BA considers life outside Heathrow as CAA backtracks on charges

Regulator rules charges will rise at faster rate than first proposed – despite agreeing airport is badly managed and staff overpaid

British Airways has warned that it will consider a future outside Heathrow after the regulator revised its proposals to cut landing charges – despite agreeing that the airport was badly managed and staff overpaid.

Airlines cried foul as the Civil Aviation Authority (CAA) ruled that charges will rise at the rate of inflation over the next five years instead of the RPI minus 1.3% rate it had proposed in the spring – and well above the real terms cut demanded by airlines.

Heathrow, which has argued for increasing returns to shareholders to ensure foreign investment continued, said the settlement would be "the toughest [it] has ever faced" and claimed it could have "serious and far-reaching consequences for passengers".

British Airways, which accounts for just over half of the traffic at the London hub, said it was a "bad day" for its customers. Willie Walsh, chief executive of the airline's parent company IAG, said the CAA had let down its passengers by ignoring calls for cuts. He said: "As the only hub airport in the UK, Heathrow exerts monopoly power over its users. Like other airlines at Heathrow, we cannot move to a better-run UK hub that offers customers real value for money."

But, Walsh added, the cost of Heathrow meant alternative hubs were "more attractive and realistic". The IAG boss has previously mooted the idea of focusing on Madrid, the base of BA's sister airline Iberia. Walsh recently said he no longer backs a third runway at Heathrow, at a time when the government's Airports Commission is considering expanding capacity in the south-east.

Walsh said: "No such alternative exists today but these excessive charges combined with a complacent management team at Heathrow make an alternative hub look more attractive and more realistic. We will carefully consider our next steps."

The CAA said that its decision to freeze rather than cut landing charges at Heathrow reflected the increasing cost of raising capital for investment. But while it had accepted some of Heathrow's arguments, the regulator claimed that it had toughened up on operating costs – and concurred with BA's view that the airport needed better management.

Iain Osborne, group director of regulatory policy at the CAA, said: "We think that with the right management focus they can do a lot to increase operating efficiency. Pay is too high; too much overtime being worked. Throughput rates for security are lower than other airports."

However, Heathrow's chief executive, Colin Matthews, who has argued that its shareholders needed rewarding to continue the investment that has transformed the airport over the last five years, said: "This proposal is the toughest Heathrow has ever faced. The CAA's proposed cost of capital of 5.6% is below the level at which Heathrow's shareholders have said they are willing to invest. The CAA's settlement could have serious and far-reaching consequences for passengers and airlines at Heathrow.

"We want to continue to improve Heathrow for passengers. Instead, the CAA's proposals risk not only Heathrow's competitive position but the attractiveness of the UK as a centre for international investment."

But Osborne said the owners – largely foreign sovereign wealth funds – were getting a fair return for a low-risk business. "There's no reason that passengers should pay more to meet the ambitions of its shareholders."

However, other airlines accused the CAA of caving in to Britain's largest airport. Virgin Atlantic said it was "deeply disappointing to see the CAA has bowed to pressure from Heathrow Airport Limited and its shareholders" and said that higher charges were "another hammer blow for both UK consumers and overseas visitors". It called on the CAA to "urgently review its recommendations".

Osborne insisted: "We're not balancing airlines against airports but the passenger interest in lower charges against the passenger interest in better services."

The CAA meanwhile said Gatwick airport could increase landing charges by RPI plus 0.5% annually for seven years, under a more flexible arrangement. Gatwick gave a "cautious welcome" to the proposals.

However, easyJet, the airport's largest customer, said it was disappointed with the increase in proposed average charges and warned that leeway given to Gatwick over a possible second runway was a "licence to print money". It claimed it could lead to passengers paying £28 more per flight.

The CAA has deferred a ruling on Stansted regulation after the airport, under the new ownership of MAG, struck deals with its largest customer Ryanair in recent weeks.

Article Source : http://www.guardian.co.uk
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Chattering classes 'to be priced out of Islington housing market'

London borough will soon be preserve of ultra-rich and ultra-poor, says report

It has a place in the popular imagination as the spiritual home of the leftwing intelligentsia, its name synonymous with fashionable, middle-class metropolitans and – often said disparagingly – with Guardian-reading views. But perhaps not for too much longer: Islington is changing as a wave of "supergentrification" fuels its colonisation by London's financial elite.

