Airlines question BAA takeover

25th Aug 2006

Major UK airports must be subject to strong price regulation to stop them abusing their monopoly positions and UK consumers must not pick up the bill for Ferrovial’s acquisition of BAA.This is easyJet’s response to the OFT’s current investigation of the UK airport industry.

Andy Harrison, easyJet Chief Executive, said

“Consumers need better protection from the airport operators who behave like local monopolists, pushing up prices to hide their own inefficiencies. So, whilst easyJet supports the break-up of BAA, the primary focus must be on tougher regulation. The issue of ownership is secondary to providing the right regulatory regime.

“Consumers will not benefit from having BAA replaced by a series of “Mini Me” monopolists.



In all but a handful of cases, airports are local monopolies with constrained supply but rising demand driven by low-fares airlines. easyJet’s evidence to the OFT demonstrates that customers flying on short-distance, time-sensitive trips overwhelmingly prefer the airport which is closest to them in terms of travel times and convenience.


Regulation of the London airports in the 1980s and 1990s successfully capped or reduced BAA’s charges, and encouraged it to become more efficient. The benefits were passed to consumers in the form of lower air fares. Unfortunately, though, the same regulation now incentivises airports to overbuild, and to try and over-charge the airlines and end consumers for facilities they do not need.


Looking forward, to prevent airports seeking to claw-back the costs of their over-investment with inflationary rises, it is clear that consumers need much better price protection - and they need it fast. 


During the time of the bid for BAA, easyJet was shocked to see the management of BAA attempt to increase the value of the company by raising the prospect of long-term price rises through lighter regulation of prices. It said to its shareholders that “in the years ahead, there is headroom to increase prices at our London airports because prices are low by European standards”. The takeover of BAA left BAA shareholders several billion pounds richer. It would be worrying if the new owners of BAA were allowed to exploit their monopoly positions and force UK travellers to pick up the bill for their expensive acquisition.


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