London Airports Broken up

The Civil Aviation Authority has added its voice to the calls for the BAA stranglehold over London airports to be broken.

Responding to the Competition Commissions consultation into the airport operator, the authority said it agreed that the ownership of Heathrow, Gatwick and Stansted by BAA is “likely to prevent, restrict and distort competition”.

Evidence from UK regional airports, and from the non-regulated London airports, shows that airports can, and do, compete for airlines and passengers and that this competition can deliver significant benefits to holiday making consumers, according to the regulator.

“Further, in its earlier evidence to the Commission, the CAA did not identify any significant benefits that arise from this common ownership.

“The CAA has concluded that economic regulation overall has not had an adverse effect on competition. Rather, it has served to mitigate the adverse effects of market power, including common ownership of BAA South East airports.”

It is now important to consider the appropriate ‘remedy’ to the adverse effects of this common ownership, including divestment of airports and consequent reforms to the framework of economic regulation, the authority said.

“BAA enjoys a very strong market position in the UK airport market, owning a number of neighbouring airports that to varying degrees would otherwise be expected to act as rivals and compete for airlines and passengers.

“In the absence of sufficient competition in London, greater reliance has been placed on regulators to decide upon the airports’ pricing and to guide the airports’ investments in capacity and service quality.

“Economic regulation has brought benefits. But it is timely to ask the question whether greater competition would better serve consumers.

“It is now for the Competition Commission to consider how any adverse effects identified can best be remedied. We look forward to working with the Commission on these issues in the weeks and months ahead.”