Spain's Ferrovial has been told to sell three of its seven British airports within two years but said it may challenge the order because such quick sales could prove impractical given global economic turmoil.
The debt-burdened company, which bought Britain's airports monopoly BAA for more than £10 billion (€10.6bn) at the top of the market in 2006, must now sell London's Stansted followed by either Edinburgh or Glasgow.
The sales will only be able to go ahead once it has completed the auction of Gatwick, which was put on the block last year.
Britain's Competition Commission delivered the ruling in a final report on the issue published today. It said separate ownership of Britain's airports, particularly in the London area, would benefit both passengers and airlines in terms of lower prices and more beneficial investment.
BAA chief executive Colin Matthews said the group would spend the next two months considering the ruling, but warned that it would challenge the order if it was deemed impractical to sell the assets in the current economic climate.
“Selling one airport is one thing, selling three is another. You can't assume we will appeal ... but we might have to if we reach the conclusion that it is simply not practical to proceed,” he said.
He added that the Competition Commission analysis was flawed, and that Heathrow competed with airports in other countries and not Gatwick or Stansted.
“There is ferocious competition between Heathrow and other international hubs,” he said. Britain's airports monopoly, which includes the country's two busiest airports, has existed for nearly 45 years.
Ashley Steel, head of transport and infrastructure at accountants KPMG, said she favoured a break-up of the 40-year BAA monopoly but was concerned that the Commission had set too strict a timeline.
“The speed at which they are trying to get the sales done is quite alarming. In the current business environment, with very little or no debt around, it is quite an ambitious timeframe,” she told Reuters.
Analysts have previously said the expected decision would not favour Ferrovial, which had over €24 billion of debt at the end of last year.
“The value of the assets are going down, and its debt is going up. Ideally they would not want to sell the airports right now,” Collins Stewart airlines analyst Andrew Fitchie said ahead of the announcement.
BAA may keep Heathrow, Aberdeen and Southampton and either Edinburgh or Glasgow, but must sell Gatwick and Stansted to different buyers, scrutinised by an independent trustee.
“We expect that the new airport owners, with the operating capabilities and financial resources to develop them as effective competitors, will have a much greater incentive than BAA to be more responsive to their customers,” head of the Commission's enquiry Christopher Clarke said in a statement.
The Commission has also called for BAA to publish more financial and other information about Aberdeen, and called on airports regulator the Civil Aviation Authority (CAA) to take specific action at Heathrow.
The deadline for bidders interested in Gatwick is due at the end of April. There are three consortiums in the running, but analysts believe Ferrovial will struggle to fetch a fee above its Regulated Asset Base (RAB) value of £1.6 billion (€1.69bn).
Reuters