LONDON GATWICK’S INITIAL RESPONSE TO THE CAA SUMMARY MARKET POWER ASSESSMENT AND INITIAL PROPOSALS FOR Q6

07 May 2013

London Gatwick believes that the Civil Aviation Authority (CAA) should follow through on the conclusions of the Competition Commission and market investigations into the BAA monopoly and, in line with the CAA's new statutory duties, seek to promote a truly competitive market amongst airports in the South East.

London Gatwick believes that the Civil Aviation Authority (CAA) should follow through on the conclusions of the Competition Commission and market investigations into the BAA monopoly and, in line with the CAA’s new statutory duties, seek to promote a truly competitive market amongst airports in the South East. It should be removing the regulatory barriers to growth, better services and more choice, not impose more of them.

We believe economic regulation is bad for passengers, airlines and the airport. It adds significant cost, which in turn gets passed onto our passengers through higher charges. It also focuses too much on what buildings should be constructed rather than concentrating on creating a better passenger experience. Crucially, it does not sufficiently reward innovation and growth by airlines at the airport.

We are encouraged by the fact that the CAA would like to implement our Contracts & Commitments framework. Our framework offers clear commitments to airlines on the quality of airport facilities, passenger service levels, consultation and price. It would allow the airport to reward airlines who want to grow at the airport. It will also allow us to attract new airlines more easily, specifically long haul carriers, increasing the connectivity of London and the UK. However we are concerned by the significant layers of additional conditions the CAA appears to want to place onto the framework. In the coming months we will continue to work with the CAA and airlines on our Contracts and Commitments framework to ensure the best solution is found. 

London Gatwick is very disappointed that the CAA, in its ‘minded to’ statements, has concluded that the airport has substantial market power and is therefore likely to introduce a licence. We have already provided evidence to the regulator, using the CAA’s own methodologies, to prove why our 25% market share across the London airport market does not meet their substantial market power test. We will be contesting this initial finding. 

We also believe that the CAA’s suggested regulated price control level of RPI +1% over five years is too demanding on the airport and would reduce our ability to invest. We believe this price level is based on unrealistic CAA assumptions, including on traffic growth, efficiency gains and financing. 

Stewart Wingate, Chief Executive said: “London Gatwick’s transformation over the last three years has shown that separate ownership and the competition that this has brought, has been good for passengers and airlines. The CAA must not hold us back through imposing heavy handed regulation, red-tape in the form of a licence and an inflexible price control, but should allow us to build on this success.

“Our Contracts and Commitments framework gives a clear legally-binding pathway from economic regulation at Gatwick. It will remove the costs of regulation, improve incentives and speed up investment. It will also allow us to incentivise those airlines who choose to grow at the airport. The deal means airlines and passengers win on price, service and the quality of facilities.

“We look forward to continuing to engage further with the CAA and airlines on a solution which protects airline interests, whilst accelerating Gatwick’s drive for passenger service and excellence.”

 
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