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BAA successfully appeals airport breakup ruling

The future of BAA Ltd.'s ownership of British airports was left hanging on Monday after the Spanish-owned company won part of its appeal against an order to break up its dominance of the sector.
/ Source: The Associated Press

The future of BAA Ltd.'s ownership of British airports was left hanging on Monday after the Spanish-owned company won part of its appeal against an order to break up its dominance of the sector.

Britain's Competition Appeal Tribunal overturned a March ruling by the Competition Commission that BAA be forced to sell three of its airports to break up its virtual monopoly.

The tribunal said it concluded "with the greatest reluctance" that the Competition Commission's order to BAA to sell Stansted and Gatwick in London and one of its Scottish airports was tainted by "apparent bias" because of an investigator's link to a potential buyer.

However, it said BAA's appeal on the grounds that the Competition Commission had not allowed sufficient time for the sales had failed.

BAA has already sold Gatwick but the future of the other airports is now uncertain, with the tribunal inviting both the Competition Commission and BAA to make further submissions on the bias claim. The tribunal expects to hold further hearings in the new year.

The Competition Commission's original decision was hailed by low-cost airlines and consumer groups that had long lobbied for BAA's breakup. They argued that the lack of competing airport owners in Britain meant that BAA was able to impose high fees on airlines and that it had little impetus to improve poor customer service.

Before it offloaded Gatwick to Global Infrastructure Partners, a U.S.-based private investment fund, BAA operated seven airports across Britain. That meant it handled about 90 percent of passenger flights taking off or landing in southeast England and 63 percent of all flights to and from Britain.

"Regardless of the reasons behind today's announcement, it remains a fact that BAA has a stranglehold on Scottish aviation, as well as a dominant position in the Southeast," said Bob Atkinson of travel Web site travelsupermarket.com. "It's not great news for passengers, especially from a customer-service point of view."

BAA earlier this month closed the 1.5 billion pound ($2.4 billion) sale of Gatwick, a process it had in train before the Competition Commission made its order. The company, which is owned by a consortium headed by Grupo Ferrovial S.A. of Spain, has complained that putting all three airports up for sale during a recessionary period would force it into accepting a lower price.

But the success of its appeal was based on its argument that one of the members of the commission had been biased against by virtue of his work for the Greater Manchester Pension Fund, which is linked to the Manchester Airport Group — a rival operator and a potential buyer for the airports BAA would have to get rid of.

The tribunal stressed that there was no allegation that the investigator, Peter Mozier, was "actually biased," and its ruling had been made on the ability of BAA to claim perceived or "apparent bias."

The Competition Commission said it was disappointed with the tribunal's decision and was "studying the judgment and its implications carefully to see if there are any grounds for an appeal."

Low-cost airline Ryanair Holdings PLC said the issue of Mozier's apparent bias should only apply to Gatwick, and should not delay the sale of Stansted — Ryanair's base — or one of the Scottish airports.

Ryanair Chief Executive Michael O'Leary said that BAA and the Competition Commission should quickly agree on remedies relating to the bias issue "and then move quickly to progress the sale of Stansted and one of the Scottish airports in order to speed up the introduction of competition, lower costs and service improvements for airlines and consumers."