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UK. In a dramatic development for the UK aviation sector, the Competition Commission today proposed – subject to consultation – the sale of three BAA airports, two in London and one in Scotland.
In a press announcement this morning the Commission announced that it had 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, the Commission said. There are also competition problems arising from the planning system, aspects of Government policy, and the system of regulation. [Click here for the full release].
It noted in its ‘Possible Remedies’: “Common ownership of the BAA airports is identified in our provisional findings as a feature that may prevent, restrict or distort competition as it prevents rivalry between airports that could potentially compete with one another. We consider that divestiture will be an effective remedy for this feature as it replaces common ownership with separate ownership where each separate owner has incentives to compete to gain the business of customers.”
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Click here to read the full provisional findings report, published on 20 August |
The Competition Commission has also published its proposed remedies on which it will now consult. As a result, if these are implemented, it will order BAA to sell two of its three London airports, and also either Edinburgh or Glasgow airport.
The Commission will reach its decisions on remedies on the basis of responses to its consultation at the same time as it makes its final decisions on the competition issues and publishes its final report in the first quarter of 2009.
The Competition Commission 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. It is also seeking views on improvements to the effectiveness of the current system of regulation.
Christopher Clarke, Chairman of the BAA Airports inquiry group, said that the “significant competition problems” at BAA’s airports are “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. 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.
“We have also provisionally found that there are competition problems arising from the planning system, aspects of Government policy and the system of regulation.”
Commenting on the individual airports, he added: “We are 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. We do not expect to require the sale of either Southampton or Aberdeen airports.
“The problems at Southampton would be remedied by the sale of either Heathrow or Gatwick. At Aberdeen, we are seeking views on whether there is a need for behavioural remedies or some form of regulation. Additionally, we are seeking views on the need for additional behavioural remedies or some form of enhanced regulation at Heathrow, whether or not there is a change in ownership, to address the competition problems arising from it being the only hub airport in the South-East.”
The Competition Commission’s findings should be assessed in the light of the urgent need for new airport capacity and a modern regulatory framework, as well as the need – which we recognise – for improved service from the airport operator.
BAA RESPONDS – “THIS IS NOT THE END”
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“We will continue to point out to the Commission the many areas where we believe its analysis is flawed and its remedies would be disproportionate and counter-productive“ |
Colin Matthews Chief Executive BAA |
BAA Chief Executive Colin Matthews 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.
“By calling not just for a fundamental restructure of BAA but also for a review of the Government’s Air Transport White Paper, the Commission risks delaying that delivery of new runways and making better customer service less, not more, likely.
“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.
“We note however that this is not the end of the Competition Commission process and we will continue to point out to the Commission the many areas where we believe its analysis is flawed and its remedies would be disproportionate and counter-productive.
“Just as the Government is about to make the decisions that could lead to the first full-length runways being built in the South East since the second world war, the Commission risks creating uncertainty, delay and confusion at exactly the wrong time.
“In Scotland, the Commission has apparently ignored the evidence presented by BAA, and supported by numerous respected third party organisations, that clearly demonstrates that the airports serve separate markets and therefore do not and would not compete, regardless of ownership.”
World Duty Free – formerly owned by BAA and now by Autogrill – is the duty free retailer at all seven BAA airports. It now faces the very likely prospect of having to deal with up to three new landlords.
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