Economic licensing of Gatwick Airport

Licence conditions can be modified in two ways:

• using a statutory process to modify set out in the Civil Aviation Act 2012
• using a self-modification process in which GAL and its airline community can modify certain specified parts of its commitments

Public register of modifications to the Gatwick licence

GAL is obliged to produce an operational resilience plan under its licence. Documents relating to the requirement are below:

• Gatwick - additional guidance for operation resilience plans required under Condition C1 of the licence and Condition 7 of Gatwick Airport Conditions of Use (September 2014)
  
  
• Gatwick - consultation on additional guidance for operational resilience plans (July 2014)
  • response from Gatwick Airport
  • response from Gatwick ACC
    
    
• Review of operational resilience at Heathrow and Gatwick - report by Steer Davies Gleave (July 2014)

GAL pays rebates to airlines if its service quality does not reach specific standards. Details of its performance against the standards are on the Gatwick airport website.

• Audit of service quality regulation at Gatwick, Grant Thornton (CAP1564)

This consultation sets out for consultation our assessment of GAL’s proposal to extend the commitments it makes to airlines on charges, investment and service quality, by four years from 1 April 2025 to 31 March 2029:

• Economic regulation of Gatwick Airport Limited: second consultation on extending the current commitments (CAP3012)
• UK Airports Financial Benchmarking (PA consulting report)
• CAA modelling assumptions - Middle case
• CAA modelling assumptions - High Opex case
• CAA modelling assumptions - No DCO case

We are consulting on these issues for a period of 6 weeks until 20 September. We expect to set out our decision on the way forward for the economic regulation of GAL in the autumn of 2024.

Responses

• Airport Consultative Committee
• British Airways
• Communities Against Gatwick Noise Emissions
• easyJet
• Gatwick Airport Consultative Committee
• Gatwick Airport Limited
• International Airlines Group
• Norse Atlantic UK
• Turkish Airlines
• Wizz Air

This consultation seeks stakeholders’ views on GAL’s revised proposal to extend the current commitments for a further four years:

• Economic regulation of Gatwick Airport Limited: Consultation on proposal to extend the current commitments (CAP2554)

We have published GAL's proposal to extend the current commitments along with our consultation document:

• Gatwick Commitments: Proposal to extend Gatwick’s commitments

Responses

• CAGNE
• easyJet
  • easyJet annex
• GAL
• GATCOM
• Gatwick ACC
• IAG
• TAP Air Portugal

This document gives notice under section 22(6) of the Civil Aviation Act 2012 (“CAA12”) of the CAA's decision to modify Gatwick Airport Limited's (“GAL”) licence. The modifications are to accept GAL's proposed new commitments as the basis of our economic regulation of GAL for the four year period from 2021/22 to 2024/25. This decision follows on from the notice issued under section 22(2) of CAA12 in February 2021 and the consultation on our proposed approach in October 2020.

Economic regulation of Gatwick Airport Limited: notice of proposed licence modifications (CAP2103)

This document gives formal notice under section 22(2) of the Civil Aviation Act 2012 of our proposal to modify Gatwick Airport Limited's (“GAL”) licence to accept GAL's proposed new commitments as the basis of our economic regulation of GAL for the four year period from 2021/22 to 2024/25. This statutory consultation follows on from the consultation on our proposed approach in October 2020.

• CAA letter of 23 December 2020 to the Airport Consultative Committee

Responses:

• Airport Consultative Committee
• British Airways
• Gatwick Airport

Economic regulation of Gatwick Airport Limited: consultation on new commitments (CAP1973)

• GAL's finalised, extended Commitments

Responses:

• Airport Consultative Committee
• CAGNE
• EasyJet
• GATCOM
• Gatwick
• International Airlines Group (IAG)
• Norwegian

Letter from the CAA regarding the economic regulation of Gatwick Airport

Consultation on the economic licensing of Gatwick Airport (CAP 1684)

Responses:

• The Consumer Council (Northern Ireland)
• easyJet
• Economic Insight
• GATCO
• GATCOM
• Gatwick Airport Limited and Airport Consultative Committee
• Heathrow Airport Limited

• Conclusion document, CAP1502 (December 2016)
  This document reports the findings and conclusions of our mid-term review of the economic regulatory framework that we now apply to Gatwick Airport Limited.

