Final and Initial proposals for H7 price control

This consultation sets out our Final Proposals for the Heathrow Airport Limited's (HAL) H7 price control review. It includes:

• This Summary document which provides an executive summary of our Final Proposals, and discusses the particular challenges and uncertainties we have carefully considering in setting the H7 price control.
• Section 1 which discusses:
  • our passenger forecasts for H7 and our proposed form of regulation for HAL, including our intention to introduce traffic risk sharing arrangements; and
  • our proposals for implementing outcome-based regulation (OBR).
• Section 2 which sets out:
  • our projections for each of the key price control 'building blocks' (including operating and capital  costs, charges for other services and commercial revenues) that have informed our Final Proposals; and
  • our proposals for developing stronger capital efficiency incentives;
• Section 3 which describes:
  • our views on the WACC, financeability and the price control on airport charges;
  • related financial issues of HAL's request for a covid-19 related RAB adjustment, and the treatment of asymmetric risk; and
  • how we will modify HAL’s licence to implement our Final Proposals.
• The appendices provide further information on the main issues set out in this consultation.
  • Appendices A - B
  • Appendix C
  • Appendices D - K
• We have published the Price Control Model and the Cost of New Debt Indexation Model alongside the Final Proposals.  

Final Proposals

• CAP2365A – Summary
• CAP2365B - Section 1: Regulatory framework
• CAP2365C - Section 2: Building blocks
• CAP2365D - Section 3: Financial issues and implementation
• CAP2365E1 - Appendices A-B
• CAP2365E2 - Appendix C
• CAP2365E3 - Appendices D-K

Reports by external consultants

• CAP2366A - Business Travel Trends, Skylark Consulting Group, March 2022
• CAP2366B - H7 Updated Beta Assessment, Flint Global, March 2022
• CAP2366C - OBR Phase 2 Targets Assessment, Arcadis, June 2022
• CAP2366D - Review of the CAA’s Approach to H7 Traffic Forecasting, Skylark Consulting Group, June 2022
• CAP2366E - Review of the CAA’s proposed traffic risk sharing mechanism, Deloitte, June 2022
• CAP2366F – H7 capex plan assessment, Arcadis, June 2022
• CAP2366G – Review of CAA’s capex categories and delivery objectives, Arcadis, June 2022
• CAP2366H – Review of commercial revenues, CEPA, Tailor Airey, June 2022
• CAP2366I - Review of opex, CEPA, Tailor Airey, June 2022
• CAP2366J – Management stretch technical annex, CEPA, Tailor Airey, June 2022

CAP2275 sets out draft modifications to Heathrow Airport Limited's (HAL) licence to show how the CAA proposes to implement the policy proposals in the October 2021 Initial Proposals for HAL's H7 price control review.

The consultation deadline has been extended to close of business on Friday 21 January 2022.

• Letter to stakeholders: Extending the consultation period for the H7 Initial Proposals: CAP2274 (OBR working paper) and CAP2275 (draft licence modifications)

Responses to CAP2275

• AOC LACC
• Arora
• Heathrow Airport
  • Annex 1 - Proposed Licence modifications for H7 

CAP2274 follows on from the October 2021 Initial Proposals consultation and provides further details of the CAA's proposed approach to implementing outcome based regulation (OBR) in the H7 price control for Heathrow Airport Limited (HAL). It sets out the CAA's Initial Proposals on targets, rebates and bonuses and summarises the key proposed changes to HAL's licence.

The consultation deadline has been extended to 12 noon on Tuesday 18 January 2022.

• Letter to stakeholders: Extending the consultation period for the H7 Initial Proposals: CAP2274 (OBR working paper) and CAP2275 (draft licence modifications)

Reports by external consultants

• CAP2274A OBR Targets Assessment, Arcadis, November 2021

Responses to CAP2274

• AOC LACC
• British Airways
• Heathrow Airport
• Star Alliance
• Virgin
  • Appendix 1 – High Level Outcomes
  • Appendix 3 – Outcome Based Regulation