Watchdog urges airport services competition probe

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The Independent Online

BAA's ownership of London's main airports looked under threat today after a regulator called for a full inquiry into its supply of airport services.

The Office of Fair Trading said it believed the current market structure "does not deliver best value for air travellers in the UK" and added that greater competition could bring significant benefits for passengers.

It is recommending a full investigation by the Competition Commission, but will hold an eight-week consultation before it makes the referral.

BAA owns Heathrow, Gatwick, Stansted and Southampton in the South East and Edinburgh, Glasgow and Aberdeen in Scotland. It has just been bought by Spanish infrastructure company Ferrovial.

In the South East, the OFT said it found that BAA's airports handle nearly 90 per cent of passenger trips, adding that these airports could, under separate ownership, compete to attract air passengers.

The OFT's study of the market found that BAA's Scottish airports, which carry more than 80 per cent of the country's air passengers, were not price-regulated and charges faced by airlines were higher than at Gatwick and Stansted.

Glasgow, which faces some competition from nearby Prestwick airport, had the largest price decreases of BAA's airports in Scotland, the OFT noted.

The study also found evidence that competition between independently-owned airports - such as Liverpool and Manchester - led to improved value for air travellers.

BAA's major airline customers have long pushed for a full investigation, with relations further strained in the summer by arguments over the implementation of enhanced security measures at London's main airports.

The operator's investment plans have also been criticised, with Ryanair boss Michael O'Leary recently angry at BAA's plans for a "£4 billion gold-plated Taj Mahal" at Stansted, which he believed could be built for £1 billion.

The OFT said significant investment at airports in the South East was planned, but without competition it pointed out that investment could be inefficient as well as costly for air passengers and for the UK.

OFT chief executive John Fingleton said: "There is evidence of poor quality and high charges - BAA's investment plans, which are of great importance to the UK, have raised significant concerns among its customers.

"There are signs of a market not working well for consumers and we believe that a full inquiry into BAA's structure is justified."

EasyJet chief executive Andy Harrison said: "We welcome this, but the ownership of BAA is not the biggest issue.

"What the OFT needs to look at is that all the BAA's London airports are local monopolies which need much more stringent price regulation. Changing the ownership of BAA will not alter this fundamental structural problem."

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