TheMoodieReport.com

TheMoodieReport.com: OFT set to refer BAA airports to the Competition Commission; airport sale on the cards – 12/12/06
Source: ©The Moodie Report
By Martin Moodie
Email Print
UK. The Office of Fair Trading (OFT) today signalled its intention to refer the supply of airport services by BAA to the Competition Commission for more detailed investigation. Depending on the outcome, this could result in the forced sale of one or more of BAA’s seven airports across the UK.

BAA, now owned by a group led by Spanish infrastructure company Ferrovial, in turn owns Heathrow, Gatwick, Stansted and Southampton in England, and Edinburgh, Glasgow and Aberdeen in Scotland. These airports have an annual turnover of £2 billion and handle over 60% of all air passengers in the UK.

"These are signs of a market not working well for consumers and we believe that a full inquiry into BAA's structure is justified"
John Fingleton,
CEO, Office of Fair Trading
The Enterprise Act 2002 allows the OFT to investigate markets in which it appears competition is weak. BAA's persistently high share of the market for air passengers led to the launch of a market study in June this year. The OFT said that Heathrow airport ranked 56th out of 58 airports in a recent Airports Council International survey, Gatwick 49th and Stansted 43rd.

OFT also said it has made a recommendation that the airports regulator advise the government on the case for the de-regulation of Manchester Airport.

In terms of BAA, the OFT market study found:


In the south east BAA's airports handle 90% of passenger trips, and these airports could under separate ownership compete to attract air passengers


Evidence of poor customer satisfaction


Significant investment at airports in the south east of England is planned. Without competition, investment could be inefficient – costly for air passengers and for the UK


BAA's Scottish airports, which carry over 80% of Scottish air passengers, are not price regulated, and charges to airlines are higher than Gatwick and Stansted


Glasgow, which faces some competition from Prestwick, has had the largest price decreases of BAA's airports in Scotland.

The study also found further evidence that competition between independently owned airports – such as Liverpool and Manchester – leads to improved value for air travellers.

The conclusion on referring BAA to the Competition Commission is provisional. OFT said it now invites comments before reaching a final conclusion.

OFT Chief Executive John Fingleton said: “We believe that the current market structure does not deliver best value for air travellers in the UK, and that greater competition within the industry could bring significant benefits for passengers.

"There is evidence of poor quality and high charges; BAA's investment plans, which are of great importance to the UK, have raised significant concerns among its customers. These are signs of a market not working well for consumers, and we believe that a full inquiry into BAA's structure is justified.”

The consultation will last for eight weeks and end on 8 February 2007.