BAA faces Gatwick and Stansted loss

Bad news for BAA: the Competition Commission says it should be forced to sell two of its London airports...

Last Updated: 31 Aug 2010

The Competition Commission has finally published its provisional findings on UK airport ownership, and it makes grim reading for BAA: the Commission found that there were indeed competition problems at the operator’s seven UK sites, and it reckons passengers are losing out as a result. It will now recommend that BAA is forced to sell three of its airports: two of the London sites (probably Gatwick and Stansted), plus either Glasgow or Edinburgh. BAA must have been expecting bad news, but perhaps not that bad…

The report was actually pretty scathing about BAA, which it said ‘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’. This was clear from BAA’s ‘approach to planning capital expenditure, including weaknesses in consultation and lack of responsiveness to the differing needs of its airline customers, and hence passengers, and the consequences for the quantity, quality, location and timing of investment’. Ouch.

BAA wasn’t the only problem, the Commission admitted – government policy, planning rules and the regulatory regime were also partly to blame. But the watchdog does seem to think that many of the problems of recent years – flight delays, lost baggage, overcrowding, poor service – could have been mitigated if the airports in the South-East were exposed to greater competition. Or to put it another way: the fact that BAA controlled 90% of departures from the region meant that it didn’t have a big enough incentive to sort things out.

In its response this morning, BAA didn’t dispute that it needed to raise its game – but it maintained that the Commission was barking up the wrong tree. The real problem, it says, is a lack of airport capacity in the South-East, which is leaving the current sites over-stretched in times of disruption. Forcing BAA to sell airports would not help, it insisted – in fact it might make things worse by delaying the decision over new runways. ‘Disproportionate and counter-productive,’ was CEO Colin Matthews’s verdict on the Commission’s proposals.

BAA is never going to sell off Heathrow, so the chances are that Gatwick and Stansted (plus Glasgow or Edinburgh) will go on the block if the Commission’s report is rubber-stamped by the Government. It’s a blow for BAA, particularly in the week that it finally secured its financial future – but with infrastructure groups and even airlines lining up to buy the assets already, at least a sale would wipe out most of its debt at a stroke...

In today's bulletin:
BAA faces Gatwick and Stansted loss
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The business case for better posture
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