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Regulator orders sale of airports Regulator orders sale of airports
(about 1 hour later)
The Competition Commission has confirmed the break-up of airports operator BAA and ordered the sale of Gatwick and Stansted.The Competition Commission has confirmed the break-up of airports operator BAA and ordered the sale of Gatwick and Stansted.
In the final report of its two-year investigation, the commission also told BAA that it must also sell either Edinburgh or Glasgow airport.In the final report of its two-year investigation, the commission also told BAA that it must also sell either Edinburgh or Glasgow airport.
It has looked into BAA's dominance over airports in Scotland and the south-east of England; BAA owns a total of seven.It has looked into BAA's dominance over airports in Scotland and the south-east of England; BAA owns a total of seven.
BAA responded to the findings by saying the commission's analysis was "flawed".BAA responded to the findings by saying the commission's analysis was "flawed".
Increasing competition Improved consultation
In its provisional decision published in December, the commission said the lack of competition between airports owned by BAA was detrimental to passengers.In its provisional decision published in December, the commission said the lack of competition between airports owned by BAA was detrimental to passengers.
2008 PASSENGER NUMBERS AT BAA AIRPORTS Heathrow: 66.9 millionGatwick: 34.2 millionStansted: 22.3 millionEdinburgh: 9.0 millionGlasgow: 8.1 millionAberdeen: 3.3 millionSouthampton: 2.0 million Source: BAA annual report2008 PASSENGER NUMBERS AT BAA AIRPORTS Heathrow: 66.9 millionGatwick: 34.2 millionStansted: 22.3 millionEdinburgh: 9.0 millionGlasgow: 8.1 millionAberdeen: 3.3 millionSouthampton: 2.0 million Source: BAA annual report
The regulator has ordered that the airports be sold within two years.The regulator has ordered that the airports be sold within two years.
The airports must also be sold in sequence, starting with Gatwick, followed by Stansted, and then finally either Edinburgh or Glasgow to ensure an orderly sale process.The airports must also be sold in sequence, starting with Gatwick, followed by Stansted, and then finally either Edinburgh or Glasgow to ensure an orderly sale process.
The sale of Gatwick is already under way and possible buyers are being vetted.The sale of Gatwick is already under way and possible buyers are being vetted.
And regarding Heathrow, where BAA will continue to have a substantial market power, the authority recommended improved consultation between BAA and the airlines.
Customer service
The regulator said its move was the "only way to address comprehensively the detriment to passengers and airlines from the complete absence of competition between BAA's south-east airports and between Edinburgh and Glasgow".The regulator said its move was the "only way to address comprehensively the detriment to passengers and airlines from the complete absence of competition between BAA's south-east airports and between Edinburgh and Glasgow".
The sale of these airports will "kick-start a process of competitive rivalry from a standing start where today there is no competition at all," it added. The sale of these airports will "kick-start a process of competitive rivalry from a standing start where today there is no competition at all", it added.
Christopher Clarke, chairman of the enquiry, said the move should bring substantial benefits to passengers and airlines.Christopher Clarke, chairman of the enquiry, said the move should bring substantial benefits to passengers and airlines.
And regarding Heathrow, where BAA will continue to have a substantial market power, the authority recommended improved consultation between BAA and the airlines. Paul Charles, a spokesperson for Virgin Atlantic, told the BBC that Thursday's decision could lead to cheaper fares in the long term.
BAA said it accepted the need to change, and having reorganised to improve customer service and started the sale of Gatwick, "was already changing". "If there is decent competition the prices will come down," he said.
But it said it thought "the remedies might be impractical in the current economic climate". But not everyone agrees.
"It will do nothing for the consumer," said Paul Whelan, head of industry body the Small to Medium Airports Group.
"There are a lot of airlines including Ryanair using Edinburgh and it is doing a good job, while Stansted has also been good for airlines," he said.
Falling profitsFalling profits
BAA, which was acquired by Spanish firm Ferrovial in 2006 for £10bn, has seen profits hit by the downturn.BAA, which was acquired by Spanish firm Ferrovial in 2006 for £10bn, has seen profits hit by the downturn.
Last month, BAA said a fall in passenger numbers had dented its 2008 profits, which declined by 18.4% from the year earlier.Last month, BAA said a fall in passenger numbers had dented its 2008 profits, which declined by 18.4% from the year earlier.
It reported a profit of £582m before tax and interest, down from £713m in 2007, as 2.7% fewer travellers went through its seven UK airports.It reported a profit of £582m before tax and interest, down from £713m in 2007, as 2.7% fewer travellers went through its seven UK airports.
"We've been improving customer service across all airports," Colin Matthews, chief executive of BAA, told the BBC.
"[But] we've got a long way to go."
Mr Matthews said BAA might "have to appeal" the decision since selling three airports in this economic climate could be impractical.
BAA has two months to respond to the findings.