Heathrow and airlines enraged by CAA price proposals Airlines using Heathrow had been calling for a 9.8pc a year cut in charges. They said the new regime would increase fees by £900m - £300m more than if the CAA had stuck to its earlier proposals. Prices per passenger, which have risen 300pc in the past decade to help fund such things as Terminal 5 and the Terminal 2 revamp, would rise from the current £21.87 to £25.35 in 2019. Dale Keller, chief executive of airline lobby group BAR UK, said: "Airline CEOs will be reaching for their oxygen masks in the knowledge that they will be forced to pass on excessive airport charges to their customers for the next five years." However, the CAA's proposals provoked equal anger at Heathrow, which had been calling for a rise in charges of 4.6pc above inflation. Mr Matthews said the CAA's proposed cost of capital - the basis for investor returns - of 5.6pc was "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. He said Heathrow's shareholders, led by Spain's Ferrovial, but also including investors from Canada, Singapore, China, Qatar and the US, would now "carefully consider" its £2.9bn investment plan. "We want to continue to improve Heathrow for passengers," Mr Matthews said. Instead, the CAA's proposals risk not only Heathrow's competitive position but the attractiveness of the UK as a centre for international investment. Heathrow sources said £1.5bn of the investment programme was maintenance, while the group had no option but to finish the Terminal 2 redevelopment. There could, however, be cutbacks to such things as taxiway improvements or parking stands if the CAA implemented its proposed regime. Mr Matthews pointed out that Heathrow had spent £11bn over the past decade improving facilities - though airlines claim passengers have still been "ripped off," with the latest five year period seeing annual increases in charges of 7.5pc above inflation. Iain Osborne, the CAA's director of regulatory policy, said that freezing prices was in the best interests of Heathrow passengers. "The fact that Heathrow's shareholders want more is not what we are looking at when we regulate the company," he said. Dismissing Heathrow's claims that it required a higher cost of capital than 5.6pc, he said the CAA had compared the risks in the business to all other regulated industries. "It is higher risk than energy companies but as low risk as an airport can get," he said. Neither was Mr Osborne persuaded by the airlines" arguments that Heathrow should face an annual cut of 9.8pc. "We think that if we had implemented what the airlines were suggesting there would be a negative impact on service quality," he said. While the final price proposals are more lenient that the initial RPI -1.3pc formula, the CAA has called for Heathrow to raise its operational cost savings from £465m to £603m. Mr Osborne said pay levels among the 6,000 staff at the airport are not only higher than at "comparable airports" but that wage increases have outstripped the national average in recent years. The CAA will not make its final pricing decision until January, giving scope for further consultation. But Mr Osborne said: "It would be pretty unusual for there to be substantial changes." The CAA also proposed that Gatwick should be allowed to raise charges by 0.5pc more than inflation for seven years. Carolyn McCall, chief executive of easyJet, Gatwick's biggest customer, said she was "disappointed" with the increase, adding: "Our greatest concern is about the lack of regulatory control of a proposed second runway at Gatwick where the CAA has handed Gatwick a licence to print money. Using Gatwick's own figures passengers could be paying £28 more per flight for years in advance of the opening of a new £9bn runway without any real oversight by the CAA.