The latest Competition Commission (CC) ruling requiring BAA to sell Stansted and one of its Scottish aiports – probably Glasgow – has to be welcomed. To be sure, this divestment process has been exceedingly protracted – taking over five years to date with the possibility of yet another appeal to the courts by BAA. Back in 2006, Spain’s Ferrovial led a consortium which paid over £10 billion for BAA – a take-over that has undoubtedly destroyed shareholder value. Some sympathy has to be extended to the consortium given the wholesale change in the competitive landscape for UK airports – a case of not just moving the goalposts but of shifting the entire pitch.
However, the widely-reported shambles at Heathrow, for which BAA must bear much of the blame, acted as a stimulus for reform. As such, the CC was let loose, which eventually led to the sale of Gatwick for £1.5 billion. It is now proposed that the sale of Stansted should progress with haste. Likely buyers include infrastructure funds, although all potential bidders will carefully scrutinise the amount of capital expenditure that will be required at Stansted. The ownership of Scotland’s main airports will also be split, with the likelihood that BAA will retain the thriving Edinburgh airport.
Crucially, as UK airport ownership becomes increasingly fragmented, airlines now have greater choice rather than being dependent on a near BAA monopoly, as was the case before the Gatwick sale – a subject on which Ryanair’s outspoken Chief Executive, Michael O’Leary, has robust views. Moreover, greater comparative operating data will become available which should drive up overall efficiency levels.
Looking forward, the UK’s three main airports – Heathrow, Gatwick and Stansted – surrounding London are expected to become increasingly competitive: Luton is also growing strongly. Of course, if you are part of the Ferrovial consortium, you will feel very short-changed by forced sales, such as that at Gatwick. Indeed, such major regulatory U-turns should normally be avoided. But introducing far more competition into the ownership of the UK’s airports has to be the best long-term solution.