Page last updated at 14:47 GMT, Saturday, 16 August 2008 15:47 UK

BAA expects forced airport sales

Planes at Heathrow
Heathrow airport is one of the busiest in the world

The chairman of the UK's largest airports operator, BAA, has said he expects the Competition Commission to order the break-up of the company.

Sir Nigel Rudd told the BBC's Robert Peston he believed such a decision would not lead to effective competition against BAA's prime airport Heathrow.

Our correspondent said it was likely to mean BAA being forced to sell key airports in England and Scotland.

BAA has come under fire for poor service and excessive airline charges.

The firm owns Heathrow, Gatwick, Stansted, Edinburgh, Glasgow, Southampton and Aberdeen airports.

With a near monopoly on airports in the South East of England and in Scotland, there have been concerns that BAA - which is saddled with debt from its purchase by Spanish property group Ferrovial in 2006 - can only focus on one development project at a time, causing capacity problems.

Map showing BAA airports

This prompted an inquiry by the Competition Commission, which is expected to announce its provisional findings next week.

Airport sale

Speculation is mounting that the regulator will conclude that BAA's ownership of seven UK airports is not in the public interest.

"[From] all the things that I'm hearing, it looks like they will announce that," conceded Sir Nigel.

This could force BAA to sell either or both London's Gatwick and Stansted airports and also Edinburgh or Glasgow airport.

But Sir Nigel said that the break-up of BAA would not be a "disaster".

He said that BAA's owners have already had "huge expressions of interest" from potential buyers of Gatwick and Stansted, though neither are currently for sale.

And he is confident that the downturn in the airline industry due to rocketing fuel costs and tightening household budgets, has not depressed in a serious way what Ferrovial and its partners would receive from a sale.

Global competition

Yet even though the Heathrow proprietors could cope with the disposal of these airports, the BAA chairman disputes the claims that a sale would increase competition between the airports due to Heathrow's prime location.

BAA Chairman Sir Nigel Rudd speaking to Robert Peston

Sir Nigel said: "Heathrow does not compete with Gatwick and does not compete with Stansted or Luton or Manchester.

"It competes with Charles de Gaulle [in Paris], Dubai now and [Amsterdam's] Schiphol, because these are big international hub airports so the ownership of the airports has nothing to do with competition."

In fact, he says fulfilling the requirements set out in the government's 2003 aviation White Paper will make it more difficult if the airports were under different ownership.

The former transport minister, John Spellar, agreed that Heathrow's real competition lay with major European airports, as well as Dubai, which wants to be a hub airport.

"We actually have a real jewel in the crown for the United Kingdom in the strength of Heathrow as a hub airport - that's why it needs that extra capacity," he said, adding, "that's the real issue for the public, rather than actually just questions of ownership."

A third runway?

Sir Nigel also spoke in the interview of his views on the Conservative Party having expressed reservations about the need for a third runway at Heathrow.

He said he believed that if elected to office, David Cameron would see the desirability of expanding the airport.

But Theresa Villiers, who speaks on transport for the party, told BBC Radio Four's Today programme the economic and environmental case for a third runway had yet to be proved.

"There's no serious research on the value of transfer passengers. Neither the government nor the studies on this have looked at the cost of the increase in pollution in the area around Heathrow," she said.

She added that the government had not costed the carbon impact of international inbound flights.

Ms Villiers said one of the alternatives the Tories were looking at was high-speed rail.

Airline speculation

Some airlines have welcomed the push for a break-up, amid speculation that an airline consortium may buy a BAA airport.

Ryanair denied it was looking to buy Stansted airport, but said it would "review our position" if there was a "very attractive" price.

"We've been calling for the break-up for a long time and the need has escalated every year," said the company's Stephen McNamara.

"What we would really hope is for Stansted to also be taken out of BAA ownership. It would be a token gesture to just sell Gatwick."

Watch the full interview with Sir Nigel Rudd here or see it broadcast on Saturday, 16 August, and on Sunday, 17 August, at 2230 BST in Leading Questions on the BBC News Channel.




SEE ALSO
BAA flies into more controversy
16 Aug 08 |  Business
Leading Questions: Sir Nigel Rudd
16 Aug 08 |  Business
Responses to the report on BAA
22 Apr 08 |  Business
BAA raises funds in property sale
25 Mar 08 |  Business

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