Highlands and Islands Enterprise (HIE), owner of the Cairngorm funicular railway, has reduced the level of rent charged to the operating company CairnGorm Mountain Ltd (CML).

The new annual rent for the rail system and associated buildings has been set at £100,000 for one year, after which the position will be re-evaluated. Previously the rent, set in 2001, was £513,500 annually. That figure was set with the aim of recovering the costs of the funicular regardless of the level of business.

The new rent arrangement is aimed at assisting CML in revising its business model to position itself as a resilient year-round visitor attraction central to the increasingly successful tourist industry in Badenoch and Strathspey.

The Highland Council has been asked to reconsider the terms of a £1million loan to the company.

Since the funicular started operating in December 2001, poor snow conditions have resulted in lower skier numbers than anticipated. However non-skier numbers have exceeded expectations and continue to increase. Commercial skiing activity in Scotland is presently very difficult to sustain, particularly given the unavoidably high fixed cost base associated with such operations.

Under the new arrangement, CML will pay a base rent of £100,000 a year, plus a percentage of annual turnover varying between five per cent and 40 per cent once turnover has exceeded £3.5M so that HIE will share in any increased level of trading.

HIE and CML have also agreed terms for the operating company to repay outstanding rent of approximately £600,000 over 10 years, with interest at a commercial rate.