Last week virtually every important stakeholder in the UK air transport scene jumped onto a bandwagon of support for the Competition Commission (CC). It clearly was a ”be nice to the Competition Commission” outbreak; any criticism was frowned upon by such unlikely soul mates as British Airways and Ryanair.
Following a referral by the Office of Fair Trading (OFT) in March, CC announced that it would investigate the merits or otherwise of breaking up what is seen as the BAA (Ferrovial) virtual monopoly of airports both in the south east of England and Scotland.
What is curious is that worldwide, where a city (or conurbation) has two large airports, they are normally owned by a single, usually privatised, company. A”roport de Paris has both Charles de Gaulle and Orly (plus 12 others in France), Amsterdam and Rotterdam (Netherlands) are one organisation, as is Frankfurt and Hahn (Germany). New York combines four major airports, all controlled by the Port Authority of New York and New Jersey, a quasi-government organisation that also operates many of the bridges and tunnels linking Manhattan to the mainland.
CC now says that it will take a year over its deliberations and then only offer what it terms ”provisional findings.” It seems to us classic civil service ”Yes Minister” thinking ” don”t actually make a decision and let us hope that it might go away.
In this case that is exactly what might happen.
BAA plc was created in 1986 in a cosy privatisation by Margaret Thatcher which resulted in the creation of Stansted as we know it and offered Gatwick and Heathrow as a non-competing duo. British Airways went along with the arrangement although opposed by some senior management. Those were the days when BA made sure it was welcome in Whitehall.
Last July BAA was purchased for ”10.1bn by a consortium led by Grupo Ferrovial, a multi-national Spanish company involved in construction, infrastructure, real estate, and related services. Its other interests include Tube Lines in the UK, a supplier to the London Underground, and Swissport, a major handling organisation operating at 170 airports.
BAA has opposed any break-up. It is now led by Stephen Nelson who joined the organisation in 2005 from Sainbury”s when that company too was going through a difficult period.
In its 12 months” ownership BAA has been through what can only be described as ”less than easy” times. Heathrow is on its third managing director, Stansted”s planning troubles have grown, and Scotland too has had its problems. T5 is on its way, as BAA is keen to say ”on time and on budget.”
And London City Airport has been sold for ”742m, an amazing sum for an airport that last year moved just 2.4m passengers. Heathrow”s throughput was 67m and Gatwick 35m.
Forget about the short term troubles at Heathrow.
According to Clickair CEO, Alex Cruz, his airline claiming to be the airport”s only low cost operator, problems are the same all over Europe. Passengers are up in arms, justifiably in most cases, just about everywhere. He says it is the British media and overseas nationals that are causing the fuss. O”Leary at Ryanair and Bigasani at IATA, who should know better.
The airports, in the main, were designed last century and cannot cope with the huge impact of much increased security (from zero) and the big (predicted) rise in numbers.
ABTN believes that with the coming of T5 and the virtual take-over of T4 by Skyteam and T1 by Star Alliance, Heathrow will greatly improve.
Ferrovial did not help themselves with the idea of holding a Heathrow press conference in Madrid and then threatening to pull out of the splendid Heathrow East project which has already gained planning permission. This could (and should) be up completed by 2012.
The numbers will go up too with Airbus A380 replacing smaller jets and regional turboprops (KLM for example) being swapped for long haul wide-bodies.
If BAA were to be broken up there appears to be plenty of would-be purchasers for both Gatwick and Stansted (and whatever Scottish airport has a ”for sale” board at the end of the runway). Big bucks for Ferrovial.
With a second runway at the airport just a dream, Gatwick is not in requirement of exceptional investment, except for the totally inadequate railway station. An outstanding marketing exercise is needed. It just does not have the pulling power of Heathrow although in most ways is a more passenger-friendly airport.
British Airways wants to see Stansted sold off. BAA has ambitious plans. Both Edinburgh and Glasgow require rail links.
Stephen Nelson says nothing is up for grabs, but he is in London. Ferrovial might just be tempted to recover some of their investment, probably at a very great profit.
It looks like being an interesting 12 months in the Madrid boardroom. No doubt the chairman and others will actually come across for the official opening of T5. Will they bring the sale documentation for some part of their major UK investment and expect to go away with a substantial cheque?
We will have to wait and see.