20-Jul-2011 10:00 AM

Competition Comission confirms BAA to sell assets, BAA response

UK's Competition Commission confirmed (19-Jul-2011) that BAA will be required to sell Stansted Airport followed by Edinburgh or Glasgow airports. This announcement confirms the commission’s earlier provisional view, which was published in Mar-2009. The sales process will start in three months’ time or sooner if undertakings are accepted from BAA in the meantime. The commission has considered whether there have been any "material changes in circumstances...that should give it [the commission] cause to reconsider the implementation of the airport sales", as claimed by BAA, since its Mar-2009 provisional decision. The asset sales are "fully justified", the commission stated, with the sales to benefit passengers and airlines to benefit from greater competition, despite the current Government’s decision to rule out new runways at any of the London airports. The commission noted that BAA's Gatwick sale "has given a foretaste of the benefits competition can bring. We think that these benefits will be all the greater once Stansted, Gatwick and Heathrow are all in competition with each other." [more]

BAA CEO Colin Matthews said (19-Jul-2011) he is "dismayed" at the commission's final decision. Decribing the decision as "draconian", Mr Matthews said BAA will now consider a judicial review of the decision, as BAA has "a responsibility to protect our shareholders' investment". "The Competition Commission has not recognised that the world and BAA have changed. This decision would damage our company which is investing strongly in UK jobs and growth," the CEO said. According to BAA, changed circumstances include:

  • The new British government has changed aviation policy to rule out any new runway capacity in the South East and BAA has sold Gatwick Airport. Both are significant changes to the airport market. Further, the airports in question face increased competition from non-BAA airports, particularly those in Europe, for the business of low cost carriers who now take a pan-European view of the market. It is also clearer now than it has ever been that Heathrow and Stansted serve different markets;
  • Changes made within BAA since the Mar-2009 provisional deicision. BAA's owners (Spainish group Ferrovial) have invested GBP5 billion in UK airports since acquiring the company in 2006 (including over GBP300 million at Stansted), and are currently investing a further GBP1 billion a year. BAA's operational performance has improved: security queues are shorter; baggage delivery is more reliable; and flight punctuality has hit record levels. Passenger surveys show that customers recognise the improvements. [more]

Other responses include:

  • London Gatwick welcomed (19-Jul-2011) the commission's final decision."The sale of Gatwick to Global Infrastructure Partners (GIP) over a year and a half ago illustrates the benefits that can be delivered to passengers as a result of airports being under separate ownership. The sale of Stansted will bring greater competition between the London airports, which can only mean good news for passengers," the airport stated;
  • The UK Civil Aviation Authority stated (19-Jul-2011) it "has long supported the Competition Commission in their decision that BAA should sell Stansted and one of its Scottish airports. We welcome their decision to confirm that position and expect that the process can now be swiftly concluded. These sales will to help to improve the conditions for effective competition between airports, and the CAA view is that additional airport competition has the potential to deliver real benefits for airlines and consumers in terms of improving the airport experience"; [more]
  • Manchester Airports Group’s hopes of a major acquisition have been reignited by the decision, according to UK media (TheBusinessDesk.com, 19-Jul-2011). MAG, which was a bidder for London Gatwick two years ago, has stated it is interested provided the price is right;
  • Ryanair welcomed (19-Jul-2011) the commission's confirmation. The LCC, which has a major base at London Stansted, said it "hopes that this latest confirmation decision will finally end the BAA monopoly's policy of using its legal stratagems to delay this sale, while it continues to overcharge airlines at Stansted to generate excess monopoly profits, while losing more routes and traffic." Ryanair urged the UK government to take steps to ensure the early sale of Stansted and one of the Scottish airports to allow competition between airports to deliver a better deal for airport users, "where the BAA monopoly has repeatedly failed"; [more]
  • easyJet, another major Stansted customer, said (19-Jul-2011) it “supports the efforts of the Competition Commission to improve outcomes for passengers in the London and Scotland airport markets. Millions of our passengers travel through these regions each year, and we hope that they will have a better experience at these airports with a change in ownership." “"The sale of Stansted and either Glasgow or Edinburgh should encourage more timely, well designed and cost effective investment, which will improve service quality and lower charges. We look forward to a long and fruitful relationship with the new owners of these airports", the LCC said; [more]
  • Unite stated it has "has always been opposed to the forced sell-off of BAA's airports as...it poses an increased threat to members" (19-Jul-2011). The union said protecting airport workers’ terms and conditions, and pension rights will be the top priority for the trade union following BAA's sale of two airports; [more]

Gatwick Airport: “Today’s ruling by the Competition Commission that BAA must now push ahead with the sale of Stansted is welcome news and underlines the importance of competition in the airport market. Under separate ownership, Gatwick is delivering real benefits to both airlines and passengers. Faster connectivity from Gatwick into central London and better commercial opportunities have seen airlines, including AirAsia X, airberlin and Norwegian Air Shuttle, switch from Stansted to Gatwick. BA and easyJet are growing their operations and airlines new to the UK, such as Vietnam Airlines, are choosing Gatwick to develop and grow their London network. Passengers flying from Gatwick are benefiting from having many more destinations to choose from." Stewart Wingate, CEO. Source: Company Statement, 19-Jul-2011.

Ryanair: "Back in August 2008, the Competition Commission recommended the break up of the BAA airport monopoly. The Competition Commission found that "the BAA's monopoly ownership of Heathrow, Gatwick and Stansted airports had adversely affected competition". It also found that "the way the BAA has conducted its business has adversely affected competition". It also concluded that "the inadequate regulatory regime operated by the CAA has adversely affected competition. It is regrettable that today, some three years later, the BAA has still failed to comply with the Competition Commission's 2008 ruling to sell Stansted and one of the Scottish airports...Ryanair believes that the airlines and our passengers have been significantly overcharged by the BAA Stansted monopoly in recent years and while the incompetent regulator, the CAA, continues to sit on its hands and do nothing to protect users. The Competition Commission has conclusively demonstrated that CAA airport regulation has failed in the UK and competition is the way forward. We regret that the BAA continues to use every legal tactic in the book to delay this process for over three years now, and have no doubt that they will continue to use their expensive lawyers to frustrate and delay the sale of Stansted. The BAA airport monopoly continues to damage competition, and the CAA's inadequate regulatory regime has allowed them to get away with it. It is now time for the Government to intervene in this shambles and force the early sale of Stansted and one of the Scottish airports and allow competition to provide consumers with more choice, lower costs and a better experience between the London airports." Michael O'Leary, CEO. Source: Company Statement, 19-Jul-2011.

Unite: "Today’s news is just confirming the original Competition Commission ruling. However, Unite has always been opposed to the forced sell-off of BAA's airports to other operators as we believe it poses an increased threat to our members’ terms and conditions in the long-term. Unite’s role must be to protect the terms and conditions of its members, and also their pension rights and entitlements. Any attempt by a new owner taking over BAA’s airports to undermine our members’ conditions will be strongly resisted. However, we are keen, as a responsible trade union, to have a positive dialogue and constructive working relationship with the new owners, whoever they are." Brendan Gold, National Officer for Civil Air Transport. Source: Company Statement, 19-Jul-2011.

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