ATW: BAA dismisses airlines' call for breakup

ATW: BAA dismisses airlines' call for breakup: BAA dismisses airlines' call for breakup
Friday September 1, 2006
BAA fought back against airline calls for its breakup, saying the lack of runway capacity in southeast England and not its control of London Heathrow, Gatwick and Stansted airports is "the biggest problem" facing UK carriers and passengers.

BAA made a submission yesterday to the UK Office of Fair Trading, which is investigating its dominance in the London market and its control of other UK airports. British Airways, Ryanair and easyJet made submissions to OFT last week arguing for a reduction BAA's role in London (ATWOnline, Aug. 25).

"I fully understand why airlines like British Airways and Ryanair want to weaken airport operators and achieve greater control over prices and investment at the airports where they hold such powerful positions themselves, but the job of the competition authorities is to protect the longer term interests of all consumers," BAA CEO Stephen Nelson said. "The biggest problem facing UK air travelers is the shortage of airport capacity, especially in southeast England. Failure to build new runway capacity will lead to gridlock, disappointed customers and significant loss to the national economy."

But BA said that is precisely the reason at least a partial breakup is necessary, contending in its OFT submission that "decisions on new runway construction in southeast England should not be concentrated in the hands of one company."

BAA countered that a fragmented market will be less likely to generate the funding to support expansion. Its filing argued that the airports market is "highly imperfect" and not like other market-driven businesses, since most passengers travel from the airport nearest to them.

"The market is also distorted by many unusual factors, such as airport slot allocation procedures and inter-governmental agreements on air services," BAA said, adding that "the threat to investment from break-up will outweigh any possible benefits to consumers in terms of choice, price or quality of service. BAA's UK airports are already among the cheapest in Europe in terms of landing charges."

Nelson said the "evidence suggests" BAA, which was taken over by Spain's Ferrovial Group earlier this summer (ATWOnline, July 11), "has done a good job" regarding security, safety, capacity, quality of service and price and deserves to retain control of the three London airports.