CAA urges break up of BAA’s London airports monopoly

The Civil Aviation Authority (CAA) has announced it thinks the BAA’s ownership of Heathrow, Gatwick and Stansted by BAA is unhealthy for competition.
Dr Harry Bush, Group Director of Economic Regulation, said: “BAA enjoys a very strong market position in the UK airport market, owning a number of neighbouring airports that to varying degrees would otherwise be expected to act as rivals and compete for airlines and passengers. In the absence of sufficient competition in London, greater reliance has been placed on regulators to decide upon the airports’ pricing and to guide the airports’ investments in capacity and service quality.”

The CAA has also concluded that economic regulation overall has not had an adverse effect on competition. Rather, it has served to mitigate the adverse effects of market power, including common ownership of BAA’s South East airports.

“Economic regulation has brought benefits. But it is timely to ask the question whether greater competition would better serve consumers.

It also argues that it is now important to consider the appropriate ‘remedy’ to the adverse effects of this common ownership, including divestment of airports and consequent reforms to the framework of economic regulation.

“It is now for the Competition Commission to consider how any adverse effects identified can best be remedied. We look forward to working with the Commission on these issues in the weeks and months ahead.”