Regulator imposes surprise Heathrow price cap

The operator of Heathrow airport is set to clash with regulators after the Civil Aviation Authority (CAA) said user charges for airlines will be capped at 1.5 per cent below RPI inflation.

Dame Deidre Hutton, CAA chairwoman, said the price cap was "good news for air passengers. They will see prices fall, whilst still being able to look forward to high service standards."

However, Heathrow operators have slammed the measure as draconian. The cap will come into effect in April. In July, Heathrow submitted plans to the CAA for a price increase of 4.6 per cent above inflation over the next five years.

The CAA rejected the proposals and said charges should fall due to increasing passenger forecasts and that the regulatory regime should ensure "there is still a supportive environment for capital expenditure."

The regulator said no cap would be imposed on Stansted and regulation for Gatwick would be based on the airport's own plans.

Ryanair's director of legal & regulatory affairs, Juliusz Komorek, criticised the CAA's failure to impose similar regulations for Stansted:

Today's decision is an example of the CAA's regulatory failure which will again harm consumers as Stansted will be able to further increase airport charges whenever it wishes, without any reference to competitive price levels.