BAA: anyone want to buy an airport?

The break-up of BAA has begun - with a For Sale sign being planted outside Gatwick airport.

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Last Updated: 31 Aug 2010

The company, which also owns Heathrow, Stansted and Scotland's three biggest airports, had been singled out by the Competition Commission for ‘significant competition problems' because of its dominant position, and was urged to give up two of its three London airports, and either Edinburgh or Glasgow. We don't envy the operator, being forced to sell three major assets at the worst possible moment in the last 15 years to shift property. And you thought you were struggling to flog your flat.

But this is exactly what it has to do if it wants to stay off the regulator's radar. Offloading Heathrow isn't an option, so it was inevitable the London sale would come down to Gatwick and Stansted. BAA says the Gatwick sale process, which analysts reckon could fetch between £2bn and £3bn, will start ‘immediately', and that it will benefit customers, staff and business.

That's just the kind of thing the meddling watchdog wants to hear. Four weeks ago the Commission published its report which tore strips off BAA, saying it ‘currently shows a lack of responsiveness to the interests of airlines and passengers that we would not expect to see in a business competing in a well-functioning market'.

The question is, will the Gatwick sale make any difference? It's hard to apply the issue of competition to airports. Customers rarely select an airport on any criteria other than that it's convenient and serves the right destination. Airlines' aims are similarly set - large companies seek slots at hubs like Heathrow, and budget fliers need to keep it cheap, hence the popularity of Stansted and Luton for the likes of EasyJet. Gatwick, meanwhile, falls between the two stools.

Because Gatwick isn't a proper hub, and offers few interconnecting flights, it suffers a lack of popularity among business travellers, a key market in the current climate. As the airport is constrained by its single runway, there's little the new owner could realistically do to affect its standing in the order of things.

That hasn't stopped Virgin Atlantic wanting a piece of the action. Sir Richard Branson's outfit wasted no time in shouting about its interest in joining a bidding consortium. Other potential bidders for the airport, which is the UK's second-busiest airport after Heathrow, used by 35 million passengers last year, include Australian company MacQuarie, Germany's Fraport, and the owners of Manchester airport.

The watchdog certainly seems to think a change of ownership will help, suggesting that many of the problems of recent years - flight delays, lost baggage, overcrowding, poor service - could have been mitigated if 90% of the departures in the South-East hadn't been in BAA's hands.

Needless to say the forced sale has gone down like a concrete fuselage elsewhere. The unions, for one. They may well have a point: given the travails of the transport sector in the current climate, with airlines and travel comapanies falling from the skies and fuel prices soaring, it may not be the best time to add extra turbulence.

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