As Christopher Clarke strode into the Competition Commission's briefing room, he knew what the members of the press were thinking. Advisers who two weeks earlier had read a draft of the "emerging thinking" report, on BAA's airport domination in Scotland and the south-east of England, had warned Clarke, the inquiry's chairman, that the findings would be seen as a break-up call.
Following the publication of the report last Tuesday, Clarke had toured television studios that morning, explaining that the report did not represent the definitive view of the inquiry, which would be given in August. To the hacks, however, a relaxed Clarke repeated the earlier words of the Competition Commission's press officer: "This is about as far as we have ever gone at this stage."
With phrases like "common ownership adversely affects competition" scattered through the report, the sell-off of at least some of BAA's seven airports now has an air of inevitability.
But what this ignores is that nearly everything is going to plan for Ferrovial, the Spanish conglomerate that bought BAA for £10.6bn in 2006 in a heavily bankrolled deal. "What people don't realise," smiles a former executive at BAA, "is that Ferrovial is going to end up getting one of the greatest steals in corporate raiding history."
Ferrovial's need to refinance the massive debt it took on to buy BAA is well known. But more to the point, says the insider, is that the capacity constraints at Heathrow, Stansted and Gatwick meant Ferrovial was always prepared to sell parts of the portfolio. "It did due diligence, so this situation came as no surprise."
A second source adds that while Macquarie, the Australian investment bank, has been reported as advising on refinancing BAA's unregulated airports – Glasgow, Edinburgh, Aberdeen and Southampton – it has also been valuing chunks of the portfolio. The source concludes that Ferrovial is gearing up for a sale.
The Spanish group has already sold 33 properties and its World Duty Free retail chain for a total of more than £800m. A further property sale that is under negotiation should bring in £700m. Gatwick could fetch £3bn and "if they get dead lucky", says the first source, Ferrovial might also be able to sell Stansted. All that could total £6bn, which would mean the Spaniards end up spending a net sum of well under £5bn.
Heathrow, meanwhile, has fixed assets worth £8bn – hence the description as one of the great corporate raids. A senior City transport banker agrees: "Heath- row is the important thing here - nothing else is critical to Ferrovial."
But disposals will bring difficulties (see the airport boxes). If the Competition Commission recommends selling Gatwick, it could well be demanding that Ferrovial sell at a time when the market has not recovered, leading to low bids. Then there are concerns over the regulatory burdens at Heathrow and Gatwick, which mean the owners cannot fix charges to airlines as high as they'd like.
"This is all high risk," says the former BAA executive. "And there's an awful lot more complexity than Ferrovial bargained for. You're talking weeks, months and years for all this to play out."
Gatwick Bidders could be grounded
This is the airport that has provoked the most speculation on bids.
Although sale price estimates fluctuate from £3bn to £5bn, two candidates may be in difficult positions. Macquarie is already acting as an adviser to BAA, so faces conflict of interest concerns. Fraport, the German transport company, owns Frankfurt airport, which could be seen as a rival to Gatwick due to its size and proximity to a major financial centre, meaning Brussels might veto a deal on competition grounds.
There are also fears that interested parties could be put off by Gatwick's status as a "designated" airport. To ensure BAA did not have a stranglehold on its sites, various systems and services, have been outsourced. This makes any purchase less attractive, and is also the reason why baggage handling at Heathrow's T5 is not done by BAA.
Edinburgh, Glasgow, Aberdeen Sales head for take-off
Accounting for 84 per cent of passengers north of the border, BAA disposals in Scotland are likely to be recommended when the inquiry releases its findings. It is thought bid teams are being put together for Glasgow and Aberdeen, which would be Ferrovial's favoured sales.
Unlike the London airports, these Scottish assets are unregulated, making them far easier for bidders to price. As charges are not reviewed every five years, there is also greater certainty, allowing bidders to raise relatively cheap long-term debt to buy and develop the airports. One source believes that, as a result, sales in Scotland will be completed before Gatwick.
But buyers may not be able to hike charges to carriers as there is not the same level of demand as in London.
Southampton Ripe for redevelopment
With the spotlight on the London giants, a possible sale of Southampton airport is often overlooked. But Ian Tyler, the chief executive of Balfour Beatty, the construction group with a 60 per cent stake in Exeter airport, has admitted an interest and there is sufficient development potential to attract more bidders.
Clarke attacked BAA's management of Southampton, citing a "lack of ambition". In 2003, the Government suggested the airport could accommodate seven million passengers a year, but BAA said 2.5 million was more realistic.
Flybe, Southampton's main carrier, was critical of BAA's capital expenditure plans and the commission report endorsed that view: "BAA had not developed Southampton, despite constraints at its London airports, as it did not understand how to develop a regional airport."
Heathrow BAA seeks room for manoeuvre
The prize asset. In return for not putting up a fight against the sale of other airports, an aviation source believes Ferrovial will push the Government to lift the Civil Aviation Authority's regulatory powers over charges to airlines using Heathrow.
In the recent five- year settlement, BAA was granted a charge far less than it argued was necessary to help fund investment. "Heathrow is already one of the cheapest international airports in all of Europe," says the source. "Ferrovial could raise prices by 50 per cent tomorrow without really affecting demand."
One banker points out that the regulatory burden has been so heavy that "it doesn't allow the necessary capital expenditure to ever catch up" with the needs of Heathrow.
Stansted Stand by for a forced sale as carriers cut up rough
A harder sell than Gatwick, the Competition Commission was also damning of BAA's management here: "At Stansted there has been no constructive engagement on capital expenditure ... and the airlines object strongly to BAA's proposed development and lack of consultation."
Ryanair and easyJet, which account for 80 per cent of the airport's passengers, have said plans for a new runway and terminal don't meet their needs. They told the inquiry they would have "little option" but to use different airports.
Clarke noted a "lack of responsiveness to carriers' needs" and said he would look further at easyJet and Ryanair's complaints. A forced sale, then, looks increasingly likely.