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H7 consultations

Consultations and policy documents

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Consultations since the H7 Determination in March 2023

  • CAP2980 Economic Regulation of Heathrow: H7 final issues deals with both the matters that were remitted to us by the Competition and Markets Authority by its Final Determinations of the appeals of our Final Decision on the H7 price control and the matters that we had not been able to resolve prior to making the Final Decision. This consultation sets out our analysis of each of these issues, our proposals for resolving them and the statutory notice of the licence modifications we propose to implement our proposals.

    We have published the Price Control Model and a report on the Cost of Index-Linked Debt.

    The CAA has asked GAD to perform a review of the deficit repair costs of Heathrow Airport Ltd. This report sets out the results of our analysis.

  • CAP2605 H7 Guidance on capital expenditure governance sets out the CAA’s updated guidance on capital expenditure governance for the H7 period, following a consultation on draft guidance issued in March 2023.
  • CAP2591 H7 Guidance on Other Regulated Charges (ORC) protocols and dispute resolution for Heathrow Airport.  This confirms the high-level principles that HAL should follow when working with stakeholders to develop new protocols and a dispute resolution function for Other Regulated Charges.
  • CAP3073 This consultation sets out our Initial Proposals for the CAA’s mid-term review of the Outcome Based Regulation scheme for Heathrow Airport Limited and asks for stakeholder views. We have also published Grant Thornton’s mid-term review targets study.

Interim price cap for 2023

CAP2515 Economic regulation of Heathrow Airport Limited: setting an interim price control cap for 2023.



This Decision follows the consultation (CAP2488) on setting the interim price cap for 2023 and replaces the holding cap that was put in place by CAA in 2022.

Close CAP2515 Economic regulation of Heathrow Airport Limited: setting an interim price control cap for 2023.

Final Proposals

CAP2488 Economic regulation of Heathrow Airport Limited: settling an interim price cap for 2023.



CAP2488 sets out the interim price cap for 2023 and replaces the holding cap that was put in place by CAA in 2022.

This interim price cap replaces the current one-year interim cap that applies to HAL’s charges in 2022,which expires at the end of this year. It is required to protect the interests of consumers in the short term as our final decision and licence modifications for a five-year price control (H7) will not be made until later in 2023.

The proposed interim price cap will be £31.57 (equivalent to £29.68 in 2020) prices per passenger (in nominal prices). This value is in line with our Final Proposals (FPs) issued in June 2022. As with our interim price cap for 2022, once we have set the final price control for the H7 period, any difference between it and this proposed interim price cap for 2023 will be trued up or down. 

Putting this interim price cap in place will enable us to make Final Decisions on the main H7 price control in an orderly way, while avoiding having a gap emerge in the price control arrangements for HAL at the start of 2023. The work to finalise the main H7 price control involves taking account of the representations we received on Final Proposals and assessing whether any changes are appropriate in the light of the new information that has emerged since then, including on issues such as passenger numbers and changes to wide macro-economic factors (in particular inflation and interest rates). We will issue a short statement in the near future confirming the timetable for reaching a final decision on the main price control.

Alongside the consultation on the interim holding cap, we are proposing a small number of specific changes to HAL’s licence to remove obligations under the service quality framework that we consider are no longer needed. 

Following this short consultation, which ends on 22 December 2022 and having taking into consideration stakeholder responses, we expect to publish our decision on the level of the interim price cap promptly in the New Year, with the licence modifications taking legal effect in February 2023.

Responses to CAP2488

Close CAP2488 Economic regulation of Heathrow Airport Limited: settling an interim price cap for 2023.

