British Airways in U-turn over airports sell-off

Willie Walsh, the chief executive of British Airways, has abandoned his call for BAA's grip on Britain's airports to be broken, demanding tougher regulation instead. The airline's lobbying led to the current Competition Commission inquiry, which said in April that it was minded to split ownership.

The airline has written to the commission, which is due to present its provisional findings and proposals in August, saying: "We are concerned that ownership separation may prove counterproductive in so far as it diverts BAA management attention away from expansion of runway capacity or creates uncertainty around the status of government policy, thereby jeopardising construction of a new runway at Heathrow. Reform of the regulatory regime may therefore be preferable in remedying BAA's lack of investment."

Mr Walsh called for BAA to be split two years ago when he lobbied the Office of Fair Trading to launch an inquiry into the company, which owns seven airports including Heathrow and Gatwick.

The inquiry, headed by the former HSBC banker Christopher Clarke, seemed to agree. His "emerging thinking" document stated: "Common ownership of the BAA airports is a feature of the market that adversely affects competition between airports and/or airlines."

However, British Airways' recent letter raises potential problems with a sale, including the suitability of any purchaser. It also argues against splitting ownership of Heathrow's terminals, citing the "complex logistical chess game" affecting 30 airlines when British Airways moved to Terminal 5. "Separate terminal ownership would render this complex arrangement still more difficult and use of capacity would likely become less efficient," said the airline.

BAA, owned by Ferrovial, has accused the inquiry of factual mistakes and incorrect analysis. In a letter to Mr Clarke it said: "The commission has presented a one-sided view of the operation and development of BAA's airports, relying heavily on the criticisms it received from airlines. Such an approach is an inadequate basis for seeking to conduct a balanced appraisal of the company's performance."

BAA added: "In some cases the 'emerging thinking' appears to be based on no evidence at all. Put simply, separation of ownership of airports would not lead to more competition."