BAA (website: www.baa.com) has formally responded to a report by the Competition Commission that ordered it to sell three of its UK airports.
The regulator was told this week that it must find new owners for two of its three London gateways, as well as one of its Scottish bases, due to concerns over market dominance.
That ruling immediately raised the spectre of a bidding war between buyers, but with months before the edict receives government sanction BAA has issued a scathing rebuttal.
Chief executive Colin Matthews labelled the watchdog’s proposals “flawed,” insisting they come at a perilous time when the UK’s airports are already reeling from overstretched capacity.
Issuing its preliminary findings on Wednesday (August 20), the commission expressed fears that BAA’s ownership of seven airports in Scotland and south-east England is bad for the industry.
It said passengers and airlines are suffering as a result of stifled competition, noting that parent company Ferrovial’s financial difficulties only exacerbate the situation.
By comparison, commission enquiry chairman Christopher Clarke said that new ownership would “drive more efficient capital investment, and better focus on levels and quality of service”.
Those sentiments have been endorsed by a host of airlines, with bmi chief executive Nigel Turner saying that the current situation – whereby BAA owns 91 per cent of the market in the south-east of England – is unacceptable.
He explained: “This has resulted in unresponsive customer service for airlines and passengers, lack of investment in capacity growth, while delivering higher costs and price increases that could not be sustained in a competitive environment.”
But BAA is standing by its guns, insisting that a forced break-up would impede progress towards expanding capacity at the London’s airports and addressing the so-called ‘Heathrow hassle’ factor.
Matthews argued: “Just as the government is about to make the decisions that could lead to the first full-length runways being built in the south-east since the second world war, the commission risks creating uncertainty, delay and confusion.”
He also insisted that the watchdog was misguided in talking about ‘competition in London’, when in reality Heathrow Airport’s main competitors are other major European hubs.
Pundits widely expect Gatwick and Stansted will be first in line for the sell-off, which could take place just six months after the commission completes its investigation next March.
Heathrow Airport is considered an unlikely target given its status as the jewel in BAA’s crown. In Scotland, analysts say Glasgow Airport is probably more dispensable than Edinburgh.
The watchdog has also called on the government to review its 2003 air transport white paper, which it says places “unintended” constraints on investment.
