The UK’s Civil Aviation Authority is examining the possibility of making Manchester Airport a regulated asset, akin to Heathrow and Gatwick airports in London.
The CAA announced the investigation last week following a request from what it described as an “interested party”, without disclosing further details. It will now undertake a market power determination report into the hub, which is 64 percent owned by local councils and 35 percent owned by IFM Investors. The airport will become an economic regulated asset if the CAA finds it meets its market tests, the organisation said in a statement.
Mark Friend, partner in the anti-trust group at Allen & Overy, explained to Infrastructure Investor that the CAA’s testing process has three components: “One is if they have substantial market power. If they are found to do so, the second test would ask if general competition law provides adequate protection for airport users. The third question is if the pros of economic regulation outweigh any adverse impacts.”
Manchester Airport would become only the third UK airport to fall under regulation following the designations of Heathrow and Gatwick in 2014. The CAA at the time also examined placing London Stansted, owned by the Manchester Airports Group, under the same regulations. However, it decided against the move, in part because of the significant presence of airlines Easyjet and Ryanair, which meant the airport did not exercise too much power.
Both Heathrow and Gatwick are under the regulated asset base model, which also governs the country’s water, electricity and gas sectors. Turning Manchester into a regulated asset would allow the CAA to cap the charges the airport levies on airlines and customers.
IFM invested in Manchester Airport in 2013, when its passenger numbers stood at 20.7 million. Its latest available figures recorded 28.3 million passengers in 2018. The CAA said it is required to undertake a market power test when requested to do so for any airport with annual passenger numbers of more than 5 million.
“Passenger growth per se is not necessarily relevant to the assessment of market power,” added Friend. “A more pertinent question is whether the airport faces constraints from competing airports in the region or whether airlines have countervailing buyer power.”
The CAA said it will begin its determination later this year. IFM Investors declined to comment.