Airlines face 15.6 pct rise in Heathrow charges

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LONDON, Nov 20 (Reuters) London's crowded Heathrow airport might be allowed to charge airlines 15.6 percent more next year, Britain's aviation regulator said on Tuesday, but in return it wants better service and less queueing at security points.

Final proposals from the Civil Aviation Authority (CAA) would also allow Heathrow's operator BAA, a division of Spain's Ferrovial, to raise charges by 8.2 percent at London's second airport, Gatwick.

Heathrow has become a headache for airlines and travellers alike, particularly since security was tightened in August 2006 when police foiled a plot to bomb transatlantic airliners using liquid explosives.

Queues, delays and lost baggage have become commonplace.

The airport's runways are 99 percent full and its terminals are struggling with 67 million passengers a year, around 40 percent more than they were designed to handle.

''Passengers and airlines deserve better than they have been provided with at Heathrow and Gatwick in recent years, but need to recognise that improvements have to be paid for,'' said the CAA's director of economic regulation Harry Bush.

The CAA is proposing setting the cap at 11.97 pounds (.57) per passenger at Heathrow for 2008/2009 and at 6.07 pounds at Gatwick.

Over the following four years, BAA should be able to raise charges by inflation plus 7.5 percent at Heathrow and by inflation plus 2 percent at Gatwick, it added.

NOT ENOUGH Ferrovial said the price increases were not enough and its BAA unit said: ''We do not believe these proposals yet recognise the scale of what is required and the risk involved''.

But one Madrid analyst said: ''It's a pretty positive proposal. They've still got months for negotiations, so it's not surprising they're trying to fight for a better deal.'' Ferrovial shares rose 3.7 percent to 61.65 euros by 1020 GMT.

The CAA said it would make its final recommendations in March 2008. The proposals follow a report into pricing at UK airports by the Competition Commission in September.

Budget airline easyJet, which uses Gatwick, said the fact the CAA's proposals were similar to those of the Competition Commission showed Britain's system of airport regulation was flawed.

''The whole thing needs a fundamental root and branch review,'' said easyJet Chief Executive Andy Harrison. ''It encourages neither operating or capital efficiency.'' The CAA said it was also proposing an increase in penalties for BAA, should it fail to hit performance targets.

''The CAA recognises that the resulting increases in airport charges, particularly at Heathrow, are significant,'' it said.

''However, these increases reflect the increased costs of security operations, the cost of recent capital projects and allowances for significant additional capital expenditure.'' REUTERS BJR HS1652

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