After a critical report by the Competition Commission, the break-up of BAA's near-monopoly of airports looks inevitable.
As it becomes clear that Gatwick is the most likely to be sold,
Sam Thomson asks what's in store for the Sussex airport and discovers two conflicting viewpoints that could indicate turbulent times ahead.
It may have been painted in
the usual beige, neutral
language of the Whitehall
mandarin but the Competition
Commission's report into BAA
was so damning at least one of
its authors must have had their
luggage lost at Heathrow's
Terminal 5.
According to the commission, the
airport operator's common ownership
of seven British airports including
Heathrow and Gatwick "may
not be serving well the interests of
either airlines or passengers",
adding it was "inclined to the view
that common ownership of the BAA
airports is a feature of the market
that adversely affects competition
between airports and/or airlines".
The comments were made in a
168-page "emerging thinking" document
published ahead of a full
report in August, in which the commission
plans to set out possible
remedies "whether requiring the
sale of one or more of BAA's airports
or otherwise".
Other points raised include:
Concern about other aspects of
BAA's conduct such as its approach
to the system of planning airport
development, which may be related
to ownership of several neighbouring
airports.
There is potential for competition
at all BAA's airports and separate
ownership would itself create a
greater incentive to expand capacity
at the three (London) airports
(Heathrow, Gatwick and Stansted).
Concern that BAA has a financial
structure with a dependence on a
single group parent balance sheet
that could constrain the ability of
the airports adequately to invest or
maintain service standards.
The commission added: "We have
seen evidence that BAA has
responded to its quality of service
problem largely by increasing costs
and passing on these increased costs
to the airlines, rather than, for
example, by improving efficiency."
In the days since the commission's
remarks it has emerged
Gatwick is the most likely of the
London airports to be sold because
Ferrovial, BAA's Spanish owner, is
determined to hold on to Heathrow.
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This looks likely to bring environmental
campaigners into direct
conflict with business and those
who support expansion at Gatwick.
Under the Government's Aviation
White Paper setting out its plans
until 2030, there will be no second
runway at Gatwick until 2019 at the
earliest. Even then it could only
come about after Stansted and
Heathrow explored expansion plans.
But if the commission orders the
break-up of BAA, then a buyer for
Gatwick will have to be found.
According to Jeremy Taylor,
chief executive of Cadia, the
Gatwick Diamond Business Association,
a firm willing to buy for about
£2 billion may want expansion
permission included in the sale.
A spokesman for the Department
of Transport said the Government
has absolutely no plans to change
the 2019 agreement, although an Act
of Parliament could do so.
Mr Taylor said: "For Gatwick to
be viable as a business prospect
then any new owner is likely to be
pushing through plans for a second
runway."
Gatwick caters for about 32 million
passengers a year, with room to
expand to more than 40 million even
without a second runway.
Mr Taylor said: "The majority of
Cadia members and the majority
of businesses we have spoken to
would support a second runway.
Some are opposed however, as are
the majority of residents. But looking
at it purely from an economic
view then the airport has a huge
input into the economy and a second
runway would only add to that."
Norman Baker, MP for Lewes and
Lib Dem transport spokesman,
strongly disagrees with Mr Taylor
and believes Gatwick would be
attractive to a potential buyer in its
current state.
He said: "It is a profitable airport
and there should not be a second
runway. If people are thinking that
the aviation industry needs to keep
expanding then they are living in
cloud cuckoo land.
"When it comes to ignoring
climate change, these business
people supporting expansion are
like the captain of the Titanic who
refuses to change course because he
believes the iceberg should get out
of the way."
Mr Baker was also scathing about
BAA, saying Gatwick should be
sold to a company prepared to pay
money to improve the passenger
experience.
He added: "It's a disgrace that an
international airport should have
signs only in English and some of
the carpets look like they are from a
1970s pub."
The prospect of a second runway
has horrified people against any
expansion at the airport, none more
so than the Gatwick Airport Conservation
Campaign (GACC).
Chairman Brendon Sewill
branded the commission "narrow
and naive", adding: "While there
may be a case for breaking up BAA
to improve service to passengers,
GACC believes that the Competition
Commission is being unrealistic in
saying that competition would
mean that more runways would be
built sooner, at Gatwick as well as at
Heathrow and Stansted.
"Many people, including the Conservative
and Liberal Democrat
parties, say that on climate change
grounds there should be no more
runways anywhere in the South
East. We will be pointing out to the
commission that the idea of improving
competition by selling off
Gatwick in order that a new company
could build a new runway is
naive. The Gatwick site is too small.
"Surrounding hills and towns
mean that there is no space for a
new runway."
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