OAG Travel News

A government-imposed sale of at least one major British airport among those owned by BAA appeared to take a step closer to reality during the weekend.

The British Competition Commission is likely to recommend the breakup of the airport operator, the company said.

Analysts said Sunday it was likely that when the commission issued a preliminary report this week on BAA's control of airport services it would order BAA to sell up to two properties: Gatwick Airport or Stansted Airport, which both serve London, and possibly Edinburgh Airport or Glasgow Airport as well.

Emilio Rotondo-Inclán, an analyst at Fortis in Madrid, said he thought a disposal of Gatwick or Stansted and a Scottish airport would be "positive" for Ferrovial, the Spanish company that owns BAA, even though the group had hoped to hold all of its British assets, having already invested considerable sums.

The commission has been investigating whether problems faced by airline passengers in Britain have been caused or exacerbated by BAA's near monopoly on facilities.

BAA, formerly the British Airports Authority, owns seven airports in Britain and controls one in Naples. That gives it effective control of airports in southeastern England and in Scotland. BAA has been owned since 2006 by Ferrovial.

BAA has been criticized for poor service and excessive airline charges. The company and British Airways suffered a public relations disaster in March with the chaotic opening of Terminal 5 at London Heathrow Airport.

"There is a mood in the country that just wants the business broken up," Nigel Rudd, chairman of BAA, said during an interview broadcast Saturday by the BBC.

Damon Hunt, a spokesman for BAA, said Sunday, "We're waiting until the provisional report comes out this week on remedies before make any further comment on how this will affect us."

Rory Taylor, a spokesman for the commission, said the preliminary report probably would be released Wednesday or Thursday. He would not discuss the findings in detail. Once the report is issued, interested parties will have another chance to state their cases to the regulator before a final report is released, probably in March 2009.

A person with knowledge of BAA who was not authorized to speak publicly, said it was too early to say whether BAA might seek to block a sale.

Investors are already pleased with progress that Ferrovial is making in refinancing its debt. Last week the company won bondholder support for an important step in a complex refinancing of more than £10 billion, or $18.7 billion, of debt and said it hoped to finalize the deal this month, lifting its share price.

Any proceeds from an airport sale would be used to help pay down the billions of pounds in debt that Ferrovial took on to buy BAA. Rotondo-Inclán estimated that the two disposals would raise £1.8 to £2 billion, or slightly more, and that there would be no shortage of bidders in an auction.

Rudd told the BBC that selling the assets would not be a financial disaster.

Michael O'Leary, chief executive of the budget airline Ryanair, has expressed interest in buying Stansted. Reports have suggested that other bidders might include Hochtief of Germany; Global Infrastructure Partners, a General Electric-Credit Suisse investment fund; Macquarie of Australia; and Manchester Airports Group of Britain.

Other bidders, including U.S. and Asian infrastructure funds and Middle Eastern sovereign wealth funds, were expected to emerge.

The commission issued an interim report in April which found that BAA's common ownership of airports "may not be serving well the interests of either airlines or passengers."

That report said that an important reason for BAA's privatization in 1987 was to provide adequate airport capacity in the southeast of the country and that there was currently a shortage of capacity.

"We are particularly concerned by its apparent lack of responsiveness to the differing needs of its airline customers, and hence passengers, and the consequences for the levels, quality, scope, location and timing of investment and levels and quality of service," the report said.

BAA said it had not yet assessed how much Gatwick Airport or any other assets might be worth. That would depend on consultations with the government and the timing of any sale.

Source: By Matthew Saltmarsh International Herald Tribune