26 September 2008

CAA backs BAA airport sell-off

Airport competition in the South East and Scotland will be increased ââ¬Åâœsignificantlyââ¬~ with the sell-off of three BAA-owned facilities.

That is the view of the Civil Aviation Authority, which said it ââ¬Åâœstrongly supportsââ¬~ the Competition Commissionââ¬â¢s provision findings that BAA should be required to sell two of its south east airports and one in Scotland.

ââ¬ÅâœThis can be expected significantly to increase competition between airports in the South East and Scotland, to the benefit of passengers, airlines and the wider UK economy,ââ¬~ the CAA said.

The authority welcomed BAAââ¬â¢s decision to sell Gatwick as an important first step to realising these benefits.

The CAA said it welcomed the commissionââ¬â¢s support for regulatory reform, adding that it continued to work with the governmentââ¬â¢s ongoing review of the regulatory framework.

ââ¬ÅâœThe CAA has called for a clear framework that provides sufficient flexibility to allow the regulation of airports to adapt to changing market circumstances ââ¬' not least the emergence of increased competition ââ¬' and to act more rapidly when unfair conduct is identified. This will ensure that regulation remains proportionate and, importantly, will facilitate the development of the competition that divestment is intended to bring,ââ¬~ the authority said.

ââ¬ÅâœThe CAA recognises that much of the time airlinesââ¬â¢ and passengersââ¬â¢ interests will be aligned. But this will not always be the case. The CAA believes that it is important, therefore, to have a clear focus for regulation of airports, and that should be on passengers.ââ¬~

Economic regulation group director Dr Harry Bush said: ââ¬ÅâœThe CAA supports the CCââ¬â¢s provisional finding that BAA should sell two South East airports and one in Scotland.

ââ¬ÅâœIndeed, the case for break-up in the South East is stronger than currently argued by the CC.

ââ¬ÅâœThe CC currently focuses on the potential gains from competition over the longer-term. This is only half of the story. Competition in the short-term ââ¬' even between airports with busy runways ââ¬' can be expected to deliver significant benefits to passengers and airlines.ââ¬~

He added: ââ¬ÅâœRegulation also has a part to play in delivering a better deal for passengers.

ââ¬ÅâœIt will need to respond flexibly to the changing market circumstances in order to facilitate ââ¬' and not inhibit ââ¬' the development of effective competition.

ââ¬ÅâœThe current regime can respond, but significant changes in airport ownership will increase the importance of modernising the regulatory framework, with a clear focus on passengers and a duty to promote competition.

ââ¬ÅâœThe CAA welcomes BAAââ¬â¢s announcement that it will sell Gatwick. It is an important first step towards the development of more effective competition in the UK airports market. It is, however, only the first step.ââ¬~

Flybe welcomed the CAAââ¬Ëœs response to the Competition Commissionââ¬â¢s provisional findings and called for BAA to also offload Glasgow and Southampton airports.

Chief commercial officer Mike Rutter said: ââ¬ÅâœWe have been saying for years that the BAA monopoly of airports in South East England and the Scottish lowlands is bad for the consumer.

ââ¬ÅâœIt is good news that the CAA has now added its weight behind the provisional findings of the Competition Commission.

ââ¬ÅâœRather than wait for the inevitable forced sell-off, we are again calling for Ferrovial [BAAââ¬â¢s owner] to read the writing on the wall and start to divest itself of at least three airports in order to improve customer focus, allow for investment and bring real competition to aviation in the UK.

ââ¬ÅâœOver the last year, Flybe has flown more than 75,000 flights from BAA/Ferrovial owned airports, so we are in a very good position to be able to comment on their lack of performance.

ââ¬ÅâœDisposing of London Gatwick alone is not enough and we now look forward to the sale of Southampton and Glasgow.ââ¬~

But Ryanair CEO Michael Oââ¬â¢Leary was typically outspoken in his response calling for ââ¬Åâœfailed regulatorsââ¬~ in the CAA to ââ¬Åâœresign in shameââ¬~. 

He said: ââ¬ÅâœThey have for 20 years allowed the BAA to charge extortionate prices, develop inefficient marble palaces which users donââ¬â¢t want or need, and provide appalling third world services to passengers stuck in their third rate, inefficient terminals, which are designed not to help passengers, but to force them through high priced shops, restaurants and duty-free outlets.ââ¬~ 

He added: ââ¬ÅâœThe CAA is a failed regulator. They failed to protect users from the BAA monopoly, they failed to protect passengers from the failure of airlines like Silverjet, Zoom and XL, which the CAA licensed as being financially fit to fly, but which went bankrupt stranding thousands of British passengers and visitors.ââ¬~ 

by Phil Davies 

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• Which is a problem: monopoly or service?
  
  

  I do agree in a way with RyanAir CEO's opinion. And as a consumer of services provided in BAA airport I am not thrilled about the quality of their service. Something had to be done to improve service quality in airport, however forcing corporation to sell airport is not going to improve situation. Not in a short while anyway. Such airports like Gatwick are too big that all service would be changed within a few months. It' going to take years to change service system in the airport of such a size. Leading to the monopoly issue - democracy should guaranty equal right to competition regardless what competition that is. Some companies are more successful than others. CAA should pay more attention to the services provided in airports and their efficiency not to the fact that one company is becoming a monopoly. Ryanair CEO comment about shops in airports I think does not have any relevance to this matter at all. People have a lot of time to kill in airports, some of them willingly choose to fly from the airport with more shops and good restaurants it is all a part of airport service you like it or not.

  By Jonas Cernevicius, Tuesday, October 14, 2008