Consultations and working papers

CAP2305 gives notice under section 22(6) of the Civil Aviation Act 2012 ('CAA12') of the CAA's decision to modify Heathrow Airport Limited's (HAL) Licence granted under section 15 CAA12. The modifications that the CAA has decided to make are to:

• replace the whole of Condition C1 (Price Control) with a new Condition C1 (Price Control), which includes a “holding price cap” for the Regulatory Year 2022;
• modify paragraph 4 in Schedule 1 to the Licence (Statement of Standards, Rebates and Bonuses) to ensure that rebates and bonuses can continue to be accrued in relation to performance against the targets set in Tables 1a to 10 in that Schedule;
• remove the definition of “Regulatory Period” in Condition A3 (Definitions) at Condition A3.1(f) and all subsequent references to that term throughout the Licence;
• amend the definition of “Regulatory Year” in Condition A3 (Definitions) at Condition A3.1(g) to remove references to specific years so that it refers only to the twelve-month period from 1 January to 31 December in any year; and
• include a reference to the Regulatory Year 2022 in Condition C2 (Charges for other services) at Conditions C2.5 and C2.6.

CAP2139 summarises our broad approach to the remainder of the Heathrow Airport Limited (HAL) H7 price control review programme. It deals with the following main issues:

• an update on timetable and recent developments (with our response to HAL's request for a Covid-19 Related RAB adjustment being set out in a document published alongside this one);
• an overview of our proposed approach to the form of regulation for HAL, including our intention to set a 5-year price control;
• our assessment of HAL's revised business plan (RBP) including our proposed approach to developing projections for each of the key price control “building blocks” that will inform our Initial Proposals due to be published this summer; and
• an update on our approach to introducing traffic or revenue risk sharing, developing stronger capital efficiency incentives, moving towards outcome based regulation (OBR), and our approach to assessing HAL's finance ability and the affordability of its charges.

Responses to CAP2139

AOC LACC

• Annex 1 CEPA Technical Note
• Annex 2 IATA Forecast Update
• Annex 3 Media Examples regarding Demand
• Annex 4 OBR Comparison

British Airways

Heathrow Airport Limited

• Annex 1 Proposed Licence Modifications
• Annex 2 Legal Annex
• Annex 3 H7 Tax Policy
• Jacobs Report

Heathrow West

CAP1996 discusses our treatment and assessment of two categories of historical capital expenditure (capex) incurred by Heathrow Airport Limited (HAL), namely capex incurred during the Q6 price control period; and early expansion costs incurred before March 2020.

In relation to the Q6 capex review, this working paper covers

• an overview of stakeholder responses received to our September 2020 Working Paper;
• an update on the key policy areas; and
• our emerging conclusions from this review.

In relation to early expansion costs, this working paper provides:

• an update on our policy; and
• our assessment of costs incurred by HAL before March 2020.

Responses to CAP1996

• AOC LACC
• British Airways
• Heathrow Airport Limited

CAP1964 discusses our approach to reviewing Heathrow's Airport Limited (HAL's) capital expenditure (capex) incurred during the Q6 price control. In particular, it includes:

• a recap of our previous work in this area;
• our method for selecting a sample of projects for review and a summary of the findings of our consultants (Arcadis) on whether there is evidence of inefficiency in relation to these projects;
• our proposed approach to reviewing these findings including in the context of broader issues; and
• the next steps.

Consultancy studies published alongside this consultation

• CAP1964A Arcadis Heathrow Q6 Capex Efficiency Review

Responses to CAP1964

• Airlines Operator's Committee (AOC) and London Consultative Committee (LACC)
• British Airways
• No 3rd Runway Coalition
• Paul Groves member of No 3rd Runway Coalition
• Heathrow Airport Limited
• Heathrow Hub Limited
• Richmond Heathrow Campaign (RHC)
• Stephen Clark member of Teddington Action Group

CAP1951 follows on from the June 2020 Consultation (CAP1940) and provides further details of our proposed approach to capital efficiency incentives for Heathrow Airport Limited including:

• recap of our previous work in this area, including the initial views of stakeholders;
• our proposed criteria for developing new incentives; and
• further details on our broad approach to developing capital efficiency incentives.

Responses to CAP1951

• Airline Operator's Committee (AOC) and London Airlines Consultative Committee (LACC)
• British Airways
• Heathrow Airport Limited
• Richmond Heathrow Campaign

CAP1940 deals with the following main issues:

• the responses we received to the April 2020 Update and our approach to protecting the interests of consumers;
• requirements for HAL's revised business plan (“RBP”), which it is due to publish in the autumn of 2020;
• improving the efficiency incentives and capital expenditure governance arrangements for the H7 price control period; and
• further thoughts on our approach to assessing HAL's finance ability and setting the cost of capital for the H7 price control period.

HAL has paused its work on capacity expansion at Heathrow airport. We also address the regulatory treatment of expenditure incurred to date on expansion.

Consultancy studies published alongside this consultation

• CAP1940A Arcadis review of the initial tests for Heathrow West proposal
• CAP1940B PwC Report: Independent Planning Cost Review for 2018
• CAP1940C Flint Report on WACC/Cost of Capital April 2020
  
  
• Online seminar (link to video), 1 July 2020
• Online seminar slides, 1 July 2020

Responses to CAP1940

• British Airways (BA)
• Heathrow Airport Limited
• Heathrow Community Engagement Board (HCEB)
• Heathrow Hub Limited
• Heathrow West
• London Airline's Consultation Committee (LACC) and Airline Operator's Committee (AOC)
  • LACC/AOC Annex A
  • Response to CAP1940 Financial issues: by CEPA, August 2020
• Richmond Heathrow Campaign (RHC)
• The Chartered Institute of Logistics and Transport (CILT)
• Transport for London (TfL)