UK competition regulators are set to order BAA to sell two of its three London airports, and one of its two main Scottish airports at Edinburgh and Glasgow.
While the Competition Commission had been expected to recommend the break-up of BAA, the provisional ruling today is tougher than foreseen.
BAA operates seven UK airports including London Heathrow, Gatwick and Stansted, plus the Scottish airports of Edinburgh, Glasgow and Aberdeen. It also operates Southampton.
But the Competition Commission says the common ownership is a "principal cause" of "significant competition problems" at these airports.
"This is evident from a large number of factors including [BAA’s] lack of responsiveness to the needs of its airline customers and a lack of initiative in planning capacity," says the Commission’s BAA airports inquiry group chairman, Christopher Clarke.
"This has resulted in investment that is not tailored to the requirements of airport users and lower levels and quality of service for both airlines and passengers."
The Commission adds that it has found competition problems arising from the planning system, aspects of Government policy, and the regulatory system.
It has published a consultation document on its proposals and is seeking views on which two London airports, and which of the two main Scottish airports, should be sold. The Commission does not expect to require the sale of either Southampton or Aberdeen airports.
BAA insists that the Commission’s findings could result in the slowing, rather than the acceleration, of much-needed airport development.
"The findings should be assessed in the light of the urgent need for new airport capacity and a modern regulatory framework, as well as the need – which we recognise – for improved service from the airport operator," says BAA chief executive Colin Matthews.
By seeking a "fundamental restructure" of BAA, he adds, the Commission "risks delaying" delivery of new runways, and making better customer service "less, not more, likely".
Matthews adds: "We will be seeking urgent clarification from the Government of how it believes this report’s findings can be reconciled with the air transport policy it established in 2003 and its current review of economic regulation."
Following the consultation the Commission will make its decision on the competition issues and publish a final report in the first quarter of next year.
Lead image © BAA
Image depicts a new design for Heathrow Airport on BAA's website but it does not indicate BAA is to sell this London airport
Blogs: BAA break-up: harsher than expected, but necessary