BAA could challenge airport sale

The sale of Gatwick airport is already under way

BAA has said it may appeal against the decision by the Competition Commission ordering it to sell Gatwick and Stansted airports.

In its final report of a two-year inquiry, the commission told BAA that it must also sell either Edinburgh or Glasgow airport.

The commission looked into BAA's dominance over airports in Scotland and the south-east of England.

BAA responded to the findings by saying the commission's analysis was "flawed".

Colin Matthews, chief executive of BAA, said it might have to challenge the decision since selling three of its seven UK airports in this economic climate could be impractical.

"We've been improving customer service across all airports," he said.

"[But] we've got a long way to go."

Ashley Steel, global chair for transport and infrastructure at KPMG, said selling three airports within two years would be difficult, "particularly in the current environment with little or no debt around and with air passenger numbers falling".

Improved consultation

In its provisional decision published in December, the commission said the lack of competition between airports owned by BAA was detrimental to passengers.

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The regulator has ordered that the airports be sold within two years.

The airports must also be sold in sequence, starting with Gatwick, followed by Stansted, and then finally either Edinburgh or Glasgow to ensure an orderly sale process.

The sale of Gatwick is already under way and possible buyers are being vetted.

And regarding Heathrow, where BAA will continue to have a substantial market power, the authority recommended improved consultation between BAA and the airlines.

Customer service

The regulator said its move was the "only way to address comprehensively the detriment to passengers and airlines from the complete absence of competition between BAA's south-east airports and between Edinburgh and Glasgow".

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The sale of these airports will "kick-start a process of competitive rivalry from a standing start where today there is no competition at all", it added.

Christopher Clarke, chairman of the enquiry, said the move should bring substantial benefits to passengers and airlines.

Paul Charles, a spokesperson for Virgin Atlantic, told the BBC that Thursday's decision could lead to cheaper fares in the long term.

"If there is decent competition the prices will come down," he said.

Falling profits

BAA, which was acquired by Spanish firm Ferrovial in 2006 for £10bn, has seen profits hit by the downturn.

Last month, BAA said a fall in passenger numbers had dented its 2008 profits, which declined by 18.4% from the year earlier.

It reported a profit of £582m before tax and interest, down from £713m in 2007, as 2.7% fewer travellers went through its seven UK airports.

BAA has two months to respond to the findings.