British Airports Authority ordered to sell 3 airports in UK ‘to end monopoly’

The Competition Commission (CC), the anti-trust regulator of Britain, has asked the British Airports Authority Limited (BAA) to sell 3 of its 7 airports in the United Kingdom.

The anti-trust regulator said it wants the British Airports Authority to sell London’s Gatwick Airport, London’s Stansted Airport and either Glasgow Airport or Edinburgh Airport in Scotland since the BAA “controls too much passenger traffic in and out of the country.”

The Competition Commission’s decision has come after an investigation lasting two years.

The regulator has given the BAA two years’ time to sell the airports, beginning with Gatwick Airport.

The BAA –which owns and operates seven airports in Britain as well as several other airports worldwide – is owned by a consortium led by Grupo Ferrovial, a Spanish company that specialises in infrastructure and construction.

Reacting to the Competition Commission’s order, Christopher Clarke, chairman of the BAA airports inquiry, said in a press release that, given the nature and scale of the competition problems, “we do not consider that alternative measures, such as the sale of only one of the London airports or greater regulation, will suffice.”

Britain’s newspaper Guardian quoted aviation analysts as commenting that the Competition Commission’s ruling was “the latest blow” to Grupo Ferrovial SA, which had accumulated enormous debts when it headed a consortium that bought the British Airports Authority in 2006 for £10.3 billion ($14.7 billion).

Analysts estimate that Grupo Ferrovial – which already has debts amounting to €26 billion – is likely to get about €4 billion ($5.4 billion) from the sale of the three airports.

Though the consortium can still keep the highly profitable Heathrow Airport, it will lose London’s Stansted Airport, which has “the most immediate potential for growth,” analysts said. Ryanair, the budget airline based in Dublin, Ireland, uses Stansted Airport.

Analysts said that the loss of Stansted Airport would be especially hard for the BAA since the British government has already accorded permission to raise capacity at Stansted by 10% to 264,000 flights a year. The government had also raised the cap on passenger numbers at Stansted Airport to 35 million a year by 2015-16 from the 25 million at present.

In a statement, the BAA said it might appeal against the Competition Commission’s order to sell three of its airports, adding that while it accepted the need for change, “the regulator’s analysis was flawed and it would prove difficult to achieve the remedies amid the recession.”

The company has two months’ time to file an appeal.

This is the first time that the Competition Commission has asked a company to strip itself of assets after having conducted a market investigation inquiry.
The British Airports Authority Limited had put London’s Gatwick Airport up for sale in 2008. This move, according to many analysts, was aimed at keeping Stansted Airport and preventing disintegration of the company.