The Civil Aviation Authority of the United Kingdom (CAA) announced having implemented a package of new measures on the economic regulation of Heathrow Airport Limited (HAL). Taking into account the airport losses caused by the COVID-19 pandemic, the authority decided to accept the airport‘s request and increase its regulatory asset base. However, the CAA agreed to enhance the asset base by only £300 million instead of £2.6 billion as it was requested.
On April 27, 2021, the UK CAA released an update on the economic regulation of Heathrow Airport regarding the enlargement of the airport’s regulatory asset base (RAB). The authority agreed on an early adjustment to Heathrow’s RAB of £300 million despite the airport requesting £2.6 billion. Paul Smith, the Director at the UK CAA, disclosed that the authority considered Heathrow’s request for a RAB adjustment by £2.6 billion as “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, recognize 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 incentivize and allow Heathrow to maintain investment, service quality and be proactive in supporting any potential surge in consumer demand later this year,” Smith was quoted in the CAA statement.
The CAA outlined that it would provide a further update on Heathrow’s RAB as a part of the next price control, which should come into effect in January 2022.