The CAA welcomes the constructive approach taken by both the airlines and the airports concerned in working together to agree the commercial terms of the extension, within a framework set by the regulator.

Commenting on the announcement, Iain Osborne, CAA Group Director of Regulatory Policy, said: “We fully support the Government’s proposals to give us a more flexible set of tools to help to place the passenger at the heart of economic regulation. By extending the current price controls we have the best chance of being able to use those tools as we devise the most appropriate price and service quality regulation for the three designated airports, taking into account their respective competitive positions. In doing so, we hope to build on the momentum we have recently established in encouraging the airports and their airlines to agree commercial terms that are in passengers’ interests.

“We applaud how well industry have worked jointly during our consultation to agree terms together, with the regulator providing the broad framework for these discussions. I look forward to being able to continue such constructive working during the development of the Bill and the next round of price controls.”

The Government’s proposals include introducing a new licensing regime for airports with significant market power, in line with other economic regulators. This allows regulation to be tailored to meet the requirements of individual airports, rather than the current one size fits all approach being applied to the designated airports. This will enable the CAA to better target regulatory activity where and when it is needed to protect the interests of passengers.

The Government expects to introduce the legislation to implement their reform proposals early in the Second Session of the current Parliament. However, without being certain of the final shape of the reforms and that they will successfully pass through Parliament the CAA cannot start to develop its price control proposals in April 2011 as it would if the new arrangements were certain. As such, extending the current controls is the best way to try and maximise the chance the next ones can be undertaken under the new system while minimising upfront cost and risks for stakeholders.