BAA warns break-up proposals would hit plans for Terminal 5

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The British Airports Authority (BAA) hit back at calls for its break-up yesterday, warning that separate ownership of Britain's main airports would lead to less investment and ultimately create a "poisonous cocktail for consumers".

Responding to the Office of Fair Trading's inquiry into the sector, Stephen Nelson, BAA's chief executive, said only a company with BAA's financial strength and experience could deliver the much-needed increases in capacity at Britain's overcrowded airports.

Last week, British Airways joined Ryanair in calling for BAA to be forced to dispose of either London Heathrow or London Stansted, claiming that increased competition in the sector was needed to help encourage greater investment and subsequently to improve standards.

However, Mr Nelson said a break-up of his company would set back ongoing expansion projects such as the construction of Terminal 5 at Heathrow and a second runway at Stansted.

"BA is arguing for a break-up as well as further regulation, which is having it both ways," he said. "They want regulation on prices [charged by airport operators], but our prices are amongst the lowest in Europe. They want further regulation because they know that, in a deregulated market, prices will rise."

Mr Nelson added that, as well as having considerable knowledge of the complex airport planning process, BAA had the financial muscle to follow through on big projects due to its size. He said Terminal 5 alone would cost £4.2bn, more than the market value of BA.

Elsewhere, John Redwood, the head of the Conservative Party's Economic Competitiveness Review, joined the attack on BAA yesterday, writing a letter to the chairman of the Competition Commission, urging him to push through a break-up of Britain's airports.

"The recent poor service at the country's leading airports following the Government's requirement for severe hand-luggage restrictions and more body searching showed how unresponsive this monopoly is, both to the requirements of their immediate customers, the airlines, and to their ultimate customers, the travelling public," he said. "If Heathrow, Gatwick and Stansted had been owned by different people it is likely competitive pressures would have provided a swifter response."

Mr Nelson brushed off the comments, saying Mr Redwood should get his facts straight before making judgements about BAA's handling of the recent security crisis. "I firmly rebut any suggestion that our contingency planning wasn't robust," he said.