RYANAIR CALLS FOR DEEP COST CUTS AT STANSTED TO REVERSE BAA’S TRAFFIC COLLAPSE

Prospective bidders should ignore BAA’s inflated £1.3billion RAB

2012-09-04 — /travelprnews.com/ — Ryanair, Stansted’s largest airline, today (4^th Sept) called on airport regulator, the CAA, to confirm for prospective investors in Stansted what it intends to do about (a) Stansted’s 5 years of traffic declines, (b) Stansted’s grossly inflated £1.3bn RAB, (c) how it will reduce Stansted’s high charges (which have doubled under the CAA’s “inadequate” regulatory regime over the last 5 years) and (d) how the CAA will ensure effective regulation in future to replace its “inadequate” regulation of the past.

Ryanair highlighted that it was the CAA’s inadequate regulatory regime, which allowed BAA Stansted to double airport charges in 2007, in order to pay for the then planned – but subsequently abandoned – second runway (“SG2”). This doubling of airport prices at Stansted has led to 5 years of record traffic declines during which other airlines have withdrawn more flights than Ryanair which is why Ryanair’s market share at Stansted has risen from 60% in 2007 to 68% in 2011 as follows:

Year	STN Pax (m)	RYR Pax (m)	RYR Mkt Share
2007	23.8	14.9	60%
2008	22.3	14.8	66%
2009	19.9	13.6	68%
2010	18.6	12.4	67%
2011	18.0	12.2	68%
2012	17.3 (-4%)	11.8	68%

Ryanair also highlighted that during this 5-year period, the CAA has spectacularly mismanaged the regulatory asset base (RAB) at Stansted. The CAA’s own mid-quinquennial review (May 2012) analysed Stansted’s inflated RAB as follows:

Stn Rab 2011	(£m)
Airfields	125
Terminals	432
Other	82
Subtotal	639
Invest. Props	72
SG2 Costs	156
Inflation	441
Total	1,308

Ryanair pointed out that no other competitive (i.e. non-regulated) industry allows its assets to be inflated each year. In no other industry would the costs of blatant mismanagement such as the abandoned SG2 project be passed on to customers who gain no benefit from such commercial failure, and Stansted’s passengers should not be paying for the inflated costs of Stansted’s land and/or investment properties. These figures conclusively prove that the underlying non-inflated RAB at Stansted (including airfields, terminal buildings and plant) amount to just £640million or approx half of Stansted’s £1.3 billion RAB which is the product of the BAA “cooking the books” while the “inadequate” CAA regulator has been asleep on the job.

The Competition Commission in 2008 ruled that:

“The BAA’s monopoly, ownership of LHR, LGW and STN has adversely affected competition”.

“The way BAA has conducted its business has adversely affected competition”.

“The inadequate regulatory regime operated by the CAA has adversely affected competition”.

Ryanair’s Michael O’Leary said:

“Traffic at Stansted continues to decline because the inadequate CAA regulatory regime has allowed the BAA monopoly to double airport charges, and double its RAB, while other non-regulated UK airports depreciate their assets and lower charges to stimulate traffic growth.

Stansted airport can return to growth, but only when it is effectively regulated, which will require its passenger charges and its inflated RAB to be halved, thereby eliminating the effects of BAA’s regulatory gaming, and the CAA’s inadequate regulatory regime.

The BAA’s recent claim that Stansted’s traffic decline was due to ‘low consumer confidence’ is patent nonsense at a time when Heathrow, Gatwick, Birmingham and Manchester are all reporting traffic growth. Ryanair calls on the CAA to implement deep cost cuts at Stansted in order to reverse the BAA’s mismanagement and traffic collapse.”

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