MANCHESTER AIRPORT REGULATORY INQUIRY 2002

The Competition Commission (CC) is today publishing a summary of the issues letter that it has sent to Manchester Airport plc (MA) and the Civil Aviation Authority (CAA) in connection with its regulatory review of MA.

The CC are required to investigate and report on:

The maximum level of airport charges that can be levied by MA for the five years beginning 1 April 2003;
Whether MA or any of its associated companies has pursued any course of conduct against the public interest in relation to activities specified in the reference in the period 10 December 1996 to 28 February 2002.

Issues relating to the level of charges

These include the general approach to be adopted in recommending airport charges at MA, in particular:-

Whether regulation should be on a single till or a dual till basis (under a single till, the maximum level of airport charges is set so as to cover the operating costs and rates of return of all the airport’s assets, commercial as well as aeronautical; under the dual till, airport charges are set on the basis of aeronautical assets only);
Whether there should be an element of charges related to achievement of quality of service targets (referred to as the Q factor);
Whether the current pass through of additional security costs should be maintained;
Whether there should be a volume term;
Whether increases in non-regulated charges by MA over the last five years have a bearing on the policy to be adopted in setting the price cap (in that allegations have been made that MA has in effect priced up to the cap over the last 5 years but by increasing non-regulated rather than regulated charges);
Whether there should be an element of charges related to peak pricing or off-peak discounts.

Issues relating to the size of X

These include the following:-

Appropriate passenger forecasts
Appropriate cost of capital for MA;
Calculation of the regulatory asset base;
Scale of investment;
Changes in operating costs and capital expenditure;
Cross-subsidisation of non-regulated activities.

Public interest issues

These include:

Structure and transparency of airport charges;
Quality of service;
Arrangements for consultation;
Role of ground handlers.

A copy of the issues statement is attached.

The CC has already received a considerable volume of evidence, particularly from airlines and other interested parties. Any further views on the issues above or any other issues would be welcome by Monday 17 June 2002.

Anyone wishing to submit evidence should write to:

The Reference Secretary (Manchester Airport)
Competition Commission
New Court
48 Carey Street
London WC2A 2JT

NOTES TO EDITORS

The reference of Manchester Airport to the Competition Commission was made by the CAA on 28 February 2002.
Under the airports Act 1986, the CAA is required to refer Manchester Airport to the CC every five years. The price cap for Manchester Airport will expire on 31 March 2003. A new price cap will have to be set by the CAA for the period from 1 April 2003 to 31 March 2008. The CAA’s proposals and background information are published on their website at www.caa.co.uk
Further information can be found on the CC website: www.competition-commission.org.uk/inquiries/Manchester.htm
Enquiries should be directed to: Francis Royle, Press Officer, tel: 020 7 271 0242.