Britain's two leading airlines threatened legal action yesterday against the civil aviation authority after the industry regulator imposed increases of up to 50% in landing charges at Heathrow airport over the next five years.
British Airways and Virgin Atlantic warned that passengers would have to pay for the extra charges which are being levied to enable BAA, the airport operator, to fund a £7.4bn, 10-year investment programme at London's three airports, including Heathrow's Terminal 5.
The airlines said the rises would give BAA £300m more than its funding requirements between 2003 and 2008. Andrew Sentance, BA's chief economist, said without this charges could rise in line with inflation plus 0.42%.
But the CAA accused them of crying wolf, insisting they would be unable to pass on the increased costs to passengers. "There's a price tag and I'm afraid to say that if some airlines cannot cut mustard there are others who will jump in and take those landing slots," Doug Andrew, the CAA's director of regulation, said.
Pointing out that the extra charges at Heathrow would be 43p per passenger per year, he said : "That's neither here nor there and they will have to eat it. The very strength of the airlines' reaction proves we're right. Because Heathrow is uniquely congested, competition will ensure they can't pass on the extra costs."
Airlines complained that the extra charges were being imposed when the aviation industry was in financial distress because of the slump in travel - and they and passengers would not benefit because the improvements to airports would not come until after 2008.
The CAA, while recognising the industry's financial difficulties, said the price cap demanded by the airlines risked delaying BAA's investment programme, with Mr Andrew claiming their proposals would result in an 80% increase in 2008 or a 20% rise in each of five years after 2007.
The CAA's decision means that BAA can charge £6.48 per passenger at Heathrow from April 1 and raise this levy each year by the rate of inflation plus 6.5%. Charges at Stansted and Gatwick would also rise.
Sir Richard Branson, Virgin's chairman, said the airline was considering its legal position. "This is sheer madness. When fuel prices are $40 a barrel and BAA still is making massive profits, whoever suggested it be allowed to raise its charges by 40% must be off their heads. It begs the question: who regulates the regulator."
Rod Eddington, BA's chief executive, said: "These increases are bad news for the travelling public who will end up paying higher prices and bad news for an industry already in financial distress."
BAA, which could raise charges more if the government gives the go-ahead for more runways, said the final CAA formula was "tough but realistic". Mike Clasper, chief executive-designate, said: "The investment programme is designed to meet our airline customers' requirements and will ensure we are providing the high quality infrastructure the country needs."
