UK Airport Ownership Review

The UK government has said it is to review the regulation and ownership of UK airports.

Transport Secretary Ruth Kelly announced on Wednesday 23rd April that the review would examine levels of customer service, how investment in airport facilities could be improved and how environmental concerns could be dealt with more effectively.

The decision followed Tuesday's announcement by the Competition Commission, which said airport operator BAA - which runs seven major UK airports - "may not be serving well the interests of either airlines or passengers".

As reported by Airport International on Tuesday, the Commission revealed its "emerging thinking" in its inquiry which is investigating whether the British Airports Authority's ownership of the seven airports restricts competition in the UK airport industry.

Ruth Kelly said the government's wide-ranging review would include the Competition Commission's points, as well as taking into consideration the views of the wider commercial aviation and airport industry and key stakeholders including passengers and businesses.

She said: "It has been over 20 years since the Airports Act 1986 put in place the current regime of economic regulation and as such it is one of the oldest economic regulatory systems in the country. Much has changed since then, and there is an urgent need to consider how the framework needs to be updated to reflect today's realities".

BAA Competition Commission Investigation

Although the Competition Commission (CC)'s report did not make any explicit statements about its thinking, and whether in its final report (due for publication in August) it would recommend that BAA should sell one or more of its airports, the Commission did say they were "particularly concerned" by what they described as an "apparent lack of responsiveness [by BAA] to meet the needs of its airline customers, and hence passengers". It also said that "separate ownership would itself create a greater incentive to expand capacity".

These comments were welcomed by airlines and politicians alike, who have long been critical of BAA's ownership - which they argue distorts competition, and has left both airlines and passengers suffering from poor service.

BAA currently operates the three major London airports at Heathrow, Gatwick and Stansted, the three major Scottish airports (Edinburgh, Glasgow, Aberdeen) as well as growing regional hub Southampton.

Paul Charles from Virgin Atlantic said: "The Competition Commission has seen the light".

Low-cost operator Easyjet said that "this is a landmark day for British aviation".
BAA "To Fight Competition Commission"

BAA has come out strongly to defend itself from the views expressed by the CC. The company's chairman Colin Matthews said the case of breaking up the company was a weak one, and argued that BAA in its present form could deliver economies of scale and "timely delivery of investment" to increase capacity.

Matthews said: "We recognise many of the concerns that have been expressed by airlines, and reflected by the Commission, and we will be doing everything we can do address these".

According to reports in Business Week magazine, BAA plans "to fight the Competition Commission" - and is apparently planning a written response to the Commission asking them to prove that airport ownership is being distorted by BAA's ownership of seven airports.

Business Week quotes a "BAA insider" as saying that: "Whatever happened to the argument for sustainable growth?...Our stance will be that no-one is better placed than BAA and Ferrovial to deliver the Government's aviation policy, to fund improvements without sapping UK taxpayers and deliver the most cost-effective options to the people who count - the passengers".

Source - Airport International's London Reporter