• Invitation letter to pre-consultation meetings (May 2015)
• Consultation document, CAP1387 (March 2016)
• Consultation responses
  • GATCOM
  • Gatwick ACC
  • Gatwick Airport Limited
  • Monarch Airlines
  • Ryanair
  • Virgin Atlantic
• Update document, CAP1437 (July 2016)

• Economic regulation at Gatwick from April 2014: Notice granting the licence (February 2014)
• Estimating the cost of capital: a technical appendix for the economic regulation of Heathrow and Gatwick from April 2014: Notice granting the licence (February 2014)

• Economic regulation at Gatwick from April 2014: Notice of the proposed licence (January 2014)
  • responses:
    • Gatwick Airport
    • British Airways
    • easyJet
    • Gatwick ACC/AOC
      • (Gatwick ACC/AOC addendum)
    • Virgin
• Estimating the cost of capital: a technical appendix for the economic regulation of Heathrow and Gatwick from April 2014: Notices of the proposed licences (January 2014)
• In Focus (short summary document) - (January 2014)
• Gatwick Airport Limited operator determination (January 2014)

• Additional information from Gatwick Airport Limited
  • Answers to CAA clarification questions
  • Delivery of 95% pier service - Tollgate 3 - Capital Programme Board presentation
  • Pavement condition index - Pier 6 Southern extension assumptions
  • South Terminal international departure lounge capacity - business case
  • Gatwick Airport services standards handbook
• Request for additional points on the Q6 airport price control consultation process - letter to Q6 respondents (November 2013)

• Economic regulation of Gatwick Airport Limited after April 2014: the CAA's final proposals (October 2013)
  • Interim responses
    • British Airways
    • CAA letter to Gatwick Airport regarding Gatwick ACC's response
    • Gatwick Airport Consultative Committee (ACC)
    • Virgin Atlantic Airways
      
      
  • Responses to final proposals (including responses to other responses) On 3 October 2013 the CAA consulted on its final proposals for the economic regulation of Gatwick Airport under the Civil Aviation Act 2012. The final proposals were built around commitments offered by the airport to be backed by a licence, the main aim of which is to ensure that the commitments are honoured and to ensure the CAA can continue to act where appropriate to protect users. Non-confidential versions of the responses to the CAA's consultation are below:
    • Gatwick Airport
      • (Gatwick Airport response to SLG Economics report on the distribution of economic rent)
    • BATA
    • British Airways
      • appendices
    • easyJet
      • appendix
    • Gatwick ACC
    • IAPA
    • London First
    • Monarch
    • Virgin
  • The CAA gave respondents to its final proposals the opportunity to respond to other parties' responses to the final proposals. These further responses are below:
    • Gatwick Airport
      • response to responses to Gatwick response
    • ACC
      • response to Gatwick submission 3 December
    • British Airways
    • Virgin
  
  
  • Estimating the cost of capital: a technical appendix to the CAA's Final Proposal for economic regulation of Heathrow and Gatwick after April 2014 (October 2013)

• CAA's top down benchmarking data for final proposals (October 2013)
• Estimating the cost of capital: a technical appendix to the CAA's final proposals for economic regulation of Heathrow and Gatwick after April 2014 (October 2013)
• 20 September final commitments proposals by Gatwick Airport Limited (September 2013)
• Gatwick's final contracts and commitments proposal (August 2013)
  • responses:
    • British Airways
    • Virgin
    • Gatwick's draft Conditions of Use
• Proposed licence conditions under section 18 of the Civil Aviation Act 2012 in relation to price commitments (July 2013)
  • responses:
    • Gatwick Airport
    • annex to Gatwick Airport
    • Gatwick ACC
    • British Airways
    • Virgin
    • Ryanair
• Letter to stakeholders: including draft price control condition, draft service quality rebates & bonuses condition, & consultation on draft penalties policy (May 2013)
  • responses:
    • Heathrow Airport
    • LACC/Heathrow AOC
    • Gatwick ACC
    • Ryanair

