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London/Madrid: London's crowded Heathrow airport will be allowed to raise airline charges by a bigger-than-expected 23.5 per cent, giving a boost to the airport's indebted owner but sparking fury among its users.
Shares in Spanish construction group Ferrovial, which bought Heathrow owner BAA in a £10 billion ($20 billion) deal in 2006, leapt as much as 8.8 per cent after BAA said yesterday the new charges should help it to complete a much-delayed refinancing of its debts by the end of June.
But airlines reacted angrily to the price controls from regulator the Civil Aviation Authority (CAA), joining forces to call for a break-up of BAA, which also runs London's Gatwick and Stansted airports, as well as an overhaul of the CAA.
"Today's announcement...of dramatic price rises at Heathrow and Gatwick clearly demonstrates that the system is broken and needs to be changed," airlines Virgin Atlantic, easyJet, Ryanair and bmi said in a statement.
British Airways (BA) agreed. "The CAA must hold BAA to account throughout the five-year period to ensure the airport operator delivers improvements and does not divert funds to pay off Ferrovial's debts," it said in a separate statement.
As well as struggling to refinance its debt amid the global credit market turmoil, Ferrovial has come under fire for service levels at Heathrow, where queues, delays and lost baggage have become commonplace.
The CAA said Heathrow would be allowed to charge £12.8 ($25.7) per passenger in the year starting April 1, and increase this by no more than retail price inflation plus 7.5 per cent in the subsequent four years.
The regulator had proposed a price cap of £11.97 in November, but said it was increasing this to take account of the need for additional investment and security. The CAA set a price cap of £6.79 per passenger for Gatwick airport, up from its previous proposal of £6.07.
Positive for stocks
"People were expecting tariffs to be the same or slightly above the previous proposal so it's very positive for the stock," said Gonzalo Moros, an analyst at Ahorro Corporacion.
"Now we have to see what happens with the refinancing but obviously, with these figures, they [Ferrovial] can negotiate with much more certainty now that they know about future cash flow etc."
BAA, whose dominance of London airports is being investigated by Britain's competition watchdog, said the rise in charges was still not enough.
"The [CAA] review does not recognise sufficiently ... the scale of the task we are embarked on," it said in a statement.
Nonetheless, BAA said the new charges would allow it to finalise its refinancing plans.
It plans to implement the refinancing by the end of the second quarter, and said it would include a migration of existing bondholders into an investment-grade, ring-fenced structure backed by its three London airports and the Heathrow Express rail service.
Market: Shares climb 7.2%
At 1055 GMT, Ferrovial shares were up 7.2 per cent at 46.78 euros.
British Airways was down 0.6 per cent at 240.25 pence, easyJet down one per cent at 407.75 pence and Ryanair 3.1 per cent at 3.15 euros.
- Reuters
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