BAA is Ordered to Sell Three Airports

The UK Competition Commission (CC) is requiring the country’s largest airport operating company, BAA, to sell its Gatwick and Stansted airports as well as either Edinburgh or Glasgow.

In addition to these airports, BAA also operates those at Aberdeen and Southampton. The company notes that it also has interests in a number of other airports outside the UK, including Naples. It claims that at present 1,700 aircraft take off from its UK airports every day, one every 30 seconds.

The Competition Commission’s final decision follows a two-year study of issues of the single ownership. It issued a provisional report in August 2008. In the months between, the Commission studied response from BAA, airlines, the UK Civil Aviation Authority and Office of Fair Trading.

The CC found problems with adverse effects at all seven of the airports. The final report notes, “A key problem at BAA’s airports in the South-East and in lowland Scotland is common ownership which precludes any competition between them. There are additional problems at the London airports arising from the current system of regulation, planning and aspects of Government policy. The problems at Aberdeen derive from its isolated geographical position giving it the characteristics of a local monopoly.”

The CC stipulates that the three airports must be sold within two years and that they must be sold in sequence: Gatwick, Stansted, then either Edinburgh or Glasgow. “We expect that the new airport owners, with the operating capabilities and financial resources to develop them as effective competitors, will have a much greater incentive than BAA to be more responsive to their customers,” says Christopher Clarke, Chairman of the CC’s Airports inquiry group. “We also expect further benefits from BAA’s own response to the action taken by these new competitors.”

In its response, BAA says it, “will consider the Competition Commission report carefully before deciding how to respond. We accept the need to change and, having reorganized to improve customer service and having initiated the sale of Gatwick, BAA is already changing. However, we believe the Commission’s analysis is flawed and its remedies may be impractical in current economic conditions.”