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Financial Times Wednesday December 10th 2008

Plans for Stansted Second Runway Slips Back

By Kevin Done

Aerospace Correspondent

A second runway at London Stansted airport will not be built until the second half of the next decade at the earliest, it emerged yesterday.

The Civil Aviation Authority, airport economic regulator, has followed recommendations from the Competition Commission to exclude the £2.3bn project at Stansted from the price control regime for the next five years to March 2014.

The CAA's decision means BAA, Stansted's owner, will have no funding from higher charges to finance development work until a new price regime is introduced in six years.

The competition watchdog last month questioned the urgency of the expansion at Stansted against a background of "deteriorating economic and financial conditions".  Monthly traffic volumes at the UK's third largest airport have been falling year on year for 12 months in succession.

The Competition Commission said its traffic forecasts indicated a second runway would not be needed until 2017 at the earliest, two years later than proposed by BAA.

A planning inquiry is due next year into BAA's proposal to build the second runway and a second terminal.  The inquiry could be derailed, however, by a change of ownership of the airport.  The commission is separately investigating the structure of BAA and has provisionally recommended the break up of the group's airport monopolies in London and Scotland, including the sale of Stansted.  BAA has already started the process to sell Gatwick.

The CAA said yesterday it was proposing to free charges - the per passenger levy on airlines - in real terms at Stansted for both 2009-10 and 2010-11.  It proposed a small increase of 1.6 per cent above inflation in the subsequent three years taking the charge to £6.65 per passenger in 2013-2014.

BAA said it is "disappointed" that a significant element of its spending to date on preparing for expansion at Stansted had thus been ruled out.  "We will continue to press for a regulatory framework which reflects the full cost of bringing forward the second runway proposals at Stansted", it said.

However, the CAA prposals were welcomed by Ryanair and Easyjet, the biggest operators at the airport, which have been campaigning hard to keep charges and capital spending at the airport in check. "Keeping prices broadly flat over the coming years should ensure consumers continue to be protected from BAA's monopolistic excesses", said Easyjet.

The CAA said it would also impose a service quality rebate scheme at Stansted similar to those at Heathrow and Gatwick with financial penalties - up to 7 per cent pf charges - if BAA failed to meet agreed standards.