Wednesday, August 20, 2008

London airports should be sold to end BAA monopoly

Original Article

LONDON - Britain's Competition Commission on Wednesday recommended the sale of three airports, two in London and one in Scotland, that are operated by Spanish-owned group BAA, owing to the company's dominance.

Following an investigation, the Competition Commission (CC) said it was seeking views on which two of London's Heathrow, Gatwick and Stansted airports should be off-loaded, which would result in the break-up of BAA.

However the CC noted that its recommendations made it "unlikely to require the divestiture of Heathrow unless the sale of Gatwick or Stansted is likely to be impractical or ineffective."

Heathrow, the world's biggest airport in terms of international passenger traffic, is the jewel in the crown of BAA's portfolio of seven airports across Britain.

Germany's biggest construction company, Hochtief, immediately said it would be interested in acquiring Gatwick, reported to be worth up to 3.0 billion pounds (3.8 billion euros, 5.6 billion dollars).

After its period of consultation, the CC would also decide which of Edinburgh and Glasgow airports in Scotland should be relinquished.

BAA described the watchdog's findings as "flawed" and its remedies as "disproportionate and counter-productive."

"The Commission's findings state that the lack of runway capacity is a main reason for what it calls the current poor standards of service and the lack of resilience at times of disruption, which results in regular delays," BAA said in a statement.

"By calling not just for a fundamental restructure of BAA ... the Commission risks delaying" delivery of new runways, it added.

Low-cost Irish carrier Ryanair, which largely operates out of Stansted airport, said it welcomed the commission's "comprehensive report into the market power of the BAA monopoly and fully endorse its findings."

It added in a statement: "Competition works -- monopolies don't. BAA's monopoly control over the London airports has been highly detrimental to competition and consumers.

"BAA has long ignored the needs of its airline users and the travelling public and provided inefficient, gold-plated facilities, encouraged by an ineffectual regulator, the Civil Aviation Authority."

British Airways said on Wednesday that the "focus must be on ensuring that the current regulation of BAA's London airports is strengthened."

The CC added that it would publish its final recommendations during the first quarter of 2009.

It said in its statement on Wednesday: "The Competition Commission has provisionally found that there are competition problems at each of BAA's seven UK airports (Heathrow, Gatwick, Stansted and Southampton in England, and Edinburgh, Glasgow and Aberdeen in Scotland) with adverse consequences for passengers and airlines."

"A principal cause is their common ownership by BAA. There are also competition problems arising from the planning system, aspects of government policy and the system of regulation."

The commission added: "The CC is now seeking views on which two of BAA's three London airports should be sold and similarly which of Edinburgh or Glasgow airports should be sold."

BAA holds a 60 percent market share of all passengers passing through British airports, a figure which rises to 90 percent around London, according to Competition Commission data.

British airlines have repeatedly called for the break-up of BAA which was bought in 2006 by a consortium led by Spanish construction group Ferrovial for 10.23 billion pounds. BAA was privatized in 1987, while the CC is an independent public body.

Airlines are unhappy with BAA over delays, overcrowding and queues caused by extra security measures put in place after the September 11, 2001 terror attacks and London bombings in 2005.

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