THE UK competition watchdog yesterday ordered BAA to sell three of its seven UK airports, ending its monopoly ownership of the leading airports in London and in Scotland.
In the most draconian corporate divestiture ever demanded by the Competition Commission, BAA – a majority-owned subsidiary of Spain’s Ferrovial – will be required to sell London’s Gatwick and Stansted airports and one of either Glasgow or Edinburgh airports in Scotland within two years.
Analysts estimate the combined value of the three airports could be £3.5 billion-£4 billion. Likely bids are expected to come from foreign airport operators, infrastructure funds, pension funds and possibly from sovereign wealth funds.
Setting itself on a collision course with BAA, the watchdog warned that if the disposals were not completed by the specified dates, it reserved the right to appoint an independent divestiture trustee to carry out the sales.
BAA, the world’s biggest airports operator, immediately hit back at the commission and said it believed the watchdog’s analysis was “flawed” and the remedies “may be impractical in current economic conditions”. It could appeal against the orders to the Competition Appeal Tribunal.
The group, which was privatised in 1987, said it accepted the “need to change”. It had already reorganised to improve customer service and had initiated the sale of Gatwick, the second largest UK airport, last September. However, two of the five potential bidders for Gatwick have already withdrawn from the race. Many analysts now doubt the UK’s second-biggest airport will fetch the € 2 billion originally hoped for by Ferrovial. It said it would consider the Commission’s report “carefully” before deciding how to respond.
The watchdog said in its final report published yesterday that BAA should sell the airports in sequence starting with Gatwick, followed by Stansted and finally by one of the airports in Scotland.
The commission said it had found “competition problems with adverse effects for both passengers and airlines” at all seven of BAA’s UK airports, Heathrow, Gatwick, Stansted and Southampton in the south of England, and Edinburgh, Glasgow and Aberdeen in Scotland.
Inquiry chairman Christopher Clarke said the commission recognised the sell-offs would have “a significant impact on BAA’s business”, but it had decided the divestitures were “the only way to address comprehensively the detriment to passengers and airlines from the complete absence of competition” between BAA’s airports. - (Financial Times service)
