Review of Q4 (2003-2008) Price control reviews

In 2004 and 2005, the CAA reviewed the processes by which it carries out its price reviews of airports. The review looked back at the 2003 airport price cap reviews and set out how the CAA believed that airport regulation should develop in the run-up to the next reviews.

• letters from the CAA to Chairs of BAA London Airport LACC's and Airport Managing Directors on progress of constructive engagement (September 2005) responses to CAA letters
• presentation from seminar 16 June 2005
• Airport Regulation - the process for constructive engagement (May 2005)
• Airport regulation: looking to the future, learning from the past - Review of responses to the CAA's Consultation Document (December 2004)
• responses to the paper
• powerpoint slides from seminar 27 May 2004
• Airport regulation: Looking to the future, learning from the past (May 2004) full document, executive summary

Airports Price Review (Heathrow, Gatwick, Stansted and Manchester 2003-2008)

• Economic Regulation of BAA London Airports (Heathrow, Gatwick and Stansted) 2003-2008: CAA decision (February 2003) - decision, annexes
• Economic Regulation of Manchester Airport, 1 April 2003-31 March 2008: CAA decision (March 2003) - decision, decision to extend price control (November 2005)

The reports of the Commission Competition with its recommendations for the 2003-2008 price caps are available via the following links:

• BAA plc: A report on the economic regulation of the London airports companies (Heathrow Airport Ltd, Gatwick Airport Ltd and Stansted Airport Ltd) (October 2002)
• Manchester Airport plc: A report on the economic regulation of Manchester Airport plc (October 2002)

Following a decision by the CAA in May 1999 to extend the price caps at the BAA London airports into a sixth year (the maximum extension the Airports Act allows) the previous price caps at Heathrow, Gatwick, Stansted and Manchester expired on 31 March 2003. New price caps were set for the period from 1 April 2003 to 31 March 2008. The CAA reviewed the BAA London airports and Manchester in parallel.

It followed a programme of work which led up to the decisions on the new price caps in early 2003. This programme was as follows:

• July 2000 - CAA published consultation paper 'Issues for the Airport Reviews'. Until September 2000, it received over 30 submissions to the consultation paper.
• October 2000 - CAA published position paper 'The CAA Approach to Economic Regulation and Work Programme for the Airport Reviews'.
• From November 2000 - CAA published a series of discussion papers on the key issues for the review, as set out in the October 2000 Paper;
  • The 'Single Till' and the 'Dual Till' Approach to the Price Regulation of Airports, December 2000. It received 18 submissions to the discussion paper.
  • Quality of Service Issues, December 2000. It received 10 submissions to the discussion paper.
  • The Use of Benchmarking in the Airport Reviews, December 2000. It received 10 submissions to the discussion paper.
  • Economic Regulation and Capital Expenditure, January 2001. It received 15 submissions to the discussion paper.
  • Economic Regulation and Incremental Costs, February 2001. It received 10 submissions to the discussion paper.
  • Direct Contracting Between Airports and Users: A Default Price Cap, February 2001. It received 11 submissions to the discussion paper.
  • Competitive Provision of Infrastructure and Facilities Within Airports, February 2001. It received 10 submissions to the discussion paper.
  • Pricing Structures and Economic Regulation, March 2001.
  • Cost of Capital, June 2001. It received 5 non-confidential submissions.
• 31 August 2001 - CAA published a report on the performance of the BAA London airports and of Manchester Airport during the price control period; Performance Reports of BAA London Airports and Manchester Airport. The CAA inadvertently omitted to include the submission by the Heathrow AOC in the report, the AOC's comments were summarised in an addendum to the report; Heathrow AOC Response to CAA questions for Performance Reports of BAA London airports and Manchester Airport.
• 2 November 2001 - "Heathrow, Gatwick, Stansted and Manchester Airports Price Caps - 2003-2008: CAA Preliminary Proposals - Consultation Paper", November 2001. Full document, Executive Summary, Cost of Capital annex, Incremental Costs annex, Peak Pricing annex, Demand Valuation annex, Revised Regulatory Cost Base annex. The following submissions to the paper were received.
• January 2002 - 9/10/11 January 2002 - Oral presentations from industry participants. Transcripts of the presentations are available (9 January, 10 January, 11 January).
• 28 February 2002 - CAA made references to the Competition Commission (Heathrow, Gatwick, Stansted, Manchester). It published its advice on the BAA London Airports (Summary - 330kb, Full Document - 4.4mb, capital expenditure annex, cost of capital annex, Heathrow demand valuation survey annex, financial modelling annex, Heathrow incremental costs annex, RRCB allocations annex, traffic forecasts annex) and Manchester Airport (Summary - 250kb, Full Document - 2.4mb, cost of capital annex, RRCB allocations annex, traffic forecasts annex, benchmarking annex (appendix - NERA report). 

BAA London airports

• End October 2002 - Competition Commission reported to the CAA.
• 29 November 2002 - CAA published the Competition Commission report (making such excisions as directed by the Government) and, for consultation, its own proposals on charges and public interest matters.
• 10 January 2003 - Deadline for written representations.
• End January 2003 - Hearings with the main parties (non-confidential transcripts - 29th, 31st).
• Mid February 2003 - Consultation on service quality.
• End February 2003 - CAA  announced decisions (annexes) on the price caps and on public interest matters identified by the Commission.
• April 2003 - New price caps came into effect.
• 15 May 2003 - CAA published service standards and rebates for Heathrow and Gatwick airports.
• 5 December 2003 - CAA published a consultation paper on taxi information desks at Heathrow airport.  Submissions here.
• 2 June 2004 - CAA published a final decision paper on taxi information desks at Heathrow airport.

Manchester Airport

• End October 2002 - Competition Commission reported to the CAA.
• 13 December 2002 -  CAA published the Competition Commission report (making such excisions as directed by the Government) and its own proposals on charges and public interest matters.
• 24 January 2003 - Deadline for written representations.
• Beginning February 2003 - Hearings with the main parties (non-confidential transcript).
• 13 March  2003 - CAA announced decision on the price cap and on public interest matters identified by the Commission. 
• April 2003 - New price cap came into effect.

In October 2000 the CAA commissioned Europe Economics to investigate airport cost allocation and the feasibility of implementing a dual till. The report 'Airport Cost Allocation - Report for the CAA by Europe Economics' is available, as well as an Executive Summary. The CAA produced a related position paper 'Practicalities of Implementing a Dual Till' on the next steps to a possible dual till.  The CAA commissioned AviaSolutions in January 2002 to advise the CAA on the appropriateness of BAA’s regulatory accounting systems for use in a RRCB environment. In April 2002 the CAA commissioned AviaSolutions to provide similar advice on Manchester Airport's regulatory accounting systems. AviaSolutions' reports are available on this website (BAA report, BAA appendix, MA report, MA appendix).

The CAA held a number of workshops with the industry to discuss its consultation papers.