Should BAA Break Up?

BAA’s hold on Heathrow, Gatwick and Stansted together with four other UK airports has been called into question by the competition watchdog.

The Competition Commission said the airport operator’s common ownership of seven UK airports “may not be serving well the interests of either airlines or passengers”.

The findings come in an interim report into the market for supply of airport services by BAA in the UK which is due to be concluded in August.

The Competition Commission’s ‘emerging thinking’ report sees potential for further competition at all BAA airports and has called for further evidence to help with its investigation.

The Commission stressed that no conclusions have been reached at this stage but added: “If competition problems are identified it intends to set out its possible remedies at the same time [August], whether requiring the sale of one or more of BAA’s airports or otherwise”.

The Commission said it was “inclined to the view that shortage of airport capacity, government policy and the regulatory system for airports, might also be features that adversely affect competition or exacerbate other features which do so”.

BAA airport inquiry chairman Christopher Clarke said: “Overall, our current view is that there is potential for competition at all BAA’s airports.

“Under separate ownership there would be potential for competition between Edinburgh and Glasgow, and between Aberdeen and the other two BAA airports in Scotland, although the evidence on Aberdeen is less strong.”

He added: “On the south-east airport there is a very real prospect of competition between the three London airports and from the BAA London airports to Southampton subject to capacity constraints and regulation.

“Given the current shortage of capacity, competition in the short term between the London airports, were they separately owned, is unlikely, at least in the near future, to be as intense or effective as competition between regional airports at least for some airlines; but nonetheless there is scope for a degree of competition between them despite capacity constraints.

“But separate ownership would itself create a greater incentive to expand capacity at the three airports.”

The Competition Commission has set a May 30 deadline for further views. Evidence can be submitted by email to: airports@cc.gsi.gov.uk

Further hearings will be held suring the summer, with the provisional findings report expected to be published in August. 

22 April 2008