Inquiry into BAA may end in break-up

Britain's consumer affairs watchdog yesterday urged competition authorities to explore a break-up of UK airports group BAA, which runs London's Heathrow, saying its dominance had led to poor service and high charges.

The Competition Commission is expected to begin a detailed investigation into BAA early next year, which could lead to the break-up of the airports group, including its London monopoly and dominance in Scotland.

The announcement yesterday of the Office of Fair Trading's (OFT) intention to refer BAA to a commission inquiry comes months after the world's leading airports group passed into foreign ownership with its £10.1 billion (€14.9 billion) acquisition by a consortium led by Ferrovial, the Spanish construction, infrastructure and services group.

John Fingleton, OFT chief executive, said greater competition could bring significant passenger benefits. "There is evidence of poor quality and high charges - BAA's investment plans have raised significant concerns among customers."

BAA controls seven airports, which handled 145 million passengers in the year to March. Last year it accounted for 63 per cent of all UK air passengers. It owns Heathrow, Gatwick and Stansted, serving London, Glasgow, Edinburgh and Aberdeen in Scotland, and Southampton.

It accounted for 92 per cent of passengers using London airports in 2005, and for 86 per cent of passenger volumes in Scotland.

The referral had been expected after the OFT said in June it was launching an investigation into UK airports. The OFT reference is subject to a two-month consultation ending on February 8th. Remedies following an investigation could include "divestment of airports, airport runways or terminals".

BAA's leading airline customers have been campaigning for a break-up of the London monopoly and have been fiercely critical of BAA's rising charges and costly investment plans.

British Airways, the biggest operator at Heathrow, said separate ownership of Heathrow and Stansted would ensure decisions on new runways in the southeast of England did not lie with one company.

Ryanair chief executive Michael O'Leary, the leading airline at Stansted, said: "Heathrow is a shambles, which most passengers, if they could, would avoid at all costs. Stansted is an over-specified, gold-plated Taj Mahal."

Heathrow, Gatwick and Stansted should be spun out into competing airports, he said, where "the market and airport users will have more influence".

Andy Harrison, chief executive of EasyJet, which operates at Stansted and Gatwick, said ownership of BAA was not the biggest issue. Each airport was a local monopoly that needed "much more stringent price regulation".

BAA denied it had abused its monopoly. Stephen Nelson, chief executive, said "the main issue is a lack of terminal and runway capacity in the southeast, which results in delay". "This problem is a result of complex planning laws, an antiquated regulatory system and inflexible slot allocation." - (Financial Times service /Reuters)