London airports monopoly questioned

[23rd May 2008]

Airport regulator the CAA agrees that BAA's ownership of Heathrow, Gatwick and Stansted "is likely to prevent, restrict and/or distort competition".

The CAA has today published its response to the Competition Commission's Emerging Thinking consultation considering whether there are features of the markets in which BAA operates that have adverse effects on competition.

"Evidence from UK regional airports, and from the non-regulated London airports, shows that airports can, and do, compete for airlines and passengers and that this competition can deliver significant benefits to consumers. Further, in its earlier evidence to the Commission, the CAA did not identify any significant benefits that arise from this common ownership," the CAA says in a press statement.

The CAA also explains that it has a strong record of limiting the adverse effects of regulation on competition. "For example, the CAA has regulated BAA’s South East airports separately – on a stand-alone basis – preventing anti-competitive cross-subsidies between BAA’s airports, and distortions to competition between BAA’s airports and non-regulated airports," the statement continues.

CAA group director of economic regulation, Dr Harry Bush, adds: “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".

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

Written by: Nick Purdom