CAA backs BAA airport sell-off

Airport competition in the South East and Scotland will be increased “significantly” with the sell-off of three BAA-owned facilities.

That is the view of the Civil Aviation Authority, which said it “strongly supports” the Competition Commission’s provision findings that BAA should be required to sell two of its south east airports and one in Scotland.

“This 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,” the CAA said.

The authority welcomed BAA’s decision to sell Gatwick as an important first step to realising these benefits.

The CAA said it welcomed the commission’s support for regulatory reform, adding that it continued to work with the government’s ongoing review of the regulatory framework.

“The CAA has called for a clear framework that provides sufficient flexibility to allow the regulation of airports to adapt to changing market circumstances – not least the emergence of increased competition – 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,” the authority said.

“The CAA recognises that much of the time airlines’ and passengers’ 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.”

Economic regulation group director Dr Harry Bush said: “The CAA supports the CC’s provisional finding that BAA should sell two South East airports and one in Scotland.

“Indeed, the case for break-up in the South East is stronger than currently argued by the CC.

“The 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 – even between airports with busy runways – can be expected to deliver significant benefits to passengers and airlines.”

He added: “Regulation also has a part to play in delivering a better deal for passengers.

“It will need to respond flexibly to the changing market circumstances in order to facilitate – and not inhibit – the development of effective competition.

“The 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.

“The CAA welcomes BAA’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.”

Flybe welcomed the CAA‘s response to the Competition Commission’s provisional findings and called for BAA to also offload Glasgow and Southampton airports.

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

“It is good news that the CAA has now added its weight behind the provisional findings of the Competition Commission.

“Rather than wait for the inevitable forced sell-off, we are again calling for Ferrovial [BAA’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.

“Over 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.

“Disposing of London Gatwick alone is not enough and we now look forward to the sale of Southampton and Glasgow.”

But Ryanair CEO Michael O’Leary was typically outspoken in his response calling for “failed regulators” in the CAA to “resign in shame”. 

He said: “They have for 20 years allowed the BAA to charge extortionate prices, develop inefficient marble palaces which users don’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.” 

He added: “The 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.” 

by Phil Davies