Exploding property prices mean that the middle-income, middle class professional families – teachers, mid-ranking civil servants, doctors, lecturers and journalists – who have traditionally made up the Islington "chattering classes" can no longer afford to put down roots, a phenomenon researchers say will over time transform the character of the borough.

By the end of the decade, families who do not qualify for social housing will need to earn £90,000 a year just to afford to rent in the area, while house-buying will be out of reach for most, leaving the borough a place where "only the very rich and very poor can live", says the study.

The research, commissioned by the Cripplegate Foundation, a local poverty charity, concludes: "This will leave Islington polarised, with very wealthy families at the top, a youthful transient and childless sector in the middle, and those on low incomes at the bottom, living in social housing."

Islington has had many famous residents, including Lenin and George Orwell, who reportedly loved its run-down seediness. The former prime minister Tony Blair famously lived there in the early 1980s and 1990s, triggering a wave of acerbic rightwing jibes at "Islington person", a decadent, liberal leftwing type who embodied all the values alien to "middle England".

But it was also home, for a time in the 1990s, to the Daily Mail editor Paul Dacre, and is now as likely to be associated with wealthy Conservative residents, such as the London mayor, Boris Johnson, and the former international development secretary Andrew Mitchell. It has also had a smattering of Hollywood glamour, with residents including Kate Winslet, Emma Watson and James McAvoy.

According to the report, welfare reform and low wages will drive out to the suburbs increasing numbers of working-class residents, especially single parents and large families, who will be unable to afford market rents because of tighter limits on housing benefit.

The report's co-author, Faiza Shaheen, a researcher at the New Economics Foundation, said widening social inequality and the gradual exclusion of low and middle-income families in Islington is replicated in other areas of inner London, such as Camden and Hackney, with potentially damaging effects on the stability and health of local communities.

Both high- and low-income residents interviewed for the research were concerned at what they saw as a waning sense of community as rich and poor lived increasingly separate lives. The poor felt resentment at being "locked out" of their neighbourhoods, while the wealthy expressed "a fear of the unknown" – a heightened sense of suspicion of poorer residents.

Relatively high-earning young professionals expressed frustration that they could still just afford to rent rooms in flatshares, but were unable to settle down. "Jenny", a consultant working in Canary Wharf who was interviewed for the research (and has since left the borough), was paying £1,000 a month for a room in a shared house. She said: "I think Islington will basically turn into somewhere like Kensington and Chelsea, where only the super-rich can afford to go."

Prof Anne Power, a London School of Economics housing expert and longtime Islington resident, said: "At the moment, there's no clear evidence that the middle is being forced out of Islington – in fact it is still dominant. But if trends continue as they are, then it will become a different place. It maybe won't become as 'empty' as places like Kensington and Chelsea, but it will become emptier; and that's when a place starts to lose its heart."

Paul Williams, head of the Islington office of Savills estate agents, said anxieties about the changing nature of Islington had existed for years. The transformation started back in the 1990s, when "City and legal money" booted out the more "avant-garde and bohemian journalists". Despite the current changes, it he felt it was unlikely to lose its distinctive character, he said: "I'd be staggered if Islington went the way of Fulham."

Property prices have more than doubled over the past 12 years in Islington – house prices in the borough currently average £580,000 (more than £1m for terraced family homes), though this figure is higher in the sought-after white-stuccoed Georgian squares around fashionable Upper Street.

Jeremy Corbyn, Labour MP for Islington North, said: "£1m homes are not uncommon in Islington. Fifteen years ago they would have been affordable for teachers, medical workers and mid-ranking professionals. Now they are bought by very wealthy people or investment money coming in from overseas."

Corbyn, who has introduced a Rent Regulation private members bill in the Commons, added: "In future private rented places will be unaffordable and the poor will be forced out, while young workers pay high rents and can't afford to save. They feel very angry and very stuck."

The enrichment of parts of Islington may surprise some of the first wave of middle-class gentrifiers who arrived in the late 1960s, buying dilapidated Georgian town houses in districts then considered to be "no-go" slum areas, like Canonbury, where larger properties can easily now fetch £3m-£5m.

Martin Jones, 76, who lives in Highbury, a now well-heeled part of the borough, described how, when he and his wife moved to neighbouring Barnsbury in 1967, their bank manager laughed at their application for £4,000 mortgage to buy a four-bedroom house. "People were aghast that we should wish to move to Islington," he said.

Article Source : http://www.guardian.co.uk

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