Page last updated at 12:00 GMT, Thursday, 19 March 2009

Selling airports will not be easy

By Tom Symonds
Transport correspondent, BBC News

Passengers at Gatwick Airport
Competition should improve the experience for passengers

It is 23 years since the giant airport group was privatised, yet there are still some that wrongly call BAA the British Airports Authority. No doubt in recognition of the grip the company has over the UK's biggest airports.

Maybe that will change.

If the Competition Commission gets its way, in two years, Stansted, Gatwick and either Edinburgh or Glasgow will have new owners.

That two-year deadline is going to cause BAA some headaches. As some have put it, selling airports in a recession is like trying to sell a house while its on fire.

Yet Gatwick is already on the market. At first there were six bidders - now there are thought to be just three. And BAA may well have to accept less than 2 billion for the airport. Not much of a mark-up on its nominal value.

BAA sources say they are "more than happy" with the bids, but the deal is still to be done.

Watch for the company - which has until mid-May to respond - trying to persuade the commission to give it more time to sell Stansted. It has already said the deadline is impractical.

'Raw deal'

The theory behind the Competition Commission's ruling is simple.

Heathrow, Gatwick and Stansted are not competing with each other, airlines aren't happy, and passengers are getting a raw deal. That, it is claimed, will change once two of the three have new owners.

Ryanair boss Michael O'Leary
Ryanair boss Michael O'Leary wants big changes to airports

But will we notice? Possibly not straight away.

Gatwick, for example, is already a different sort of airport than Heathrow. It is not a hub, where passengers fly in to connect with onward flights. It has low-cost operators like Easyjet, which Heathrow doesn't have. There are holiday charter airlines too, and a wider range of destinations.

To make it more attractive to the likes of British Airways for example, Gatwick would need more capacity. A new runway cannot be built before 2019, because of local legal rulings. And the government is currently not keen on the idea anyway.

On top of that, many airlines will not be interested in Gatwick because they need to be at a hub like Heathrow, especially given the need to reduce the cost of their operations.

Stansted has become the no-frills base for the south-east of England, and the low-cost airlines are for now the only ones making significant profits. No reason for it to try to take on Heathrow's business and long-haul stance for now.

Speedier service

The changes to our big airports once in new ownership are likely to be more subtle. BAA has often been accused of exerting too much power over its airports; of trying to keep passengers captive in the terminals so that they spend money in shops. The UK's big airports feel far more like retail malls than many airports abroad.

The commission has ordered BAA and the new airport owners to work far more closely with airlines, sharing information and strategies.

The airlines will want the emphasis to be on speeding up the flow of passengers, on getting them through check-in and security, onto planes as quickly as possible.

Different airlines will also demand different facilities. Perhaps there might be simpler check-in procedures for short and long-haul passengers.

Virgin Atlantic's Paul Charles uses the analogy of supermarket check-in queues. "In supermarkets", he says, "you have desks for ten items or fewer, and you have the ones for people with a full trolley. Passengers have a lot more luggage for long-haul flights than short-haul."

Ryanair, at Stansted in particular, wants to get rid of check-in altogether. It would rather passengers spend money on its planes, than in someone else's airport. The Irish operator will be delighted by today's announcement.

Needless to say, the hope is that competition will also encourage passengers to consider which airports they chose. If Stansted gets a reputation for very quick check-in, for example, or Gatwick for very cheap parking, travellers may well base their choice of airline on the airport from which it flies.

Passenger choice

BAA is not buying any of this.

It says the decision is flawed, and the commission has ignored the constraints under which the airports work.

In the South East they will run out of spare runway capacity in the middle of the next decade. The system of price regulation which controls which airports can charge in landing fees, is not changing. It will make, according to one senior official at the company, "no difference".

But no-one can be in any doubt that the big break-up is the most fundamental change in the way our biggest airports are run for decades.

Want to buy an airport? Now's your chance.

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