• Economic regulation at Gatwick from April 2014: Initial proposals (April 2013).
• responses:
  • ACC
  • Aurigny
  • British Airways response
    • appendix 2
    • appendix 3
    • appendix 4
    • appendix 5
    • appendix 6
  • Consumer Council of Northern Ireland
  • easyJet
  • Gatwick Airport Limited
  • Gatwick Consultative Committee
  • Gatwick Consultative Committee (Passenger Advisory Group)
  • Independent Airport Parking Association
  • States of Guernsey
  • Thomas Cook
  • Thomson
  • Virgin

• CAA mandate for Constructive Engagement at Gatwick (April 2012)
  (Relating to constructive engagement between Gatwick and its airline customers on the airport's business plan)

Consultant reports commissioned by the CAA

• Q6 review of the distribution of economic rent: a response to comments by Compass Lexecon - by SLG Economics (December 2013)
• Q6 capex review Heathrow Airport - final report by Alan Stratford (December 2013)
• Q6 capex review Heathrow Airport - report by Alan Stratford (October 2013)
• Estimating the cost of capital for designated airports - a report prepared for the CAA by PwC (October 2013)
• Review of maintenance, renewals and other operating expenditure at Heathrow Airport (phase 3) Final report - report by Steer, Davies, Gleave (September 2013)
• Review of maintenance, renewals and other operating expenditure at Gatwick Airport (phase 3) Final report - report by Steer, Davies, Gleave (September 2013)
• Assessment of commercial revenues at Gatwick Airport (stage 3) Final report - by Steer, Davies, Gleave (September 2013)
• Q6 review of the distribution of economic rent between airport, airlines and passengers and cargo users at Heathrow and Gatwick - report by SLG Economics (September 2013) data related to footnote 15
• Review of pension costs for Heathrow Airport - Government Actuary's Department (September 2013)
• Review of pension costs for Gatwick Airport - Government Actuary's Department (September 2013)
• Response to Oxera's note on scope for efficiency gains at Gatwick - TFP, LEMS and output price indices - report by CEPA (September 2013)
• Response to Oxera's note on scope for efficiency gains at Gatwick (RUOE analysis) and updated RUOE analysis - report by CEPA (September 2013)
• Assessment of commercial revenues at Heathrow Airport (stage 3) Final report - by Steer, Davies, Gleave (August 2013)
• Comparing and capping charges at regulated airports (addendum note) - report by Leigh Fisher (August 2013)
• Gatwick Airport Q6 capex review for the CAA - phase 3 report by Davis Langdon (August 2013)
• Assessment of central support costs at Heathrow & Gatwick airports - final report for Gatwick Airport - report by Helios (July 2013)
• Assessment of central support costs at Heathrow & Gatwick airports - final report for Heathrow Airport - report by Helios (July 2013)
• Estimating the cost of capital in Q6 for Heathrow, Gatwick and Stansted- report by PwC (April 2013) - terms of reference
• Cost of capital for UK designated airports - paper on the split cost of capital and skewed returns by PwC (April 2013)
• Scope for efficiency gains at Heathrow, Gatwick and Stansted airports - report by CEPA (April 2013) - terms of reference
• Gatwick Airport Q6 capex review - phase 2 report by Davis Langdon (April 2013)- terms of reference
• Assessment of maintenance and renewals costs at Heathrow - report by Steer, Davies, Gleave (April 2013) - terms of reference
• Assessment of maintenance and renewals costs at Gatwick - report by Steer Davies Gleave (April 2013)
• Assessment of commercial revenues at Heathrow - report by Steer Davies Gleave (April 2013) - terms of reference
• Assessment of commercial revenues at Gatwick - report by Steer Davies Gleave (April 2013)
• Airport price monitoring: Further insights - report by First Economics (April 2013) - terms of reference
• Advice on the calculation of long run incremental cost estimates for Gatwick and Stansted: response to comments by Gatwick Airport Limited - report by Europe Economics (April 2013) - terms of reference
• Review of other operating expenditure at Heathrow Airport - report by Steer Davies Gleave (April 2013) - terms of reference
• Review of other operating expenditure at Gatwick Airport - report by Steer Davies Gleave (April 2013)
• Central support costs - report by Helios (April 2013) - terms of reference
• Comparing and capping airport charges at regulated airports - report by Leigh Fisher (April 2013) - Emerging findings report (September 2012) -terms of reference
• Benchmarking employment costs: a research report for the CAA - Gatwick - report by IDS Thomson Reuters(April 2013) - terms of reference
• Benchmarking employment costs: a research report for the CAA - Heathrow - report by IDS Thomson Reuters (April 2013)
• Gatwick Airport report of Q5 capex - report by URS (April 2013) - terms of reference

