BAA forced to sell three of its biggest airports

A hammer blow for BAA, as the regulator says it will be forced to sell three of its four busiest airports...

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Last Updated: 31 Aug 2010

The Competition Commission said today that it plans to force BAA to sell not only Gatwick, but also Stansted and Edinburgh – which would mean the beleaguered BAA losing its three biggest airports outside Heathrow. The regulator reckons that greater competition between operators is the only way to ensure a decent service at UK airports, a sentiment that will probably ring true for frequent flyers. But understandably, BAA is rather upset that it could be forced to sell three of its best assets - particularly at a time when prices are plummeting...

The recommendation about selling Gatwick was hardly unexpected; the Commission suggested back in August that BAA would have to give up some of its seven airports, prompting the operator to put Gatwick up for sale. Various bidders, including Macquarie and Virgin Atlantic, are already lining up for a tilt at the airport – and with a valuation of nearly £2bn, a sale would free up some much-needed cash to help BAA pay down some of its vast debt pile. (Just a pity this didn't happen a couple of years ago, when asset values were going through the roof...)

However, BAA was hoping that it might be able to get away with selling just one of its London hubs. ‘We do not believe that [the Commission] has set out compelling evidence to support its view that selling Stansted as well as Gatwick will increase competition,’ the operator said in its response today, adding that a sale process would only delay the introduction of much-needed extra runway capacity. Unfortunately the regulator doesn’t agree: it’s decided that the three London airports have to be separately owned, or there’ll be no incentive to improve service levels. Since the two airports handled about 60m passengers last year, that’s rotten news for BAA.

BAA is also unhappy about the plan for Scotland: although it seems to accept that it will have to sell one of its airports north of the border, it doesn’t see any reason why Edinburgh should be put on the block rather than Glasgow (which is about the same size) or Aberdeen. As it says, if it’s a question of competition, there seems no obvious reason for selling one rather than another. BAA also argued that Edinburgh and Glasgow actually serve separate markets, so there’s no advantage to be gained from greater competition. This sounds a bit implausible to us (given how close together they are), and it clearly sounded implausible to the Commission too…

The plan remains subject to a final consultation, so BAA still has a chance of an eleventh-hour reprieve. But we suspect it’s unlikely to find too many ardent supporters. And at least it gets to hang on Heathrow, its prize asset – since the airlines are never going to give up their Heathrow slots (well, unless they run out of cash), some argue that competition would be best served by letting different operators run the different Heathrow terminals. That would have really left BAA in the mire...


In today's bulletin:

BAA forced to sell three of its biggest airports
City eyes further cuts as Fed starts giving money away
Nixon checks out at moneysupermarket.com
Pension warning after £100m Government cock-up
Parisian models bare all in protest

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