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Dominic O’Connell

BAA in break-up inquiry
Dominic O’Connell



THE Office of Fair Trading is poised to refer BAA to the Competition Commission, a move that could herald the end of the monopoly ownership of London’s main airports.
Aviation-industry sources said last night the OFT, which has been examining airport ownership since the shock announcement of an inquiry in June, was expected to deliver its verdict within the next fortnight. Some think it could come as soon as this week.



The sources said it was not certain that the OFT would ask for the Competition Commission to undertake an inquiry, but that was the most likely outcome. “We are not planning for any other eventuality,” one said.

A referral could bring an end to BAA’s long-standing ownership of the three largest airports serving the capital, Heathrow, Gatwick and Stansted.

It has owned and operated the trio since it was privatised as the British Airports Authority in 1987.

Having been quoted on the stock market for 19 years, BAA went private this year in a £10.3 billion takeover led by the Spanish infrastructure group Ferrovial.

A break-up is unlikely to come overnight. If a Competition Commission inquiry is ordered, it will take up to two years to complete.

BAA executives say that even if there is a referral, they will fight to preserve the monopoly. Earlier this year Stephen Nelson, promoted to be BAA’s chief executive after the Ferrovial takeover, said a break-up would be “a poisonous cocktail for consumers”, leading to less investment in new runway capacity and terminals.

But BAA’s airline customers have pushed hard for a full Competition Commission investigation.

Willie Walsh, British Airways’ chief executive, cited “poor performance” by BAA, and said the two airports earmarked for expansion by the government, Stansted and Heathrow, should not be owned by the same company.

The airlines’ mood was not improved by the security chaos at UK airports over the summer caused by the uncovering of an alleged terrorist bomb plot. Airlines blamed BAA for some of the problems.

Michael O’Leary, chief executive of Ryanair, has been an even harsher critic of BAA, claiming its management of the London airports has deteriorated since the takeover by Ferrovial.

City sources believe Ferrovial won’t be unduly worried about a break-up.

“There is a strong argument for there being greater value for them if they are forced to sell one or more of the airports. They would keep Heathrow, which is the cash cow, and dispense with Gatwick or Stansted,” one banker said.

If the OFT does act this week, it will spark a regulatory logjam for the airports company.