|Client||British Airways (BA)|
|Service(s)||Regulation & Competition, Strategy & Finance|
CEPA was retained by British Airways (BA) to undertake a study on the allowed WACC for National Air Traffic Services (NATS) en-Route aviation navigation services. The output of the study was a report submitted to the Civil Aviation Authority (CAA) as part of the price control review process.
The report covered regulatory precedents for:
- the cost of debt;
- the cost of equity;
- appropriate gearing;
- an approach to allowing for taxation costs; and
- the appropriate regulatory asset base.
The report sought to justify that based on well established economic theory, cross-checked against actual market data, an increase in the allowed WACC was not required.
Particular features of the report included:
- the impact of the financial crisis on the allowed WACC;
- assessing the relative risk of NATS in the face of few obvious comparators; and
- implications for the WACC of NATS being a relatively capital non-intensive regulated business.