BAA must sell Stansted and one other airport

Airport operator BAA must sell two of its UK airports, competition chiefs said today in a final ruling.

BAA, which runs six UK airports including Heathrow, will have to sell Stansted followed by either Edinburgh or Glasgow airport, the Competition Commission (CC) said.

The sale process will start in three months "or sooner if undertakings are accepted from BAA in the meantime", the CC said.

Today's announcement follows a provisional ruling on the sales made in March this year and ends a two-year saga which began in March 2009 when the CC made what was seen then as a final report on BAA's airport ownership.

In that March 2009 ruling, the commission said BAA must sell Gatwick - since disposed of - as well as Stansted and either Edinburgh or Glasgow.

But there were then a series of legal challenges by BAA to the ruling, which ended with the CC findings being upheld.

The CC then considered whether there had been material changes in circumstances since the 2009 ruling.

Both in the provisional ruling in March this year and in today's final report, the CC said the sale of the airports was fully justified.

It added that passengers and airlines would still benefit from greater competition with the airports under separate ownership, despite the current Government's decision to rule out new runways at any of the London airports.

While the legal battle was going on, BAA sold Gatwick - with the West Sussex airport being bought by US-based investment fund Global Infrastructure Partners for around £1.5 billion in late 2009.

Peter Freeman, the CC's chairman of the BAA remedies implementation group, said today: "We hope that the sales can now proceed without delay so that passengers and airlines can start to enjoy the benefits of greater competition.

"Our report has been challenged, reviewed and upheld and it is clear that the original decision to require BAA to divest three airports (including Gatwick) remains the right one for customers."

He went on: "It has been a long process whilst BAA has challenged the decision - quite understandably given its significance. However, 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.

"The introduction of new ownership at Gatwick, while too recent for us to draw any firm conclusions, has given a foretaste of the benefits competition can bring. We think that these benefits will be all the greater once Stansted, Gatwick and Heathrow are all in competition with each other.

"There has also been no cause to alter our view on the need for either Edinburgh or Glasgow to be under separate ownership."

The CC said Stansted should be sold first as it served the larger number of passengers and there would be a small overlap between the Stansted sale and that of one of the Scottish airports.

This final ruling from the commission may not be the end of the matter, as BAA immediately responded today by saying that it was considering a judicial review.

BAA chief executive Colin Matthews said: "We are dismayed that the CC's final decision still requires us to sell Stansted and either Glasgow or Edinburgh airport. The CC has not recognised that the world and BAA have changed.

"This decision would damage our company which is investing strongly in UK jobs and growth. We have a responsibility to protect our shareholders' investment and we will now consider a judicial review of the CC's decision."

Spanish-owned BAA argues that the change in Whitehall policy which has ruled out new runways in south east England, as well as the sale of Gatwick, have significantly changed the airport market.

Also, the airports in question face increased competition from non-BAA airports, particularly those in Europe, for the business of low-cost carriers who now take a pan-European view of the market.

BAA also says that it is clearer now than it has ever been that Heathrow and Stansted serve different markets.

Stressing how it has changed since the March 2009 original decision, BAA makes the point that it has invested £5 billion in UK airports since 2006, including more than £300 million at Stansted, and is currently investing a further £1 billion a year.

BAA also says its operational performance - criticised by the CC in its March 2009 report - has improved, with shorter security queues, more reliable baggage delivery and record levels of flight punctuality.

Brian Ross, economics adviser of the Stop Stansted Expansion group, said: "The uncertainty has gone on far too long and BAA should now respect the ruling of the CC and the courts and sell Stansted as quickly as possible.

"BAA's statement today suggests it is considering a fresh challenge in the hope of buying yet more time so that Stansted is sold under better market conditions.

"Such procrastination would only worsen relations between the airport and the community which it has already done so much to destroy.

"Our hope is that, with a new owner in place, there would be an opportunity for genuine and meaningful dialogue based on maximising the local benefits of the airport and minimising its adverse impacts on the community."

Bob Atkinson, of http://www.travelsupermarket.com, said: "These airport sales are excellent news for those who use these gateways, and the break-up of BAA's monopoly on UK airports is likely to be welcomed by consumers.

"The introduction of new operators for some of the UK's key airports will give consumers greater choice and in turn should raise the standard of service within all UK airports across the board."

Gatwick's chief executive, Stewart Wingate, said: "Today's CC ruling is welcome news and underlines the importance of competition in the airport market.

"Under separate ownership, Gatwick is delivering real benefits to airlines and passengers."