Economic regulation of Heathrow Airport Limited: H7 Initial Proposals, October 2021

Overview

This consultation sets out our Initial Proposals for the Heathrow Airport Limited's (HAL) H7 price control review. It includes:

• This summary document which discusses our overall approach and the impact of the particularly challenging circumstances created by covid-19 on Heathrow airport, the price control review and these Initial Proposals.
• Section 1 which discusses: our proposed approach to the form of regulation for HAL, including our intention to introduce traffic risk sharing arrangements and to set a 5-year price control; and our projections for each of the key price control 'building blocks' (including numbers of passengers, costs and commercial revenues) that have informed our Initial Proposals.
• Section 2 which sets out our views on HAL's request for a covid-19 related RAB adjustment, the treatment of asymmetric risk, the WACC, financeability and our provisional range for the H7 price control on airport charges; and
• Section 3 which describes: our proposals for developing stronger capital efficiency incentives and  implementing outcome based regulation (OBR); and our approach to dealing with airport charges in 2022 noting the particularly difficult and challenging circumstances that have been created by the pandemic and its impact on the CAA's H7 price control timetable.
• The appendices provide further information on the main issues set out in this consultation. 

We have also published, alongside these Initial Proposals, a number of supporting consultancy studies:

• CAP2266A - Review of H7 Opex and Commercial Revenues: Initial Assessment and Forecasts, CEPA Taylor Airey, October 2021
• CAP2266B - HAL RBP Update: Capex plan Review, Arcadis, October 2021
• CAP2266C - HAL RBP Update: Review of capex categories and delivery objectives, Arcadis, 2021
• CAP2266D - H7 Forecast Review [Passenger Forecasting], Skylark, October 2021
• CAP2266E - Estimating Heathrow's beta post Covid-19, Flint, August, 2021
• CAP2266F - Review of Consumer Acceptability Testing Research, FTI Consulting, October 2021

Views invited

We welcome views on all the issues raised in this document by no later than:

• Wednesday 17 November 2021 for any matters relating to airport charges for 2022 and the introduction of the holding cap discussed above; and
• Friday 17 December 2021 for the wider issues in this consultation relating to our Initial Proposals for HAL’s H7 price control and the associated incentive arrangements.

Please e-mail responses to economicregulation@caa.co.uk 

We expect to publish the representations on our website for other interested parties to read after the period for written representations expires. Any material that is regarded as confidential should be clearly marked as such and provided in a separate appendix. Please note that we have powers and duties with respect to information under Section 102 of the Act and the Freedom of Information Act 2000.