Leading article: Break up this faltering empire

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Yesterday's report from the Competition Commission noting that BAA's near monopoly on UK airports "may not be serving well the interests of either airlines or passengers" is merely "emerging thinking".

The final verdict will not be released until August. Nevertheless, the report gives a pretty clear indication of where the commission's thinking is heading. The final destination is likely to be a recommendation that BAA's conglomeration of seven UK airports be broken up for the good of passengers.

BAA's new chief executive, Colin Matthews, argued yesterday that the Competition Commission needs to demonstrate that an alternative ownership structure would deliver new capacity and new investment more effectively. Actually, to satisfy most passengers of the case for a break-up, the commission merely needs to demonstrate that a different ownership structure would exhibit less inept management than BAA. And that will surely not be hard. The chaos witnessed at Heathrow's new Terminal 5 last month points to an organisation with seriously skewed priorities.

If BAA had paid more attention to ensuring the supposedly state-of-the-art luggage processing system was properly tested, rather than cramming so many shops in to the new terminal, the grand opening might have been less of a disaster.

We should, however, beware of treating the Competition Commission's views with too much reverence. The commission seems to regard planning constraints on airport expansion as inherently negative and argues that competition should be encouraged because it will increase runway capacity in the south east. The threat of climate change has superseded such concerns. For the sake of the environment, the Government should permit no more runways to be built in the UK. But the commission is right to the extent that there is no reason why existing airports in the region should not compete for traffic through offering a better service. A negative final verdict is likely to cause BAA's owners severe financial trouble. BAA's Spanish parent firm, Ferrovial, took on a colossal amount of debt (some £10bn) to buy the airports in 2006.

Ferrovial is already struggling to refinance this debt because of the turmoil in the credit markets. The loss of revenue and landing fees from being forced to sell off several airports might well send it over the edge. Yet that is hardly a legitimate objection to a break-up. It is not the business of regulators or the Government to protect private companies that have made poor strategic decisions. BAA's monopoly has been tolerated for too long already. It is time for the empire to be dismantled.

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