BAA raises passenger charges

British Airports Authority, which owns and runs seven of the largest airports in the UK including Heathrow, Stansted and Gatwicj has been given clearance by the Civil Aviation Authority to increase the charge it makes for each passenger using the airport. It is a good example of how an industry regulator has the power to cap charges or prices in a market and the news has been criticised by many of the major airlines who are lobbying for a breakup of the BAA monopoly. They accuse the CAA of regulatory failure, of collapsing against the pressure placed on them by BAA to give them greater freedom to life passenger charges for taking off.

According to the Financial Times “The CAA said it was increasing the price cap at Heathrow by £2.44 or 23.5 per cent in real terms to £12.80 per passenger for the coming year from April 2008. Charges in the four subsequent years could rise by 7.5 per cent a year above inflation.”

I wrote about BAA in a recent edition of EconoMax. BAA is now owned by the Spanish firm Ferrovial and is struggling under a mountain of debt. They face huge bills for ramping up security arrangements at all of the major airports and in investing in new capacity and facilities at airports already stretched to breaking point. Ultimately of course, given the nature of the business, it is the passenger who will foot the bill through higher fares.

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