UK regulator recommends divesting BAA's airport holdings in London, Scotland

London: British regulator, the Competition Commission (CC), has called for Spanish-owned group BAA to sell two airports in London and another in Scotland in a move aimed at benefiting passengers and airlines. The CC said it was seeking views on which two of London's Heathrow, Gatwick and Stansted airports ought to be off-loaded.

"The Competition Commission has provisionally found that there are competition problems at each of BAA's seven UK airports (Heathrow, Gatwick, Stansted and Southampton in England, and Edinburgh, Glasgow and Aberdeen in Scotland) with adverse consequences for passengers and airlines," it said.

"A principal cause is their common ownership by BAA. There are also competition problems arising from the planning system, aspects of government policy and the system of regulation.

"The CC is now seeking views on which two of BAA's three London airports should be sold and similarly which of Edinburgh or Glasgow airports should be sold."

The move would result in the break-up of the BAA.

BAA responded by describing the CCs findings as ''flawed'' and its remedies as "disproportionate and counter-productive.

"The Commission's findings state that the lack of runway capacity is a main reason for what it calls the current poor standards of service and the lack of resilience at times of disruption, which results in regular delays," BAA said in a statement.

"By calling not just for a fundamental restructure of BAA ... the Commission risks delaying" delivery of new runways, it added.

Germany's biggest construction company, Hochtief, immediately announced its interest in acquiring Gatwick, which could cost it close to  £3.0 billion pounds ($5.6 billion). Stansted has been valued by analysts at up to £2.0 billion pounds.

Manchester Airports Group (MAG), UKs second-biggest British airport operator, after BAA, also expressed an interest in acquiring one or more of the airports.

Earlier, in a preliminary report the CC had said that problems arising from BAA's ownership of seven British airports created "adverse consequences for passengers and airlines."

The CC tried to ally fears about Heathrow, the jewel in the BAA's crown, noting that its recommendations made it "unlikely to require the divestiture of Heathrow unless the sale of Gatwick or Stansted is likely to be impractical or ineffective."

Heathrow is the world's biggest airport in terms of international passenger traffic.

The CC will decide about the divestiture of Scottish airports, either Edinburgh or Glasgow, only after a period of consultation.

Meanwhile, low-cost Irish carrier Ryanair, which largely operates out of Stansted airport, said it welcomed the commission's "comprehensive report into the market power of the BAA monopoly and fully endorses its findings.

"Competition works -- monopolies don't. BAA's monopoly control over the London airports has been highly detrimental to competition and consumers," it said.

"BAA has long ignored the needs of its airline users and the travelling public and provided inefficient, gold-plated facilities, encouraged by an ineffectual regulator, the Civil Aviation Authority."

British Airways said on Wednesday that the "focus must be on ensuring that the current regulation of BAA's London airports is strengthened."

The CC has said it would publish its final recommendations during the first quarter of 2009.

British airlines have strenuously called for the breakup of the BAAs monopoly, which sees it holding a 60 per cent market share of all passengers passing through British airports. This figure rises to 90 per cent around London, according to Competition Commission data.

The BAA was bought in 2006 by a consortium led by Spanish construction group Ferrovial for  £10.23 billion.