BAA to be broken-up

Heathrow's new Terminal 5 was completed earlier this year

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The Competition Commission has proposed breaking-up airports operator BAA, to end its monopoly of airports in London and Scotland. Heathrow, Stansted, Gatwick, Edinburgh and Glasgow could all be up for sale.

The decision could require BAA to sell up to three airports - either Glasgow or Edinburgh, in addition to two of its three London airports.

In its draft decision, the Commission said BAA monopoly had: "adverse consequences for passengers and airlines."

It suggests that more owners would increase competition, and accelerate the improvements many of these ariports need. "We would expect that introducing separate ownership through divestiture would provide significant incentives for owners of the London airports to pursue a more proactive and less sequential approach to capacity expansion and investment."

For London, "We have provisionally concluded that Heathrow, Gatwick and Stansted could compete with one another and that common ownership results in an adverse effect on competition [AEC].

"It is currently our view that divestiture of two of these airports to achieve separate ownership of each of Heathrow, Gatwick and Stansted would effectively address this AEC," reads the provisional findings.

In Scotland, "We have provisionally concluded that Edinburgh and Glasgow airports could compete with one another and that common ownership results in an AEC. It is currently our view that separate ownership of Edinburgh and Glasgow would effectively address this AEC."

Aberdeen airport was excluded because of its "geographical isolation".

Ryanair Chief Executive Michael O'Leary urged the Competition Commission to break up the three major London airports into three separate competing companies in a letter to the Financial Times published on Monday. 

"Each of these airport operators will then compete aggressively to develop additional runways, and additional efficient terminal facilities to meet airline and passenger needs," said O'Leary.

He also said that Ryanair has offered to pay for and develop a second runway and terminal at Stansted for a quarter of the budget that BAA is currently proposing.

Manchester Airport Group (MAG), who already own Manchester, East Midlands, Bournemouth and Humberside, has also come forward as a potential bidder. 

MAG is owned by the 10 local authorities of Greater Manchester and it is likely that any bid for Gatwick or Stansted would be in partnership with another investor group, but MAG could bid alone for one or more of BAA's portfolio of Scottish airports.

"We have a strong track record when it comes to running airports - we have a lot of skilled people who have developed very good relationships with airlines and other partners," said chief executive of Manchester Airports Group Geoff Muirhead.

"The group is interested in acquiring assets that will add value for our shareholders"

The Commission also propose to change the way airports are regulated, and is critical or the role of the Civil Aviation Authority (CAA). "the CAA, unlike other sectoral regulators, is unable to impose significant obligations on airport operators as conditions of an economic licence."

That single airports may have different terminal operators within a single airport, as carrier EasyJet propose, the Commission will explore as part of its consultation.

The Commission will now consult on what measures to take, and which airports should be sold. Final decisions will be made in 2009.

BAA was bought by Spanish infrastructure giant Ferrovial in June 2006.