Lost appeal over airport sale clips BAA's wings
But despite the ruling, the company has still not given up its two-year fight against divestment
Wednesday 20 July 2011
BAA has lost its final appeal against the Competition Commission ruling that it must sell both Stansted airport, and either Glasgow or Edinburgh. The Spanish-owned group – which also owns Heathrow, Aberdeen, and Southampton airports – expressed "dismay" at the decision yesterday, and warned that it may push for a judicial review.
Click HERE to view graphic (110k jpg)
The determination is the latest in a string of statements, appeals and re-statements in a two-year saga over who should own Britain's airports.
BAA has already sold Gatwick to Global Infrastructure Partners (GIP) for £1.5bn in 2009, in an attempt to pre-empt the regulator-induced break-up it could see was coming.
But Gatwick was not enough. And yesterday's ruling from the Competition Commission unequivocally re-stated its original finding from 2009 that not only is the sale of Stansted and one of the Scottish airports fully justified, but also that both passengers and airlines will benefit from greater competition.
It is now time for BAA to get on with the sales, said Peter Freeman, the chairman of the commission's BAA Remedies Implementation Group.
"Our report has been challenged, reviewed and upheld, and it is clear that the original decision to require BAA to divest three airports remains the right one for customers," Mr Freeman said.
"Both we and the courts have now exhaustively re-examined the case for the sales and found it to be sound so there are no grounds for delaying further," he added.
BAA is required to sell Stansted first, beginning the process within three months. It must then move on to divest either Glasgow or Edinburgh.
But even now, BAA has not given up the fight. The company's chief executive, Colin Matthews, says the Competition Commission has not recognised that the world has changed since the original determination two years ago.
"This decision would damage our company, which is investing strongly in UK jobs and growth," he warned.
"We have a responsibility to protect our shareholders' investment and we will now consider a judicial review of the Competition Commission's decision."
BAA has several strands to its argument. The favourite – which was singled out for rebuttal by the Competition Commission yesterday – is that the world has changed since the March 2009 decision. Not only has BAA sold Gatwick, but the Government has also ruled out any new runway capacity in the South-east.
BAA also points out it has invested £5bn since the group was taken over by Spain's Ferrovial in 2006, with improved security, baggage delivery and flight punctuality as a result.
Even so, there are few, if any, commentators who believe that BAA can avoid the sales.
"It would be absolutely astonishing if there were even a further review, let alone if it came to a different conclusion," Bob Atkinson, at Travelsupermarket.com, said.
"BAA needs to see the game is up, go on and sell what they have to, and focus on delivering world-class standards at the airports they do have."
The central issue for the company is how much Stansted is worth. Ferrovial paid more than £10bn for BAA. Since then, the financial crisis and subsequent recession has slashed the value of its assets. BAA has already delayed any sales as long as possible, in the hope the market will recover.
But many experts consider the expected £1.2bn price tag for Stansted is still too high, given that there are no longer plans for a second runway, and that a consumer spending squeeze is felt particularly hard at an airport tilted towards budget travellers.
There is also the dominance of Ryanair to consider, even more so given the string of airlines, including AirBerlin, Norwegian and AirAsia X, which have chosen to move to Gatwick.
Stansted is not the only facility that could go for a fraction of what Ferrovial nominally paid for it.
It is widely expected that Glasgow airport will go on the block, rather than fast-growing Edinburgh, with a price similarly depressed by sluggish traffic and consumer confidence. The big question is whether a new owner at Stansted or in Scotland will improve service for customers, as the Competition Commission claims. EasyJet, which is based at Stansted, certainly thinks so.
"Millions of our passengers travel through [London and Scotland] each year, and we hope they will have a better experience at these airports with a change in ownership," easyJet's director Paul Simmons said.
"The sale should encourage more timely, well-designed and cost-effective investment, which will improve service quality and lower charges," he added.
The evidence from Gatwick is hopeful. The Competition Commission acknowledged yesterday that it is too soon to draw any firm conclusions, but said that the new ownership of Gatwick has "given a foretaste of the benefits competition can bring".
And according to GIP, customer complaints dropped by 15 per cent last year and traffic is rising.
So far there are no sure bidders. With regard to Stansted, there have been positive noises from Manchester Airports Group, which was knocked out of the running for Gatwick. There is also expected to be interest from international investors, helped by the weak pound.
But experts still remain divided about how far a new owner can make a real difference – and warn that it will be a long time before any impact will be felt.
"Each airport is a monopoly in its own area," James Halstead, an independent airline expert, said. "The hope is that maybe a new owner can run it more efficiently and flexibly than BAA, but we won't know for five years."
Sales of the tablet are set to fall again, say analysts
Met Police confirm there was a 'minor disturbance' and that no-one was arrested
George Lucas criticises the major Hollywood film studios
Does Chris Grayling realise what a vague concept he is dealing with?
Trend which requires crisps, a fork and a strong stomach is sweeping Mexico's streets
Parties threaten resort's image as a family destination
I Am Bread could actually be a challenging and nuanced title
- 1 Indian footballer Peter Biaksangzuala dies after injuring spine doing somersault celebration
- 2 Jack the Ripper: Scientist who claims to have identified notorious killer has 'made serious DNA error'
- 3 Drink alcohol and eat meat to improve male fertility - but cut down on coffee, studies suggest
- 4 Kentucky gang rape: 15-year-old boy left in critical condition after sexual attack by group at party
- 5 Lynda Bellingham dead: Loose Women presenter dies after battle with colon cancer
Banksy arrest hoax: Internet duped by fake report claiming that the street artist's identity has been revealed
'Russian submarine spotted' by Swedish military off coast of Stockholm
Kentucky gang rape: 15-year-old boy left in critical condition after sexual attack by group at party
Hurricane Gonzalo: When will it hit the UK and how strong will it be?
Oscar Pistorius sentence: Athlete's wealth and notoriety provoke an overdue debate on South African prisons
Cameron is warned 'no possibility' of UK reducing immigration and that bid to bring in quota on migrant workers would be illegal
Sorry Judy Finnigan – Ched Evans is no less sickening than an alleyway rapist
Residents should throw a street party and mix with immigrant neighbours, councils told
Workers 'could be forced to pay £5 a week' to get benefits
Russell Brand threatened with arrest after filming outside Fox News headquarters
London bus driver allegedly kicks gay couple off for kissing
iJobs Money & Business
£18 - 23k + Benefits: Guru Careers: We are seeking a Customer Service Executiv...
£60 - 65k + Benefits: Guru Careers: We are seeking a ASP.NET Web Developer / ....
£60,000 - £80,000: Saxton Leigh: Our client is an leading Asset Manager based...
£27000 - £32000 Per Annum: Clearwater People Solutions Ltd: Our large charity ...