CC may order BAA to sell off airports

Britain’s competition regulator may order the UK’s airport operator BAA to sell off three of its airports.

In a sector inquiry the Commission (CC) found problems at each of BAA’s seven UK airports, which include Heathrow, Gatwick and Stansted as well as Glasgow and Aberdeen in Scotland.

A principal cause is their common ownership by BAA, said the regulator, which also found problems with the system of regulation.

The CC has published a set of proposals on which it will now consult.

If these are implemented, the CC will order BAA to sell two of its three London airports, and also either Edinburgh or Glasgow airport. It is expected to reach its decisions in the first quarter of 2009.

Christopher Clarke, chairman of the airports inquiry group, said the lack of competition was evident in BAA’s dearth of responsiveness to the needs of airline customers and 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,’ he said.

The CC is also seeking views on those aspects of government policy which adversely affect competition by restricting airport capacity.

“BAA as the owner and operator of these London airports has played a major role in not pressing for more runway capacity sooner.

Christopher Clarke, chairman of the airports inquiry group

BAA has argued to us that there is no scope for competition to develop so long as there are runway 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,’ added Clarke.

‘BAA as the owner and operator of these London airports has played a major role in not pressing for more runway capacity sooner,’ he said.

The CC does not expect to require the sale of either Southampton or Aberdeen airports.

Regulation problems

The Commission said that the Civil Aviation Authority (CAA) should be brought closer into line with other sectoral regulators. The CAA should be given stronger powers to protect the interests of consumers, promote competition and enforce economic licensing, said the CC.

A review into the airports’ regulatory system is also being undertaken by the Department for Transport (DfT). The Secretary of State for Transport has stated that the current basis of price controls at Heathrow and Gatwick will remain in force.