British Airports Authority faces big fine if it doesn’t improve conditions at Stansted Airport

The British Airports Authority (BAA), the owner and operator of seven airports in the United Kingdom and also the operator of several other airports worldwide, may be fined up to £9 million a year if it does not improve customer service levels at London’s Stansted Airport.

“The operator could be required to pay airlines rebates of as much as 7% of the amount it was charged if it is determined that the BAA provided poor service,” a statement from Britain’s Civil Aviation Authority (CAA) said.

Ryanair, Europe’s largest low-cost carrier headquartered in Dublin, Ireland, has frequently voiced its anger about the poor quality of service offered by the BAA at Stansted Airport. Ryanair has its biggest operational base at Stansted Airport.

Under the CAA’s financial incentive regime, Stansted Airport could be ordered to pay rebates of up to 7% of its total airport charge revenues if it does not meet prescribed targets for passenger security queues, cleanliness, baggage reclaim and other services. Under similar procedures at London’s Heathrow Airport and London’s Gatwick Airport, the BAA has already been fined £4.3 million and £3.6 million, respectively.

The CAA published details of its scheme for Stansted Airport along with the CAA’s five-year price controls outlining what the BAA can charge airlines for the use of Stansted Airport. Price caps will be set at £6.34 per passenger for the first two years from 2009, and will rise to £6.65 by 2013-14.

The pricing regime fore Stansted Airport has given rise to controversy because the BAA was asking for major increases – from £6.05 in 2008 to nearly £9 by 2013-14 – to cover the cost of building a second runway.

However, the Competition Commission (CC), which makes recommendations prior to the CAA’s final decision, ruled that passenger-number predictions push the investment out towards 2017, so it is not relevant to the current review. In fact, the price caps prescribed by the CAA were lower than the Competition Commission’s proposals, having taken into account revenues from non-passenger flights.

Harry Bush, director of economic regulation at the CAA, said in a statement: “The CAA intends the price rise in the later years to signal its support for expansion. The price control will enable charges to increase in coming years to allow Stansted Airport or competing airports to build new capacity as and when warranted to meet passenger demand. The proposal is a part of a price control scheme that the CAA is developing for Stansted Airport and also designed to encourage the development of competition among airports in south-east England, and airport development that occurs at the right place and right time for the benefit of airline passengers.”

The CAA has indicated that the price caps it is proposing for Stansted are lower than what the Competition Commission has recommended, in order “to reflect an adjustment to take account of airport charge revenues from cargo and other non-passenger flights.”

“Our proposed price controls,” Harry Bush added, “protect passengers and airlines while maintaining good levels of service. They also look to the long-term potential expansion of airports.”