Gatwick sets out 'radical' plan to keep charges low

Gatwick sets out 'radical' plan to keep charges low

A “radical” new plan to raise competition between London’s airports by freeing Gatwick from regulatory constraints has been put forward by the airport.

Gatwick claims it can offer airlines a lower price path over a longer period of time than would be the case if it continues to operate within a regulatory framework.

It would be able to do this by removing “wasted costs of regulation, improving incentives and speeding up investment”.

Under Gatwick’s new deal it has been calculated that the maximum average price level would increase by 1.3% above inflation (RPI) over a seven year period following a one-off price adjustment.

This equates to an increase in the per passenger fee from £8.80 in 2014 to a maximum per passenger fee of £10.68 in 2020/21.

This price compares with a maximum average price level increase of RPI+3.3% which would otherwise result under a five-year regulatory framework, taking the maximum per passenger fee up to £11.45 by 2018/19.

“This outcome would ensure Gatwick’s prices remain highly competitive when compared to other London airports,” the airport said. “However, charges to airlines with contracts may well be at prices lower than these levels.”

Gatwick, majority owned by Global Infrastructure Partners, plans a further £1 billion investment in facilities between 2014 and 2019 to build on the improvements made over the past three years.

The proposal comes just days after rival Heathrow put forward plans to raise fees to airlines to help fund future development.

Gatwick chief executive Stewart Wingate said: “Competition is by far the best mechanism for promoting the interests of passengers.

"It is the very reason why the Competition Commission took the decision to break up the BAA monopoly and why Gatwick is now thriving under separate ownership.

“Our proposed new deal for Gatwick moves that competition judgment on further and is a better deal for airlines and their passengers than a regulatory outcome.

“Free from regulation, we would be able to respond more quickly to the changing needs of airlines and their passengers and we would be able to step up the pace of improvement in the passenger experience.

"The deal means airlines and passengers win on price, service and the quality of facilities.

“A decision to allow competition, rather than regulation, to protect the interests of passengers would be, in my view, the most important step the Civil Aviation Authority could take when it considers this plan.”


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