BAA 'Could Sell Airports'

Airport operating company the British Airports Authority (BAA) could sell off some of its airports, according to media reports.

British newspapers stated over the weekend that BAA - which runs seven airports around the UK, including the three London airports at Heathrow, Gatwick and Stansted - may well sell some of its airport portfolio in order to cope with its financial situation, and any possible repurcussions from a competition investigation into the sector.

BAA currently has a £9 billion debt as a result of its acquisition in 2006 by the Spanish construction firm Ferrovial. City analysts say the interest payments on this figure amount to a further £900 million per year.

One analyst, Andrew Fitchie, from financial services group Collins Stewart, told the Sunday Telegraph: "without radical measures, BAA's financial future could be in jeopardy in 12 months".

Although BAA has said it is "comfortable" with its financial position and was not looking to sell, some analysts believe this could change.

Analysts like Fitchie and others from investment banks such as JPMorgan, believe the continuing credit crunch and financial uncertainty could eventually force BAA's hand to dispose of either Gatwick, Stansted, or one from its four regional airports at Southampton, Edinburgh, Glasgow and Aberdeen.

Indeed it is rumoured that Macquarie, an Australian banking group, could be interesting in purchasing some of BAA's assets if the company decided to sell. Macquire already has stakes in a number of airports, including Brussels, Copenhagen, Sydney and Bristol.

BAA Competition Commission Investigation

Aside from the financial situation, BAA could in any case be forced to sell one - or more - of its airports because of the findings from a regulatory inquiry.

A Competition Commission (CC) investigation is currently examining whether BAA's ownership of seven airports, including all three major London hubs and the three major Scottish airports, restricts competition in the airport sector. The inquiry began last year when the Office of Fair Trading referred BAA to the Commission, saying it had "reasonable grounds to suspect that BAA's high regional market shares in the south east of England and Lowland Scotland, the system of economic regulation of airports and capacity constraints combine to prevent, restrict or distort competition".

The CC is due to issue its report on the matter later this year. However, it is due to announce its "emerging thinking" on the matter during March - and it widely thought that it is going to recommend that BAA be broken up. This would force the company into selling some of its airport property, regardless of its financial situation.

Sources speaking to The Independent newspaper said that Gatwick could turn out to be the likeliest candidate for sale. Analysts have predicted that such a sale could generate between £3-5 million.

Last week, BAA announced that Colin Matthews will become the company's new Chief Executive from April, replacing Stephen Nelson. Matthews' appointment is widely regarded as an attempt by BAA to help steer the group through the any restructing or regulatory issues the company could face later this year - Matthews has previously faced this issues working in the utilities sector.

Source - Airport International's London Reporter