London’s Stansted Airport Must Be Sold
London’s Stansted Airport Must Be Sold, Regulator Tells BAA
Chris Ratcliffe/Bloomberg
Passengers wait outside Stansted Airport in Essex, U.K.
Passengers wait outside Stansted Airport in Essex, U.K. Photographer: Chris Ratcliffe/Bloomberg
BAA Ltd., the owner of London’s Heathrow Airport, was today ordered to sell the U.K. capital’s Stansted terminal and a base in either Edinburgh or Glasgow following the latest ruling in a four-year antitrust tussle.
The U.K. Competition Commission, reviewing an earlier decision, said a breakup is “fully justified” and must start in three months at the latest. BAA said it was “dismayed” by the ruling and may seek a judicial review to have it overturned.
“We hope that the sales can now proceed without delay so that passengers and airlines can start to enjoy the benefits of greater competition,” Peter Freeman, chairman of the Commission’s BAA Remedies Implementation Group, said in a statement. “It is clear that the original decision to require BAA to divest three airports remains the right one.”
BAA, whose Heathrow hub is the biggest in Europe, was first ordered to find buyers for Gatwick and Stansted in March 2009, together with either Edinburgh or Glasgow in Scotland. While Gatwick was sold to Global Infrastructure Partners Ltd. for 1.51 billion pounds ($2.4 billion), BAA was able to delay the other disposals when the Competition Appeal Tribunal upheld claims that an adviser to the regulator had a conflict of interest.
Continental Squeeze
“We think it’s an unreasonable and draconian decision, and a damaging one,” BAA Chief Executive Officer Colin Matthews said today, adding that the London-based company will decide whether to seek a judicial review in the next few weeks.
The ruling “failed to recognize that the world and BAA have changed,” the CEO said, citing increased competition after the disposal of Gatwick, Britain’s second-busiest airport, and U.K.-government opposition to new runways in southeast England.
Stansted, the biggest hub for Ryanair Holdings Plc (RYA) and a major base for EasyJet Plc (EZJ), also faces stronger rivals overseas as low-cost carriers increasingly take “a pan-European view,” London-based BAA said, adding that the airport and Heathrow serve different markets, with no single airline serving both.
Passenger numbers at Stansted fell 3.3 percent to 1.68 million in June compared with a year earlier, versus a 5.2 percent gain to 3.2 million at Gatwick, according company statements. Stansted’s annual total has slumped 22 percent from a peak of 23.8 million in 2007 to 18.6 million last year.
“It’s not an ideal time to be selling Stansted with its current loss of traffic,” said John Strickland, an aviation analyst at JLS Consulting Ltd. “A potential buyer may look at it and say we have to significantly rework the airport.”
Gatwick Switch
The Competition Commission, which began investigating Britain’s airports in March 2007, said in its statement that any changes since 2009 have been considered and that customers would still be best served by greater competition.
Gatwick airport, the busiest in the world with a single runway, said in a statement that it welcomed today’s decision. Carriers including AirAsia X, Air Berlin Plc and Norwegian Air Shuttle AS have switched over from Stansted since the split from BAA, CEO Stewart Wingate said.
Ryanair CEO Michael O’Leary also backed the sale of Stansted, describing BAA in a statement as “an abusive monopoly” which continues to “overcharge” airlines at the airport.
BAA is facing a breakup just as other European terminals come on the market. Spain’s cabinet last week agreed to raise cash by selling contracts to run the Madrid and Barcelona hubs plus a 49 percent stake in state-owned Aena Aeropuertos, while France aims to reach an agreement before September on the sale of Bordeaux, Lyon, Montpellier and Toulouse airports, Les Echos reported today, citing government officials it didn’t identify.
Spanish infrastructure group Ferrovial SA (FER), which bought BAA for 10.1 billion pounds in 2006, was trading 1.3 percent higher at 8.20 euros as of 9:59 a.m. in Madrid. The stock has gained 10 percent this year for a value of 6 billion euros ($8.5 billion).
To contact the reporter on this story: Steve Rothwell in London at srothwell@bloomberg.net
To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net
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