Economic licensing and price control overview

The CAA undertakes economic regulation of airports and NATS (En Route) plc (NERL). This page focuses on airport regulation. Information on regulation and licensing of NERL can be found here.

We provide information to prospective and current investors at Heathrow and Gatwick airport on the Investors page.

Economic regulation of airports

We assess whether airport operators have substantial market power and, where appropriate, licence those that do. Airport economic licences include conditions on price controls, specifying the quality of the services the airport operator must deliver and how much it can charge from them.

We issue certificates to airport operators that meet the statutory requirements to be classed as Statutory Undertakers.

We declare the hours of peak congestion at Heathrow and Gatwick under the Traffic Distribution Rules.

Market power assessments

In January 2014, we determined that the operators of Heathrow and Gatwick met the market power test set out in the Civil Aviation Act 2012 and therefore required a licence to recover charges for its services. We found that the operator of Stansted did not meet the test for services to either passenger and cargo airlines and therefore did not require a licence.

Further information on market power assessments

Airport licences

In February 2014, we granted licences to the operators of Heathrow and Gatwick which came into force on 1 April 2014. These licences include conditions relating to prices, service quality and operational resilience, amongst others. More details are on the economic licensing of Heathrow and Gatwick pages.

We have powers under the Civil Aviation Act 2012 to impose penalties for breach of a licence condition or breach of an enforcement order issued in relation to a licence condition. We may also impose penalties for non-compliance with information notices we have issued and for destroying information or knowingly supplying false information. We are required to publish a statement of policy on penalties for non-compliance under Chapter 1 of the Civil Aviation Act 2012 setting out the criteria we will use to determine whether a penalty is appropriate and the amount of any penalty.

• CAP1156 Our penalties statement (February 2014)

In May 2015, after consultation, we published Economic Licensing Enforcement Guidance covering our approach to enforcing the airport economic licences and licences to provide air traffic services under the Transport Act 2000. The guidance outlines the legal framework in which our work fits and informs stakeholders of the enforcement powers we have and how we will use them.

• Economic Licensing Enforcement Guidance (May 2015)

After consultation, we also published prioritisation principles that explain our approach in deciding which pieces of work to take forward in the areas of consumer protection, competition law and economic regulation.

Prioritisation Principles for the CAA's Consumer Protection, Competition Law and Economic Regulation work (May 2015)

Latest price control reviews

Since we started price regulating airports in 1986, we have completed six price control reviews.

The current control period (referred to as Q6) started on 1 April 2014 for both Heathrow and Gatwick, and will run until 31 December 2019 (price control extended by one year in 2016) for Heathrow and 31 March 2021 for Gatwick. You can view our work on the Q6 reviews, including the price controls and other licence conditions, on our economic licence pages for Heathrow and Gatwick.

We are currently reviewing the regulatory arrangements at Heathrow.

• Q6 price control of Stansted

Previous price control reviews

• Q5 (2008-2014) price control of Heathrow, Gatwick and Stansted
• Q4 (2003-2008) price control of Heathrow, Gatwick, Stansted and Manchester

Statutory undertakers

An airport operator whose annual turnover at the airport exceeded £1m in at least two of the last three financial years may apply for a certificate that confers rights on the operator as a statutory undertaker. Airport operators who already have a permission to levy airport charges issued under section 39 of the Airports Act 1986 retain their status as a statutory undertaker.

• A note on the transition between the Airports Act and Civil Aviation Act (including a list of airports that have rights as statutory undertakings)
• A note on the information required in an application for a certificate

Traffic Distribution Rules 1991

Under the Traffic Distribution Rules 1991 whole plane cargo services or general or business aviation cannot be operated at Heathrow or Gatwick airports during periods of peak congestion declared for each scheduling season, without permission from the airport operator.

The periods of peak congestion 

The Civil Aviation Authority, in exercise of its powers under the above Rules and having consulted Heathrow Airport Ltd, Gatwick Airport Limited, and Airport Coordination Ltd defined and published the hours of peak congestion at Heathrow and Gatwick airports for the purposes of the above Rules are as specified below. All times are UTC.

UKRN guidance for regulators on cost of capital methodology - consultation

The UK Regulator Network (UKRN) has published draft guidance for consultation on the methodology for setting the cost of capital. A number of UK regulators, including the CAA, have worked together to identify areas where there is already significant alignment and to make recommendations where further alignment could be achieved, recognising the benefits brought about by aligning regulatory approaches to investors and customers.

The report notes that it is not expected that the recommendations in the draft guidance be adopted for price control decisions that have been made or are in the process of being made, including for the CAA. We will review our approach to the cost of capital and how to best have regard to the positions set out in this document after the end of the H7 and NR23 reviews.

The UKRN report is available at this link for consultation: https://ukrn.org.uk/publications/ukrn-guidance-for-regulators-on-the-methodology-for-setting-the-cost-of-capital-consultation/