UK: CC Confirms Compulsory Divestment Of Two BAA Airports

The Competition Commission ('CC') has concluded that BAA is still required to sell Stansted and either Edinburgh or Glasgow airports.  The CC's final decision on its market investigation into the supply of airport services by BAA confirms the CC's provisional findings (published in March 2011 - see issue 515 of Community Week) and follows three years of challenge by BAA.

Since the CC's original decision in March 2009, BAA has been seeking to overturn the finding that it should sell its holdings in three UK airports, namely Gatwick, Stansted and either Edinburgh or Glasgow airports.   In December 2009, BAA opted to sell Gatwick airport for £1.5bn to a consortium led by US-based investment fund, Global Infrastructure Partners, leaving BAA owning six airports in England and Scotland.

In 2010, BAA successfully argued in the Competition Appeal Tribunal ('CAT') that there was 'apparent bias' as one of the CC investigation group members was an adviser to a pension fund which had links to Manchester Airport.  The CAT's decision was however subsequently overturned by the Court of Appeal and the CC's report was reinstated in October 2010.  In February 2010 BAA was refused permission by the Supreme Court to appeal further.

Given that three years had elapsed since the CC published its original decision, the CC considered whether there had been any material changes in circumstances which would give it cause to reconsider the compulsory divestment decision.  The CC has now determined that the airport sales are still fully justified.

The CC has concluded that with the airports under separate ownership, passengers and airlines will benefit from greater competition - a view supported by Easyjet and Travelsupermarket.com - despite the government ruling out the development of new runways at any of the London airports.  Peter Freeman, Chairman of the CC's remedies implementation group, highlighted that these benefits "will be all the greater once Stansted, Gatwick and Heathrow are all in competition with each other".

In response, BAA's Chief Executive, Colin Matthews, publicly stated that the CC's decision was "unreasonably draconian" and that the forced sale in a difficult market could destroy shareholder value.  BAA is currently considering judicially reviewing the CC's ruling.  Budget airline Ryanair has accused BAA of "using delay tactics to maximise the amount it can raise for the inevitable sale".

The CC said that the sales process for Stansted airport would start in three months' time, to be followed by (and overlapped with) the sale of whichever of the two Scottish airports BAA elects to divest.

To view Community Week, Issue 530, 22^nd July 2011 in full, Click here.

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