BAA referred to competition authorities

Emily Pacey

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A government watchdog recommends the break-up of BAA’s UK airports

UK consumer watchdog the Office of Fair Trading (OFT) planls to refer airport operator BAA to the Competition Commission. The Commission would investigate the company's dominance of the country's airports.

The move could pave the way for the break-up of the ownership of London’s key airports, Heathrow, Gatwick and Stansted. The OFT’s decision comes after it carried out a study that found that customers were unsatisfied with the quality of service at BAA airports.

BAA airports handle 90% of passenger traffic in the Southeast of England. The OFT has recommended that under separate ownership these airports could compete to attract passengers.

The watchdog is also concerned that the significant investment planned at BAA airports including Heathrow and Stansted, could be inefficient without competition.

OFT CEO John Fingleton said: “There is evidence of poor quality and high charges. BAA's investment plans, which are of great importance to the UK, have raised significant concerns among its customers. These are signs of a market not working well for consumers and we believe that a full inquiry into BAA's structure is justified.”

British Airways and Ryanair have both called for the break-up of BAA, complaining of insufficient staffing levels at security checkpoints resulting in passengers missing flights despite having gone through check-in.

BAA is strongly opposed to any break-up, arguing that the threat to investment would outweigh benefits to customers in terms of choice.

In an interview with DFNI last month in which he addressed the prospect of referral to the Competition Commission, BAA commercial director Duncan Garrood said: “We believe that the current structure [of BAA] has been beneficial to all parties in producing significant investment—Heathrow T5 would never have happened under a different structure, for example, and it is the best structure for ensuring future capital investment such as new runways...In a league table of airports, Heathrow comes in as the busiest, but is twenty-seventh on the table of most expensive, in terms of landing charges and passenger fees. Gatwick is the fifth busiest and the thirty-fifth most expensive, and Stansted is not even in the top 50.

“One reason is that half our income comes from commercial operations, and aeronautical charges are offset by that. A successful retail operation helps to keep the prices for customers very low. Our belief is that we have a record that speaks for itself.”

The OFT is inviting comments before reaching a final conclusion on the matter in February. If it upholds its decision to refer the airports group to the Competition Commission, a full investigation is expected to take at least two years.

BAA, a subsidiary of Spanish construction firm Grupo Ferrovial, owns Heathrow, Gatwick and Stansted airports in London, as well as Southhampton airport in Southern England. It also owns Glasgow, Edinburgh and Aberdeen airports in Scotland.

These seven airports have annual sales of £2bn ($3.9bn) and handle more than 60% of all air passengers into the UK.