Consultant reports commissioned by other stakeholders

• British Airways comments on Compass Lexecon response to SLG Economics report on the distribution of economic rent (January 2014)
• Gatwick Airport response to SLG Economics report on the distribution of economic rent (January 2014)
• Comments on report by SLG Economics for Gatwick Airport on the distribution of rents between airports, airlines, passengers and cargo users at Heathrow and Gatwick airports - note for Gatwick Airport by Compass Lexecon (December 2013)
• A further note on regulation of an increasingly competitive airport sector by Professor Littlechild (September 2013)
• Response to initial proposals: Cost of capital; (2nd addendum) - note prepared for Gatwick Airport by Oxera (September 2013)
• Cost of debt indexation - report for Heathrow Airport by NERA (August 2013)
• Response to initial proposals: Cost of capital (addendum) - note prepared for Gatwick Airport by Oxera (August 2013)
• Comments on recent papers by BA and CEPA - Heathrow Airport (August 2013)
• Update of PwC analysis on the risk free rate report for Heathrow Airport by Europe Economics (August 2013)
• Choice of WACC range percentile for Q6 report for Heathrow Airport by Europe Economics (August 2013)
• Review of choice of high percentile WACC from a range in its initial proposal for cost of capital for HAL and GAL - report for CEPA and British Airways by Professor Sudarsanum (June 2013)
• A review of the CAA's approach to estimating the WACC for Q6 - a report for Heathrow Airport by NERA (June 2013)
• AT Kearney's airport operating cost benchmarking report for Gatwick - full report included as part of Gatwick Airport's response to CAA initial proposals(June 2013) - meeting with CAA, presentation to CAA
• A review of the risk assessment in the CAA's initial proposals for Q6 - report for Heathrow Airport by NERA (June 2013)
• Response to PwC arguments on the cost of capital for Q6 report for Heathrow Airport by Europe Economics (May 2013)
• Regulation of an increasingly competitive airport sector by Professor Littlechild (May 2013)
• Relative risk for London Heathrow - a report for London Heathrow by NERA (April 2013)
• Setting the weighted cost of capital for Heathrow and Gatwick in Q6 - report by British Airways for CEPA(April 2013)
• Heathrow Airport's cost of capital - report on behalf of Heathrow by Europe Economics (April 2013)
• What is the cost of capital for Gatwick Airport beyond Q5 - Methodology and estimation - report for Gatwick Airport by Oxera (January 2013)
• How has the risk of Gatwick Airport changed since the start of Q5 - note prepared for Gatwick Airport by Oxera (December 2012)
• Comment on the split cost of capital proposal of Professor Helm submitted by British Airways - prepared for BAA (March 2012)
• The split cost of capital and utility regulation with particular reference to airports - paper commissioned by British Airways by Dieter Helm (December 2011)
• Adjusting Heathrow's cost of capital for skewness: Methodological and qualitative issues - report for BAA (September 2011)