Sept. 17 (Bloomberg) -- BAA Ltd., the owner of London's three major airports, plans to sell Gatwick after antitrust regulators recommended a breakup to reduce the company's dominance in the U.K.

Gatwick, 30 miles (50 kilometers) south of London, is ``an important and valuable part of BAA and the decision to sell was not taken lightly,'' Chief Executive Officer Colin Matthews said in a statement today. The airport, Britain's second-busiest after BAA's Heathrow, may fetch 3 billion pounds ($5.4 billion), analysts said.

Gatwick attracted 35 million passengers in 2007, ranking it sixth in Europe, and BAA is seeking a buyer only after the U.K. Competition Commission said last month the company should sell two London bases and one in Scotland to check its domination. Matthews didn't comment on further disposals and said a sale of Stansted, its third London terminal, would imperil capacity increases there.

``They're very sensible in seeing that attempting to hold on to Gatwick is a non-starter if they are to keep Heathrow,'' said Howard Wheeldon, senior strategist at BGC Partners in London. ``There will be further pressure to sell Stansted but clearly it's best to sell one at a time.''

Grupo Ferrovial SA, the Spanish builder that bought BAA for 10 billion pounds in 2006, fell 23 cents, or 0.7 percent, to 32.28 euros. The stock has declined 33 percent this year.

``This is good news in relation to a share price that's heavily depressed,'' said Robert Crimes, a London-based analyst at Credit Suisse with an ``overweight'' rating on Ferrovial.

Debt Reduction

The Spanish company will be compelled to use sale proceeds to pay down loans from Citigroup Inc. and Royal Bank of Scotland Group Plc to 1.3 billion pounds from 4.4 billion pounds, he said.

Virgin Atlantic Airways Ltd., Britain's second-biggest long- haul airline, said today it would ``relish the opportunity'' to bid for Gatwick as part of a group of carriers. Manchester Airports Group, operator of Britain's busiest airport outside London, said it's interested in any BAA assets that might add to shareholder value. Aeroports de Paris, owner of Charles de Gaulle and Orly airports, said it preferred not to comment. CEO Pierre Graff said on Aug. 29 that his company might have a look if BAA decided to sell any London-area airports.

Hochtief Interest

Among infrastructure companies, Hochtief AG, Germany's biggest builder, has a ``strong interest'' in bidding, spokeswoman Donatella Gasser said. Abertis Infraestructuras SA, Spain's No. 1 highway operator and owner of London Luton airport, said it's too early to specify if it will bid and Vinci SA of France, the world's No. 1 builder, didn't comment.

Frankfurt airport operator Fraport AG said it would be interested in bidding for BAA assets after the Competition Commission issued its provisional report on Aug. 20. The company didn't respond to phone calls today. Dubai Airports Authority, run by former Gatwick chief Paul Griffiths, isn't bidding for any airport in the U.K., sister company Dubai Aerospace Enterprise said by e-mail.

``I wouldn't be surprised if the process happened quite quickly,'' said Steven Fernandez, an analyst at Exane BNP Paribas in Paris who estimates a sale would raise ``close'' to 3 billion pounds. ``It's very likely that if they have decided to sell they already have a pretty good indication of the interest.''

BGC's Wheeldon also said that Gatwick, the world's busiest single-runway airport, may fetch 3 billion pounds or more.

BAA has yet to select an adviser for the sale, spokesman Stuart Butchers said. Citigroup, HSBC Holdings Plc and Macquarie Group Ltd. advised Ferrovial on the BAA takeover.

More Disposals Required

The Competition Commission responded to BAA's announcement by reiterating that implementation of its provisional findings would require the sale of two London airports plus either Glasgow or Edinburgh in Scotland. Still, the regulator will take into account any action taken by BAA before making final recommendations early next year, it said in a statement.

BAA CEO Matthews, who took over in April, said the process of selling Gatwick will begin immediately. The company still disagrees with the regulator's analysis but has been ``realistic'' in its response, he said. The airport operator had until the close of business today to comment on the proposals.

BAA argues that dissolving its collection of airports won't benefit travelers and airlines because divestment won't deliver the capacity increases needed to ease overcrowding. Heathrow, Europe's busiest terminal, operates at 99 percent of its government-allowed flight limit, the company says.

Runway Delay

Stansted, which BAA might also be required to sell, would suffer planning delays for a second runway if there was a change of ownership, the company said in its statement.

Virgin Atlantic, owned by billionaire Richard Branson, said that an airline consortium would be the best owner for Gatwick and that such an arrangement would make the airport more responsive to the different needs of mainline and low-cost carriers. Non-airline investors could also be involved, it said.

``Gatwick doesn't just need a new owner,'' Virgin Chief Executive Office Steve Ridgway said on Bloomberg Television. ``It needs a much tougher regulatory system which ensures any new owner doesn't simply become BAA mark-two.''

Ryanair Holdings Plc, Europe's biggest discount airline, said BAA was putting Gatwick up for sale as part of a plan to hang on to Stansted, where the Dublin-based carrier is the biggest operator. The Competition Commission should insist that BAA sell other assets in time for next summer's timetable, Chief Executive Officer Michael O'Leary said in an e-mailed statement.

Regulatory Question

EasyJet Plc, the biggest user of Gatwick, said it wasn't surprised by BAA's decision to sell the airport and that the move is a ``possible cause for alarm'' in that it does nothing to tighten regulatory controls and suggests that Ferrovial's debt burden is dictating U.K. airport policy.

The Unite union, representing workers at Gatwick, said it would meet with BAA executives to raise concerns over job cuts that might follow a sale. The airport should not be ``flogged off with little care for the wider social impact,'' it said in an e-mailed statement.

Credit Suisse's Crimes said the terms of Ferrovial's borrowings mean the builder must pay down loans before it can start to pay itself a dividend from BAA. The analyst estimates that a sale may raise about 2 billion pounds, or about 3.5 euros before tax per Ferrovial share.

To contact the reporter on this story: Steve Rothwell in London at srothwell@bloomberg.net; Brian McGee in Madrid at bmcgee3@bloomberg.net.

Last Updated: September 17, 2008 14:14 EDT