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Ready for take-off

Douglas Fraser | 11:05 UK time, Wednesday, 17 December 2008

BAA plc - formerly the British Airports Authority, then privatised, and now a Spanish-owned airport operator unloved by delayed passengers, seems to be even less loved by the Competition Commission.

In a drawn-out consultation, the two sides of this debate really aren't getting on too well. Don't expect them to be invited to each other's Christmas parties.

The Competition Commission's second last set of recommendations were published this morning, repeating its requirement that one of the two Scottish central belt airports should be sold off. The claim is that it has been anti-competitive in the way it has controlled Edinburgh and Glasgow Airports.

What's new this morning is that it is arguing Edinburgh should be the one to get sold off.

The argument from BAA is that Edinburgh Airport's customer base is more than 90% from the east, and Glasgow's is more than 90% from the west. It's not the most compelling argument. You could as easily say that it breaks down that way because that's the way BAA has marketed them. Because of its position on the west of the capital, if Edinburgh were marketed in competition with Glasgow, it could pull in more business from Lanarkshire and other parts of west central Scotland.

Glasgow Airport's key weakness is that it is on the wrong side of the Glasgow rush hour. Most people on the east side of the M8 Kingston Bridge are often better off going to Edinburgh Airport. And the building of an airport rail link only makes sense in accessing the wider Scottish market if there is a cross-rail scheme to link Glasgow's Central and Queen Street stations. But last week's Scottish Government announcement on its priority strategic transport project makes it look like cross-rail has fallen off the planning table.

The Competition Commission argument that Edinburgh should be sold off because it has better growth prospects and would raise more money is odd reasoning. There is an argument to be made about anti-competitive practice, but it is a different and much more contentious argument that BAA should be doubly penalised - first by a forced sale, and then by being left with the weaker part of the deal.

While the Commission is also pushing for BAA to sell off Gatwick and Stansted while keeping Heathrow (it already has Gatwick on the market), there's another new aspect to the findings on its ownership of Aberdeen Airport. Operating a monopoly in north-east Scotland, as there's not much point in locating a new airport around the city, it's been found that Aberdeen suffers from under-investment and BAA has been making excessive profits per passenger.

The answer is to reinforce the company's inflation-minus-1% annual increase in landing charges, to help drive down prices to airlines. The bit that is going to hurt BAA, on top of that real terms cut, is a 15% rebate to the airlines on top of that real terms cut. The rebate could be less painful, cut to 12%, once BAA commits to more investment at the airport.

Selling an airport into the current market is not going to be easy. Not many companies have the confidence and cash to buy airports these days. Even if there's a buyer to be found, the price won't be high.

BAA can take some comfort - though there isn't much in this set of recommendations - from the timetable for appeals after the final report is published next March. If that gets spun out enough, the company could hope to delay its forced sales until the market is looking a bit cheerier.


  • Comment number 1.

    About time BAA was made 2 sell off its Scottish Monopoly over the Airports here, i live on the east coast and the Availablity of flights i've taken in recent years have always come from Glasgow which is a nightmare to get to, also Aberdeen Airport has to be one of the Worst 2 access in either morning or evening Peak times due to the singular access to the Airport,

  • Comment number 2.

    Finally! The argument that both airports serve different markets is completely imaginary! Perhaps if the two airports weren't nightmares to get to then they would compete a little more? The logic of going past edinburgh airport by train into edinburgh to then catch a bus back is ridiculous. Similarly, there is absolutely no practical way to get to glasgow international from the east coast.

    Get a direct train that runs Edinburgh-Edinburgh Airport-Glasgow-Glasgow International in less than an hour and you will see the competition! That would make edinburgh airport closer to glasgow than prestwick, and would anybody argue that prestwick and glasgow international serve different markets? Like hell they do!

    Sort that out and there should be 3 airports competing for custom within the central belt. Plus it would cut down carbon emissions and noise, given that as admitted by BAA most airlines duplicate their routes.

    Perhaps if BAA were left with only glasgow they would participate in investing the paltry amount required to build the glasgow crossrail?

  • Comment number 3.

    Both airports lack destinations, to go on holiday from Edinburgh or Glasgow confines travellers to a very few destinations compared with Gatwick and Manchester. The same now holds true for Newcastle, Teeside etc. The companies owning and running these airports should be forced to serve all of the people, not just those in the south or in the midlands where obviously demand is greater and profit higher. However all citizens of this country are entitled to like treatment and this problem needs to be addressed.

  • Comment number 4.

    #3 kaybraes

    That situation is nothing to do with the airports, but the airlines who all use a hub system which is simultaneously more economic and greener.

    Exactly the same situation happens elsewhere in the world.

    Or are you arguing for public subsidies to fly empty planes to a range of holiday destinations from Sumburgh?

  • Comment number 5.

    I reckon that Central Scotland has too many airports. Much of it is to do with civic pride and not much else.
    Other small countries have one major airport (Denmark, Netherlands) which becomes a reasonable hub.

    In Scotland the lack of political guts means nobody will say close the current 3 central belt airports (PIK, GLA & EDI) and build one say near Falkirk/Stirling (slap bang in the middle with easy Motorway and Railway access).

    Unfortunately we have the free market dogma (and back yard politics) and all three soldier on serving leaving a weak airline service as the volumes of connecting passengers that would make a service viable are just not there.

    Amsterdam and Copenhagen airports are hubs. Glasgow and Edinburgh airports are just the end of the line.

    A certain Mr Salmond is always keen on comparing Scotland's progress with Denmark. Well Mr Salmond here is an opportunity.

  • Comment number 6.

    A pity the Competition Commisssion weren't as diligent when it came to the HBOS Lloyds TSB takeover.

    That said, in reality selling off one airport won't make a blind bit of difference. Oldnat is right. The choice comes from the airlines not the airport.

  • Comment number 7.

    It is true for the take off...

    ~Dennis Junior~


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