Transport secretary Ruth Kelly humiliated the independent aviation industry regulator this morning by slapping down its recommendation to lift price caps at Stansted Airport.
The Civil Aviation Authority had recommended allowing the market to determine the cost of landing charges at the UK's third largest airport. Airlines had opposed the move vociferously, saying Stansted's owner, BAA, would hike prices to pay off the interest charges for its £9.3bn debt burden.
The Department for Transport stunned BAA by stating that price caps were "the best way of protecting passengers who use the airport", throwing out the CAA's tightly argued case in favour of deregulation. Kelly said landing fees should remain fixed because London's airports are operating at full capacity, and the CAA should wait until a second runway is built at Stansted or a Competition Commission investigation into BAA brings further changes.
"Until this new capacity can be delivered, the CAA plays an important role in protecting passengers," she said. "I am therefore asking the CAA to continue to protect passengers by setting price caps at Stansted until new capacity is delivered or until further evidence emerges from the ongoing Competition Commission review."
Kelly's ruling is a blow to the CAA, which is currently subject to a wide-ranging review by the DfT. The CAA has already been criticised by airlines for failing to crack down on lengthy queues at BAA airports.
The CAA indicated in a statement that it was at loggerheads with the government over Stansted's competitiveness with other airports, which is a key factor in setting price caps because the likes of Luton airport were seen by the CAA as strong enough competitors to Stansted.
The CAA said: "At first sight, there appear to be differences between the Government's analysis of competitive conditions in the market in which Stansted operates and the CAA's analysis on which the CAA based its advice that price control was not needed at Stansted.
EasyJet called for an overhaul of the airport pricing regime, adding that the government had spared its passengers from higher ticket prices.
Andrew Barker, easyJet planning director, said: "Ruth Kelly and the Department for Transport officials should be congratulated for protecting air travellers from BAA ripping-off airlines at Stansted. They recognise that, without regulation, customers would be at the mercy of a highly-indebted infrastructure owner seeking short-term profit maximisation at the expense of air traveller."
The CAA has argued that Stansted has negligible power over customers because easyJet and Ryanair represent 85% of its customer base and could take their jets elsewhere. Hence the landing fee at the airport is £5.50 a passenger instead of the maximum £6.44 that could be levied under the current price regime.
BAA reiterated its support for lifting price caps today, adding that it welcomed Kelly's support for a second runway at Stansted.
"We welcome the secretary of state's statement that the key issue facing our airports in the south east of England is lack of capacity; as well as her renewed support both for a second runway at Stansted, and to consulting on a third runway at Heathrow," said the airport owner.
