The aviation regulator today rejected a plea by Heathrow to raise its asset base by £2.6 billion due to Covid losses as “disproportionate”.
Instead, the Civil Aviation Authority agreed to a “limited” early adjustment to its regulatry asset base (RAB) of £300 million.
The London hub has requested an adjustment to its RAB of £800 million now and a total of £2.6 billion at the end of the year due to the effects of the pandemic.
This would be recovered through airport charges from 2022.
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But the authority ruled: “We are clear that any risks to HAL’s [Heathrow Airport Limited’s] actual financing are a matter for its shareholders, not for consumers to resolve.”
CAA director Paul Smith said: “Following Heathrow’s request for a RAB adjustment we have taken the decision that an early intervention on the scale of its request is disproportionate and not in the interests of consumers.
“The other issues raised by Heathrow as part of its request will be dealt with during the next price control review.
“We do, however, recognise that these are exceptional circumstances for the airport and there are potential risks to consumers if we take no action in the short term.
“The decision we have announced today will incentivise and allow Heathrow to maintain investment, service quality and be proactive in supporting any potential surge in consumer demand later this year.”
The airport is economically regulated by the CAA, using the same RAB model of economic regulation found in all UK regulated sectors, and which the government plans to use to attract private investment in the future infrastructure projects which are the cornerstone of its national recovery plan.
Heathrow argures it will face losses of around £3 billion through the Covid crisis, in spite of significant action to cut costs and capital investment.
A Heathrow spokesperson: “The CAA accepted the need for it to act in order to meet its duties to consumers and to Heathrow’s financeability – but today it has failed to deliver.
“At a minimum it needed to immediately restore regulatory depreciation in line with UK regulatory principles – the interim adjustment falls far short.
“This undermines investor confidence in UK regulated businesses, and puts at risk the government’s infrastructure agenda.
“The CAA will need to address all the issues related to adjustment fully in the upcoming H7 regulatory settlement to attract the investment needed to maintain service, keep prices lower than they would otherwise be and protect resilience through the recovery.”
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