British airports operator BAA received a tougher-than-expected ruling from the competition regulator today, which said it should sell two of its three London airports because of problems created by its near monopoly.
Along with two of its London airports - Heathrow, Gatwick and Stansted - BAA should sell either Edinburgh or Glasgow, cutting its portfolio of British airports to four from seven, the Competition Commission said today.
The ruling will be subject to a consultation process, but is likely to be rubber-stamped by the Commission in a final report due early next year.
It comes just two days after Ferrovial, the Spanish company which owns BAA, finalised refinancing of some £13.3 billion, most of it money used to buy the airports in June 2006.
"There are significant competition problems arising from BAA's common ownership of seven UK airports. This is evident from .. its lack of responsiveness to the needs of its airline customers and a lack of initiative in planning capacity," inquiry chairman Christopher Clarke said in a statement.
The Commission also criticised Britain's planning process, which is crucial to long-running proposals to expand Heathrow and Gatwick, its government policy and regulation under the Civil Aviation Authority (CAA).
Airlines including British Airways and easyJet had called for tighter regulation.
The report was widely expected to recommend a break-up after a preliminary study in April found that under a single owner there was no competition among some of its airports.
However, it was anticipated that two airports at most would be put up for sale.
Ryanair today welcomed the Competition Commission’s recommendation.
In a statement, the airline said: “Ryanair has long called for the breakup of this abusive monopoly, which ignores the needs of airlines and the travelling public and charges rip off prices for abysmal services.”
The Competition Commission’s Preliminary report confirms that this monopoly has been bad for competition and bad for consumers, it added.
But rival easyJet said a change of ownership at Britain's airports would not help passengers or improve efficiency, and instead called for better regulation.
"Airports are individual monopolies. Selling a monopoly to a new owner will not help protect the consumer or improve efficiency. Airports need better regulation," chief executive Andy Harrison said.
He said he backed the break-up of BAA but added it was less important than an overhaul of the regulatory system.
"A break-up of BAA is a step forward, but it is the bronze medal at the consumer protection Olympics. A gold medal would be a better, more effective regulator," he added.
British Airways said that tougher regulation at Britain's airports was a bigger issue than their ownership following a Competition Commission ruling to break up operator BAA.
"We think the ownership structure is secondary - the focus should be on strengthening the regulatory system," a spokeswoman said.
BAA, formed in 1965, owns the London trio of airports, three in Scotland, and Southampton.
London's five airports include Luton, owned by Spain's Abertis, and London City, bought by American International Group and other investors in 2006.
Owner Ferrovial has come under fire from British politicians and airline bosses for delays and poor service at Heathrow and Gatwick in the past two years, culminating in the bungled opening of Heathrow's Terminal 5 in March.
BAA responded to the ruling by saying the call for airport sales could delay the building of new runways.
"By calling not just for a fundamental restructure of BAA but also for a review of the [British] government's Air Transport White Paper, the Commission risks delaying that delivery of new runways and making better customer service less, not more, likely," BAA chief executive Colin Matthews said.
There has been some speculation that Ryanair might seek to purchase Stansted Airport should it come on the market, but in a recent interview with The Irish Times the airline's chief executive Mr Michael O’Leary insisted the company has no interest in buying the airport.