Originally Posted by
BasilBush
Renationalisation of Heathrow is not a likely scenario any tine soon, and given the airport's market power some form of price regulation is bound to continue. The real issue is the form of regulation. The current cost-plus mentality that has been in place for 25 years has not served anyone well, as it gives the airport operator no real incentive to be more efficient, whether in the delivery of capital projects or in day-to-day operation. New thinking is required.
Whilst trying not to labour the point, regulation is never going to solve the problem for the following reasons:
1 Regulation just plays into the hands of HAL in that every time they are accused of not improving LHR they have the ready made excuse that their income is being regulated.
2 If their income is decreased they will look at other revenue streams, after all those nice Galleries lounges would make very good retail space in T5 and are are only used by a few elite fliers anyhow.
3 The UK government is not a customer of HAL so why should they care what the government think anyhow. In fact the reverse is true as the exchequer would lose out on taxation of additional profits.
4 The customers of HAL have no real alternative to LHR in the UK, so allowing LHR's competitors to raise prices relative to LHR is hardly gong to increase competition.
5 It has been proved time and time again that regulation does not begat improved efficiency, only open competition can achieve it. HAL need to be in a position where they have think about their pricing and service delivery.
Regulation does not work because your average businessman is a lot smarter than your average politician.