conditions A3.1(f) and (g); and C2.1, C2.2, C2.3, C2.5, C4.1, E1.3, E1.5(a)&(b), E2.2, E3.1, E3.5, Schedule 1: paragraphs 2.1(e),(f) &(j), 2.4, 2.28(a)&(b), 3.2, 3.4, 3.4(a)&(b), 3.5, 3.7, 3.11, 3.13, 3.15, 4.2, 4.4, 4.5, 5.2(b) 6.2, 6.3(c) and 6.6; a new Condition C1; Conditions C2.5, 2.6 Schedule 1 paragraphs 4.1, 4.2,4.3,4.4,4.5 and 4.6 and Table 9.	insert new price control condition to set a new 'holding price cap' for 2022; consequential changes to the Licence, including Schedule 1, to update the price control arrangements; minor changes to remove a redundant term.	Notice of licence modifications (CAP2305) Responses to CAP2265 2022 Charges ABTA Aegean Airlines Air France Airlines for America Airlines UK American Airlines AOC LACC Avianca British Airways Heathrow Airport IAG IC Advisory Logan Air and LHR Charges 2022 Spreadsheet Lot Polish Airlines Lufthansa Mr Aaron Conlin Star Alliance United Airlines Virgin Atlantic
5 November 2019	17 December 2019	Section 22 of Civil Aviation Act 2012	Conditions A3.1(g); new B3.1, B3.2 & B3.3; C1.2; C1.4 including Table C1 & Table C2; C1.9 (Table C3); C1.11 including Table C4; C1.12; new C1.13, C1.14 & C1.15; C1.16 ((d), (h), (j), (p) & (q)); C2.5; 2.6; C4.1; D1.10; E1.5; new E1.6 and subsequent renumbering; new E1.8; Paragraphs 2.2, 4.5, 4.6, 4.7, Table 1a, 1b, 1c, 1d, 9, in Schedule 1	extend the current price control by a two year interim period, up to 31 December 2021, taking account of the commercial arrangements between HAL and certain airlines for this period; include a new licence condition to promote economy and efficiency by HAL in the operation, maintenance and development of Heathrow airport; and make minor changes to update the price control arrangements, remove obsolete terms and make a change to HAL's regulatory audit requirements to reflect current auditing guidelines	Notice of modifications AOC response American Airlines response HAL response Heathrow Hub response and worksheet Heathrow West response IAG response Consultation
23 December 2016	Amendment: Paragraph 5 of the notice to allow for an annual recovery of £10m of Category B costs for a new northwest runway reported that the CAA had received a representation to its consultation proposing the modification from “the AOC representing the airline community”. The paragraph should have said that the CAA had received a joint representation to its consultation from “the LACC and the AOC representing the airline community".
21 December 2016	1 February 2017	Section 22 of Civil Aviation Act 2012	Conditions C1.2, C1.12	To allow for an annual recovery of £10m of Category B costs for a new northwest runway.	Letter Notice HAL response Virgin response LACC/AOC response IAG response
21 December 2016	1 February 2017	Section 22 of Civil Aviation Act 2012	Conditions A3.1g, C1.2, C1.4, C1.9, C1.11, C2.5, C2.6, C2.7, C4.1; Table 9 in Schedule 1	Extension of the Q6 price control by one year to 31 December 2019.	Letter Notice HAL response Virgin response LACC/ AOC response
29 July 2016	29 July 2016	Self-modification	Paragraphs 2.8a, 2.15, 2.18, 2.20; Tables 10a, 10b, 10c, 10d, 10e in Schedule 1	Remove the question regarding overall cleanliness so the licence condition correctly captures the method used. Update the names of the Q6 governance bodies where agreement on some service quality issues can be taken. Remove references to audited rebates and bonuses and replace with references to rebates and bonuses reviewed and agreed by the CAA.	Notice
30 March 2015	30 March 2015	Self-modification	Tables 2b, 3b, 4b, 5b, 10b in Schedule 1	Change the delivery date of the automated security queue measurement from 1 April 2015 to a date agreed by HAL and the airline community.	Notice
24 March 2015	5 May 2015	Section 22 of Civil Aviation Act 2012	Table C.3 in Condition C1.6	Correct an error made to the inflation adjustment of development capex.	Notice Consultation HAL response Heathrow AOC response
1 August 2014	1 August 2014	Self-modification	Paragraph 2.3 and Table 3d in Schedule 1	Technical changes to QSM measurement in Terminal 2 and measurement of pier served stand usage in Terminal 3.	Notice

Close Modifications to the licence

Notices / guidance issued under the licence

Date	Related licence condition	Brief description	Links
30 July 2020	Condition C2	CAA decision on hold baggage screening costs	CAA decision
8 September 2017	Schedule 1	CAA determination on HAL’s updated service quality protocol	Service quality determination
6 March 2015	E1	HAL has to produce regulatory accounts in conformity with CAA regulatory accounting guidelines	Guidelines
19 November 2014	Schedule 1	CAA determination on HAL's service quality protocol	Service quality determination
23 September 2014	D2	Additional guidance for operational resilience plans	Additional guidance HAL response Heathrow AOC response Consultation on additional guidance

Close Notices / guidance issued under the licence

Q6 capital triggers definition sheets

HAL's licence contains triggers on the completion of capital projects. Documents relating to the triggers are below:

Tunnels refurbishment (February 2014)
Terminal 3 integrated baggage (February 2014)
Terminal 4 Code F stand 410 (February 2014)
Runway rehabilitation project (February 2014)

Close Q6 capital triggers definition sheets

Capital investment triggers handbook

Q6 Capital Investment Triggers handbook (March 2015)

Close Capital investment triggers handbook

Service quality

HAL pays rebates to airlines if its service quality does not reach specific standards. It also receives bonuses for out-performance. Documents relating to service quality at Heathrow in recent years are below: