BAA wins appeal on airports sale

BAA said it was pleased with the ruling

BAA has won its appeal against an order to sell three of its UK airports on the grounds that the ruling panel was affected by "apparent bias".

But the appeal tribunal rejected BAA's argument that it was being forced to sell the airports too quickly.

The Competition Commission had ruled in March that BAA must sell Gatwick, Stansted and either Edinburgh or Glasgow airports within two years.

BAA has already sold Gatwick but the judgement will not affect that sale.

It is unclear whether BAA will have to sell the other airports.

The Competition Appeal Tribunal said it would now allow more time to hear arguments from both sides as to what should happen next.

ANALYSIS Nils Blythe, BBC business correspondent This is a painful slap in the face for the Competition Commission. The appeals tribunal finds that commission member Professor Peter Moizer was a "trusted and highly influential" adviser to Manchester councils on pension investments. And those councils also owned Manchester Airport Group (MAG) - which is BAA's largest competitor in the UK. When it became clear, six months into the two-year inquiry, that MAG had a strong interest in the outcome of the inquiry, Professor Moizer should have ceased to be a member of the six-person inquiry team. In the event, Professor Moizer remained a member of the team, with some restrictions, until just before it finalised its conclusions. While the tribunal does not conclude that Professor Moizer was biased, it says that a "fair-minded observer" would see a "real possibility" of bias.

BAA said it was pleased that the tribunal had upheld its appeal on the grounds of apparent bias and said further discussions should now take place with the Competition Commission as the tribunal suggested.

A spokesman for the commission said it was reviewing the ruling and was planning to make further submissions to the tribunal, adding that the judge had made the ruling with "the greatest reluctance".

Conflict

BAA had argued that there was a conflict of interest because of links between a member of the commission panel and an organisation interested in buying the airports.

BAA said that Professor Peter Moizer should not have been on the panel as he was a long-standing fee-paid adviser to to the Greater Manchester Pension Fund, which had links with Manchester Airport Group.

The fund is governed by the 10 local authorities of Greater Manchester, which own all of the shares in Manchester Airport Group (MAG).

MAG is a potential buyer for the airports BAA was told to sell, and it participated in the commission's investigation.

"A fair-minded and informed observer would conclude that there was a real possibility of bias affecting the deliberations, thinking and ultimate outcome of the investigation," the tribunal said in its judgement.

BAA had also argued that the commission had not given it sufficient time to complete the sales, particularly given "the current financial and economic circumstances".

However, the tribunal dismissed this challenge.

Buying time

In England, BAA runs Heathrow, Stansted, and, up until earlier this year, Gatwick in the south-east, as well as Southampton.

AIRPORTS INQUIRY SO FAR March 2007: Office of Fair Trading asks Competition Commission to investigate whether BAA's ownership of seven airports makes supply of airport services in the UK uncompetitive March 2009: Competition Commission orders BAA to sell Stansted and Gatwick to different buyers and sell either Edinburgh or Glasgow airport to introduce more competition May 2009: BAA challenges the ruling on the grounds of apparent bias on the panel, and that the remedies were disproportionate December 2009: Tribunal upholds the appeal on the grounds of apparent conflict of interest

In Scotland, it runs Edinburgh, Glasgow and Aberdeen airports.

The commission ordered the sale of three airports after a two-year review, concluding that the lack of competition in the south-east of England and in lowland Scotland was bad for passengers and airlines.

In October, BAA announced the sale of Gatwick to investment fund Global Infrastructure Partners for a fee of £1.51bn.

Aviation analyst John Strickland from JLS Consulting said that having its appeal upheld would probably give BAA more time to complete the sales.

"They probably will still have to sell off Stansted and one of the Scottish airports but however this works itself out over the next couple of months, they have bought themselves considerably more time," he said.

"That means they will get a better price."

Budget airline Ryanair, which operates from Stansted and supported the Competition Commission at the tribunal, said it was disappointed by the tribunal's decision.

"Ryanair is worried that this finding will allow the BAA monopoly to further delay the sale of Stansted Airport," the airline said in a statement.

"The sale of Stansted Airport has the support of the overwhelming majority of airline users and passengers at Stansted, where high costs and the inefficient facilities delivered by the BAA monopoly has caused substantial declines in traffic over the past two years."