Breaking up BAA is the right thing to do

tauringhuang.

Posted by: Economist.com | LONDON
Categories: BAA
BAA, which owns seven airports in Britain, including Heathrow and Gatwick, is to be required to sell three of its operations. An interim report from the Competition Commission, which is investigating BAA at the instigation of the Office of Fair Trading, recommends the sale of two airports in London and one in Scotland.

And not before time, says this week’s Economist.

The prescription may seem harsh, but so too were the findings that since BAA’s privatisation in 1987 the company has dragged its heels in building new terminals and runways. The hope is that once BAA’s monopoly around London is broken up, competition will force improvements at all three airports [Heathrow, Gatwick and Stansted]. Christopher Clarke, the commission’s deputy chairman, reckons that under separate owners each airport would press hard to get planning permission to build new runways and terminals. They would pay more attention to the needs of airlines and travellers, he thinks. The expectation is plausible. A queue of buyers has already lined up hoping to bid for Gatwick and Stansted, the two airports most likely to be sold. They are understood to be drawing up creative plans ranging from cheap and basic warehouses for low-cost carriers such as easyJet to luxurious lounges aimed at winning the hearts of frequent-flying businessmen.
The paper does not buy the argument that Heathrow's power as a hub prevents competition between London's airports.

There is little reason to think that an economy as large as London and its surrounding region cannot support two competing hub airports. If allowed to build a second runway, Gatwick could well become a second hub, and another runway there would bother fewer residents than at Heathrow.
The main argument against the break-up, articulated by BAA themselves and by John Willman in the Financial Times, is that it will complicate matters at a time when the government is on the verge of giving the go-ahead to a new runway. Colin Matthews, the chief executive of BAA, put it this way:

"Just as the Government is about to make the decisions that could lead to the first full-length runways being built in the South East since the second world war, the Commission risks creating uncertainty, delay and confusion at exactly the wrong time."
Hmm. I'm not convinced by that: I don't think a little more uncertainty and confusion in an uncertain, confused industry can exactly be considered deal-breakers.