SUMMARY OF BELFAST
INTERNATIONAL AIRPORT LIMITED AND BELFAST CITY AIRPORT LIMITED: A REPORT
ON THE MERGER IN CONTEMPLATION
On 1 August 1995 the Secretary of State for Trade and
Industry asked the MMC to investigate and report on a merger situation,
as defined in the Fair Trading Act 1973 (the Act) arising from the contemplated
acquisition by Belfast International Airport Limited (BIA) of Belfast
City Airport Limited (BCA). The terms of reference are at Appendix 1.1.
Prior to privatization Belfast International Airport
(the International Airport) was operated by Northern Ireland Airports
Limited (NIAL). NIAL was privatized on 20 July 1994 by means of a management
and employee buy-out. BCA is a wholly-owned subsidiary of Short Brothers
PLC (Shorts) which is in turn owned by Bombardier Inc (Bombardier), a
Canadian company. BCA operates Belfast City Airport (the City Airport).
BIA made an unsolicited conditional offer to acquire
BCA on 2 May 1995. Shorts has told us that BCA is for sale and that it
will be seeking bids from a number of parties, including BIA. BIA has
confirmed that if it is cleared to bid again for BCA, it intends to do so.
As a result of the contemplated merger, BIA would increase
its share of airport services in Northern IrelandCan area which meets
the criterion of constituting a substantial part of the UK-from about
63 per cent to about 89 per cent, satisfying the requirements for our
investigation under the Act.
The overlap between the International Airport and the City Airport (the
Belfast Airports) is almost wholly on domestic scheduled flights, which
account for about 80 per cent of Northern Ireland airport passenger
services. Six domestic routes are presently served by both airports.
Of these routes, three (Manchester, Birmingham and Glasgow) have substantial
volumes of traffic from each of the two Belfast airports.
We are in no doubt that the Belfast airports have sought to compete
vigorously under separate ownership. We are also clear that the airlines
are influenced in their choice of airport by that competition, and that
competing airports encourage competition between airlines. We should
not expect competition between the airports to continue under joint ownership.
Choice of airport might remain but much would depend on how BIA acted
in practice as regards the City Airport.
We would expect the loss of competition between the airports to result
in higher airport charges than would apply in the absence of the contemplated
merger; a reduction in competition between airlines; and arising from
these the likelihood of a reduction in routes and services offered by
airlines and/or an increase in air fares.
BIA is in our view unlikely to encourage the airlines to expand services
from the City Airport beyond its existing capacity while there remains
significant spare capacity at the International Airport. As a result
we would expect airlines and passengers over time to enjoy less choice
with the Belfast airports under common control than they would if the
City Airport remained independent: an independent owner would have a
greater incentive to develop the City Airport to its full potential.
We have carefully considered the potential benefits arising from the
contemplated merger but believe them to be outweighed by the detriments
to competition and choice set out in paragraphs 1.7 and 1.8. We therefore
conclude that the merger may be expected to operate against the public
interest and recommend that it should be prohibited.
Back to the Top
Last Revised 4/99
|
