BAA's ownership of seven UK airports may not best be serving the interests of airlines or passengers, and it might have to sell one or more airports, Britain's Competition Commission said today.
The Commission said it would publish possible remedies in August, which could include ordering BAA to sell one or more airports.
BAA, part of Spain's Ferrovial since 2006, owns the three main airports serving London - Heathrow, Gatwick and Stansted - as well as Scotland's Edinburgh and Glasgow airports.
The Commission is investigating whether problems faced by airline travellers through Britain, as highlighted by the botched opening of Heathrow's Terminal 5, are caused or exacerbated by BAA's monopoly.
"There is no competition between BAA's three London airports, and only very limited competition from non-BAA airports (London City and Luton)," the inquiry's chairman, Christopher Clarke, said in interim report.
"Similarly, there is no competition between their two airports in lowland Scotland," he added.
BAA said it recognised the concerns of airlines, and was doing everything to address them, but said its ownership of the airports was in the interests of passengers.
Virgin Atlantic welcomed the Commission's statement and called for its findings to lead to a break-up.
"It seems the Competition Commission has seen the light. They support the views of every airline and every passenger that there is no competition at our major airports. We now need to see a roadmap laid out for changing their ownership structure,"
Paul Charles, Director of Communications, said.
Commission Chairman Clarke said areas of concern included "the apparent lack of responsiveness to the differing needs of its airline customers, and hence passengers" and BAA's approach to planning airport development.
"It (BAA) seems largely to have limited itself to one major project at a time, for example Terminal 5," he said.
He acknowledged that there was a shortage of capacity at London's airports, but said the Commission would be looking at whether the problem is linked or not to competition.
Britain's biggest airline, British Airways, said it would favour a less extreme strengthening of the regulatory framework than a break-up.
"The ownership structure is secondary - the key is for airports to develop in the best needs of its customers," a spokesperson said.
BA would prefer a licence system, where BAA's performance was monitored by regulator the Civil Aviation Authority (CAA). BAA would receive sanctions for underperformance, with the maximum penalty being the withdrawal of the licence, she said.