CAP2365 Economic Regulation of Heathrow Airport Limited; H7 Final Proposal, June 2022



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

  • This Summary document which provides an executive summary of our Final Proposals, and discusses the particular challenges and uncertainties we have carefully considering in setting the H7 price control.
  • Section 1 which discusses:
    • our passenger forecasts for H7 and our proposed form of regulation for HAL, including our intention to introduce traffic risk sharing arrangements; and
    • our proposals for implementing outcome-based regulation (OBR).
  • Section 2 which sets out:
    • our projections for each of the key price control 'building blocks' (including operating and capital  costs, charges for other services and commercial revenues) that have informed our Final Proposals; and
    • our proposals for developing stronger capital efficiency incentives;
  • Section 3 which describes:
    • our views on the WACC, financeability and the price control on airport charges;
    • related financial issues of HAL's request for a covid-19 related RAB adjustment, and the treatment of asymmetric risk; and
    • how we will modify HAL’s licence to implement our Final Proposals.
  • The appendices provide further information on the main issues set out in this consultation.
  • We have published the Price Control Model and the Cost of New Debt Indexation Model alongside the Final Proposals.  

Final Proposals

Reports by external consultants

  • CAP2366A - Business Travel Trends, Skylark Consulting Group, March 2022
  • CAP2366B - H7 Updated Beta Assessment, Flint Global, March 2022
  • CAP2366C - OBR Phase 2 Targets Assessment, Arcadis, June 2022
  • CAP2366D - Review of the CAA’s Approach to H7 Traffic Forecasting, Skylark Consulting Group, June 2022
  • CAP2366E - Review of the CAA’s proposed traffic risk sharing mechanism, Deloitte, June 2022
  • CAP2366F – H7 capex plan assessment, Arcadis, June 2022
  • CAP2366G – Review of CAA’s capex categories and delivery objectives, Arcadis, June 2022
  • CAP2366H – Review of commercial revenues, CEPA, Tailor Airey, June 2022
  • CAP2366I - Review of opex, CEPA, Tailor Airey, June 2022
  • CAP2366J – Management stretch technical annex, CEPA, Tailor Airey, June 2022

Responses 

External reports submitted by Airlines

Close CAP2365 Economic Regulation of Heathrow Airport Limited; H7 Final Proposal, June 2022

Initial Proposals

CAP2275 H7 Initial Proposals Draft License Modifications, November 2021



CAP2275 sets out draft modifications to Heathrow Airport Limited's (HAL) licence to show how the CAA proposes to implement the policy proposals in the October 2021 Initial Proposals for HAL's H7 price control review.

The consultation deadline has been extended to close of business on Friday 21 January 2022.

Responses to CAP2275

Close CAP2275 H7 Initial Proposals Draft License Modifications, November 2021

CAP2274 H7 Initial Proposals – Working paper on outcome based regulation, November 2021



CAP2274 follows on from the October 2021 Initial Proposals consultation and provides further details of the CAA's proposed approach to implementing outcome based regulation (OBR) in the H7 price control for Heathrow Airport Limited (HAL). It sets out the CAA's Initial Proposals on targets, rebates and bonuses and summarises the key proposed changes to HAL's licence.

The consultation deadline has been extended to 12 noon on Tuesday 18 January 2022.

Reports by external consultants

Responses to CAP2274

Close CAP2274 H7 Initial Proposals – Working paper on outcome based regulation, November 2021

CAP2265 Economic regulation of Heathrow Airport Limited: H7 Initial Proposals, October 2021



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, finance ability 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.

Initial Proposals

We are also publishing, alongside these Initial Proposals, a number of supporting consultancy studies.

Reports by external consultants

  • 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

Responses to the RBP Capital Plan

Responses to CAP2265 H7 Price Control

Responses to CAP2265 2022 Charges 

Close CAP2265 Economic regulation of Heathrow Airport Limited: H7 Initial Proposals, October 2021

RAB adjustment

CAP2140 Economic regulation of Heathrow Airport Limited: response to its request for a covid-19 related RAB adjustment, April 2021



On 27 July 2020, HAL sent us a request that we should make an adjustment to its regulatory asset base (RAB) to address the shortfall in the revenue it expected to recover in 2020 and 2021 due to the severe impact of the covid-19 pandemic on its business. Since then, HAL has made a series of further representations to us in support of its request.

