UK regulator rejects Heathrow's request for pandemic cushion

[LONDON] Britain's aviation regulator rejected Heathrow's request for an increase to its regulatory asset base of £2.6 billion (S$4.78 billion), instead offering the country's biggest airport a £300 million adjustment to cover pandemic losses.

Heathrow's passenger numbers have plunged over the last year and remained more than 80 per cent lower in recent months at levels last seen in the 1970s, pushing its losses to around £3 billion.

The airport therefore asked Britain's Civil Aviation Authority, the CAA, for an increase in its regulatory asset base (RAB), part of a funding model set by the regulator that maintains an appropriate level of risk and reward for investors while setting the charges paid by passengers.

But the CAA said on Tuesday that a RAB adjustment on such a scale would not be in the interest of consumers.

It agreed a £300 million interim adjustment and said the issues raised by Heathrow would be considered as part of the next regulatory settlement which comes into effect from January 2022.

"The decision we have announced today will incentivise and allow Heathrow to maintain investment, service quality and be proactive in supporting any potential surge in consumer demand later this year," the CAA said in a statement.

Heathrow criticised the CAA's offer, saying that it would undermine investor confidence in UK regulated businesses.

"At a minimum it needed to immediately restore regulatory depreciation in line with UK regulatory principles - the interim adjustment falls far short," a Heathrow spokesman said in an emailed statement.

Heathrow is owned by Spain's Ferrovial, the Qatar Investment Authority, China Investment Corp and other financial investors.

REUTERS