BAA breakup on the horizon

The Competition Commission's interim analysis of Britain's airport market points to BAA being forced to sell one, or possibly two, of the airports in its portfolio.

The 'Emerging Thinking' report - issued on 22 April - said that BAA's dominance of airport markets in southeast England and central Scotland limits choices for passengers and airlines and curbs capacity expansion. BAA has also grown stagnant by operating airports in a near-monopoly situation and shows a "lack of responsiveness" to the interests of airlines and passengers "that we would not expect to see in a business competing in well-functioning market".

Spanish-owned BAA has a 91 per cent share of airport passengers in southeast England, the report said, and an 84 per cent share of passengers in Scotland, where BAA owns Aberdeen, Edinburgh and Glasgow.

Ownership by different companies of Gatwick, Heathrow and Stansted, the three main airports for London, would create incentives to expand capacity, said the report.

The report paves the way for BAA, which serves 150 million passengers per year, being forced to sell off one of its three London airports - most likely Gatwick or Stansted. BAA's other UK airport is in Southampton. It may also have to sell one of its Scottish airports.

Asset divestment is one remedy being considered by the commission to resolve service issues within the UK airport market. While it will not set out findings or make recommendations before August, market expectations are that an enforced sale by BAA of one of its London airports is firmly on the cards.

"The 'Emerging Thinking' report, as its name suggests, is not set in stone. It merely shows the line of thinking the commission is taking at this juncture in its investigation of the airport market.

However, such is the language of the report, that it is pretty clear that the breakup of BAA is the commission's preferred outcome," says Stephen Tupper, partner and head of law firm Watson Farley & Williams' competition and regulatory group.

"I would expect that the commission ultimately will recommend sale of one or more of BAA's airports. Breaking up BAA is the only way to inject competition into the airport sector, particularly around London," says Ian Giles, partner in law firm Norton Rose's competition division. 374 of 2,154 words