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Competition Commission Market Investigation – supply of airport services in the UK by BAA

The Office of Fair Trading (OFT) referred the market for BAA airport services in the UK to the Competition Commission (CC) on 29 March 2007 under section 131 of the Enterprise Act 2002.

The CC published its final report on 19 March 2009.

The CC found competition problems with adverse effects for both passengers and airlines at all seven of BAA’s UK airports (Heathrow, Gatwick, Stansted and Southampton in England, and Edinburgh, Glasgow and Aberdeen in Scotland).

It found that a key problem at BAA’s airports in the South-East and in lowland Scotland is their common ownership by BAA which precludes any competition between them. It also found additional competition problems at the London airports arising from the current system of regulation, planning and aspects of Government policy, and problems at Aberdeen deriving from its isolated geographical position giving it the characteristics of a local monopoly.

The CC report sets out a number of remedies to address the issues identified:

• A requirement for BAA to sell Gatwick and Stansted as well as either Edinburgh or Glasgow within 2 years of the publication of the CC’s report.
  
• At Aberdeen, BAA must improve consultation with airlines as well as publish certain financial information.
  
• The Civil Aviation Authority (CAA) should take certain specified action at Heathrow, the UK’s only hub airport, where BAA will continue to have substantial market power even after the sale of Gatwick and Stansted.
  
• Recommendations to Government on aspects of the Government’s air transport policy, and in relation to the economic regulation of airports.

Government responded to the recommendations addressed to Government on airports policy and the economic regulation of airports in July 2009.