BAA ordered to break up monopoly

BAA has been ordered to sell off two of its London hubs and either Glasgow or Edinburgh airport by the Competition Commission.

Findings on the state of the UK’s airports published today by the Commission also demand that the Civil Aviation Authority reacts to a chorus of disapproval on how airports are run by airlines.

Chairman at the BAA Airports inquiry group Christopher Clarke said the existing BAA monopoly and resultant lack of competition  was “evident from a large number of factors including its lack of responsiveness to the needs of its airline customers and a lack of initiative in planning capacity”.

He added: “This has resulted in investment that is not tailored to the requirements of airport users and lower levels and quality of service for both airlines and passengers.”

The Commission’s report highlights competition problems at each of its seven airports. It says that the common ownership of the London airports meant a distortion of competition between the airlines and that because BAA owned so many airports it was unable to make a decision that was in the best interests of one airport as it may then affect another in the region adversely. It said that if Stansted, Gatwick and Heathrow were in competition, this would have been less likely to happen.

The report also highlights Heathrow’s delays and poor standards which is regarded as having damaged the country’s reputation.

This view is shared by former mayor Ken Livingstone who went on record as saying the airport “shamed the capital”.

But the withering comments were sternly rebutted by BAA’s chief executive Colin Matthews. He said: “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.

We will be seeking urgent clarification from the Government of how it believes this report’s findings can be reconciled with the air transport policy it established in 2003 and its current review of economic regulation.”

On Scotland, BAA issued a statement which said: “In Scotland, the Commission has apparently ignored the evidence presented by BAA, and supported by numerous respected third party organisations, that clearly demonstrates that Edinburgh and Glasgow Airports serve separate markets and therefore do not and would not compete, regardless of ownership.”

Easyjet has welcomed the Commission’s provisional findings, saying its report has “hit the nail on the head” about the UK’s “fundamentally flawed “ airport regulation.

It added that it felt the CAA had never recognised what the airlines had been saying for years – that BAA was “a failure” and that regulation wasn’t working.

Its chief executive Andy Harrison said: “Today’s Competition Commission report is what we have been waiting for, an honest and unbiased assessment of our airports. They have said what everyone knows, that our airports aren’t working, and that BAA and regulation aren’t working. But let’s not kid ourselves into thinking that the break-up of BAA will automatically result in a better deal for the travelling public. Simply selling a monopoly airport from one greedy, highly indebted capitalist to another will benefit no-one part from the dealmakers in the City. Gatwick will be sold to the highest bidder, who will probably be highly indebted, like Ferrovial, and, like Ferrovial, will be expecting UK consumers to pick up the bill. 

 â€œTherefore the other part of the CC’s work is just as important. Without better regulation there will be no more protection for the consumer from the greedy new owners than there was from BAA  – in fact it would just create a number of BAA “Mini-Me Monopolies” – smaller monopolists, hell-bent on sweating their assets and increasing charges, without improving the passenger experience.”

By Dinah Hatch