Ready for take-off
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.