BAA told to sell two London airports

[August 20th 2008]

As predicted by Holiday Extras earlier this week, BAA is almost certain to have to sell both Gatwick and Stansted airports following the findings of the Competition Commission.

“We have provisionally found that there are significant competition problems arising from BAA’s common ownership of seven UK airports (Heathrow, Gatwick, Stansted and Southampton in England, and Edinburgh, Glasgow and Aberdeen in Scotland),” says chairman of the BAA Airports inquiry group, Christopher Clarke.

“This is evident from a large number of factors including its lack of responsiveness to the needs of its airline customers and a lack of initiative in planning capacity. This has resulted in investment that is not tailored to the requirements of airport users and lower levels and quality of service for both airlines and passengers,” Clarke adds.

The CC has now published a consultation document seeking views on which two of BAA’s three London airports, and which of Edinburgh or Glasgow airports, should be sold. It seems unlikely, however, that following the consultation period BAA will be asked to sell Heathrow airport.

BAA chief executive, Colin Matthews, responds “we will continue to point out to the Commission the many areas where we believe its analysis is flawed”. BAA is concerned in particular that the delivery of new runways could be delayed.

“Just as the Government is about to make the decisions that could lead to the first full-length runways being built in the South East since the second world war, the Commission risks creating uncertainty, delay and confusion at exactly the wrong time,” says Matthews.

Clarke responds: “While we accept that constraints on runway capacity in the South-East will limit the scope for the benefits of competition in the short-term, we believe that separate owners would be more active than BAA in exploiting existing opportunities”.

“BAA has argued to us that there is no scope for competition to develop so long as there are capacity constraints. We take the opposite view; unless the market is opened up to competition, there is a serious risk that the current capacity constraints will persist, certainly for longer than in a better functioning market,” adds Clarke.

The CC and BAA also have a difference of opinion about Glasgow and Edinburgh airports. “The Commission has apparently ignored the evidence presented by BAA, and supported by numerous respected third party organisations, that clearly demonstrates that Edinburgh and Glasgow Airports serve separate markets and therefore do not and would not compete, regardless of ownership,” Matthews believes.

BAA is criticised too by the CC over its customer service. “We have also been struck by the differences in approach to both airline customers and development between BAA and owners and operators of regional airports. We have identified significant competition between several pairs of such airports with benefits which include lower charges, development of new routes and a far greater responsiveness to customers. In terms of capacity development, we note that both Manchester and London City airports have expanded successfully without explicit Government support,” says Clarke.

Written by: Nick Purdom

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