CAP2140 sets out the CAA's response to HAL's request and its further representations. It provides our decision on the regulatory intervention package which we will apply ahead of making our proposals for the next (H7) price review. It follows on from our October 2020 and February 2021 Consultations on these matters.

In particular, this document sets out:

  • the process which we have followed in reaching our decision, including our consideration of stakeholders' consultation responses;
  • an updated and final assessment framework, based on our statutory duties including the “better regulation principles” which we must have regard to under the Civil Aviation Act 2012 (CAA12)
  • our assessment of the different options for regulatory intervention using that assessment framework; and
  • details of the early intervention we have decided to take and our proposed next steps.

Responses to CAP2140

Close CAP2140 Economic regulation of Heathrow Airport Limited: response to its request for a covid-19 related RAB adjustment, April 2021

CAP2098 Economic regulation of Heathrow Airport Limited: response to its request for a covid-19 related RAB adjustment, February 2021



In October 2020, we published a consultation document in response to the request made by Heathrow Airport Limited (HAL) in July 2020 for the CAA to change its approach to the calculation of HAL's regulatory asset base (RAB) to take account of the impact of the covid-19 pandemic.

CAP2098 and CAP2098A provide our latest views on HAL's request and our developing thinking on whether HAL's price control framework should be changed in response to the circumstances created by the covid-19 pandemic. In particular the document sets out:

  • our framework for identifying and assessing options for intervention;
  • the assessment of options, including HAL's proposal for a RAB adjustment, in the light of this framework and the views of HAL and airlines in response to the October 2020; and
  • our next steps and timetable for dealing with these matters

Responses to CAP2098

Close CAP2098 Economic regulation of Heathrow Airport Limited: response to its request for a covid-19 related RAB adjustment, February 2021

CAP1966 Economic regulation of Heathrow Airport Limited: response to its request for a covid-19 related RAB adjustment, October 2020



CAP1966 and CAP1966A are published in response to the request made by Heathrow Airport Limited (HAL) in July 2020 for the CAA to change its approach to the calculation of its regulatory asset base (RAB) to take account of the actual and expected impact of the covid-19 pandemic on its revenues in 2020 and 2021. It provides our initial views on HAL's request and proposes next steps for consultation.

The document sets out:

  • the background to HAL's request and the initial views of airlines in response to it;
  • our approach to assessing HAL's request;
  • our initial assessment of HAL's request; and
  • proposals for our next steps and timetable for dealing with the issues raised by the request.

Stakeholder submission published alongside this consultation

Responses to CAP1966

Close CAP1966 Economic regulation of Heathrow Airport Limited: response to its request for a covid-19 related RAB adjustment, October 2020

Consultations and working papers

CAP2387 Draft Decision on the cost of the Heathrow West project



CAP2387 sets out our draft decision on Heathrow West’s request that it be allowed to recover its planning costs on relation to its proposal to deliver a terminal as part of the expansion of Heathrow Airport.

Responses to CAP2387

Close CAP2387 Draft Decision on the cost of the Heathrow West project

CAP2305 Economic regulation of Heathrow Airport Limited from January 2022: notice of licence modifications, December 2021



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.
Close CAP2305 Economic regulation of Heathrow Airport Limited from January 2022: notice of licence modifications, December 2021

CAP2139 Consultation on the Way Forward, April 2021



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

British Airways

Heathrow Airport Limited

Heathrow West

Close CAP2139 Consultation on the Way Forward, April 2021

CAP1996 Working paper on Q6 capital expenditure and early expansion costs, April 2021



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

Close CAP1996 Working paper on Q6 capital expenditure and early expansion costs, April 2021

CAP1964 Working paper on the efficiency of HAL’s capital expenditure during Q6, September 2020



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

Close CAP1964 Working paper on the efficiency of HAL’s capital expenditure during Q6, September 2020

CAP1951 Working paper on capital expenditure efficiency incentives, August 2020



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

Close CAP1951 Working paper on capital expenditure efficiency incentives, August 2020

CAP1940 Policy update and consultation, June 2020



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

Responses to CAP1940

Close CAP1940 Policy update and consultation, June 2020

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