BAA must sell three airports within two years, watchdog rules

BAA will be forced to sell both Gatwick and Stansted, and one of its Scottish airports, the Competition Commission (CC) confirmed yesterday.

In line with preliminary findings published late last year, the CC has formally ruled that Heathrow, Stansted and Gatwick do not compete with one another, and neither do Edinburgh and Glasgow, because of their common ownership. Christoper Clarke, the chairman of the CC's BAA Airports inquiry, said: "The problems we found we consider to be very considerable in competition terms and we are obliged to determine remedies that are effective, reasonable and proportionate. We decided that the only appropriate remedy is divestiture."

BAA, which is majority-owned by the Spanish infrastructure group Ferrovial, hinted yesterday that it may appeal against the findings. The group has two months in which to lodge an appeal. BAA is already in the process of selling Gatwick. Three bidders – Global Infrastructure Partners, which owns London City Airport; Lysander, which includes Citigroup; and Manchester Airport Group – are still in the running and will submit final bids, expected to be in the region of £2bn, at the end of March.

The CC requires Stansted to be sold next, and then whichever of the Scottish facilities BAA chooses. Strict dates for the divestments have been set but will remain confidential so as not to work against BAA. But all three sales are to be completed within two years.

Any appeal from BAA is likely to cite the worsening economic conditions. The aviation sector is one of the worst-affected industries. A spokesman for BAA said: "BAA will consider the report carefully before deciding how to respond. We accept the need to change and, having reorganised to improve customer service and having initiated the sale of Gatwick, BAA is already changing. However, we believe the commission's analysis is flawed and its remedies may be impractical in current economic conditions."

The changes are likely to affect government policy on airport growth at both Gatwick and Stansted. The planning application for another terminal at Stansted is expected to be put on hold pending a sale, and a new owner at Gatwick will probably want to re-examine a 40-year agreement for no expansion before 2019.