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Business Weekly - Home:BAA rejects calls for break-up of its airportsBy Alan Smith, 06 September 2006, emailed 76 times

BAA has dismissed calls for the break-up of its UK airports, arguing that a more fragmented ownership structure would undermine vitally needed investment in airport capacity.
BAA has dismissed calls for the break-up of its UK airports, arguing that a more fragmented ownership structure would undermine vitally needed investment in airport capacity.

In a submission to the Office of Fair Trading study on the UK airports market, BAA urged the OFT to focus on the true interests of consumers.

Stephen Nelson, BAA’s chief executive, said: “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.

“The biggest problem facing UK air travellers is the shortage of airport capacity, especially in South East England. Failure to build new runway capacity will lead to gridlock, disappointed customers and significant loss to the national economy.

“Despite this, some airlines want to break up BAA and impose even heavier price regulation.

“This have-it-both-ways proposal would be a poisonous cocktail for consumers.

“It risks setting back the much needed investment programme BAA is pursuing to transform London’s airports through projects like Heathrow Terminal 5, Heathrow East and the Stansted second runway.”

BAA’s final submission to the OFT argues that the airports market is highly imperfect because most people use the airport closest to where they live, or which offers flights to their preferred destination. The market is also distorted by many unusual factors, such as airport slot allocation procedures and inter-governmental agreements on air services.

BAA says 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, which are heavily subsidised by BAA’s retail activities and regulated by the CAA.

Nelson added: “We are not saying the current situation is perfect and we welcome the OFT’s review, so long as it is wide-ranging and evidence-based.

“The OFT needs to consider regulation as well as ownership structures. The evidence suggests that BAA has done a good job since privatisation, in terms of security and safety, capacity, quality of service and price.”

BAA is in the process of a £10.4 billion takeover by the Spanish infrastructure company, Grupo Ferrovial, but the new owner has pledged its commitment to a second runway and related developments at the Essex hub.