BAA urged to sell three UK airports

LONDON, England (CNN) -- Britain's competition watchdog said Wednesday that airport operator BAA should sell three of its seven airports, including two in London.

BAA owns seven airports in the United Kingdom, including London's Heathrow, Gatwick, and Stansted. The Competition Commission said there are competition problems at each of the seven airports and that the problems have adverse consequences for passengers and airlines.

The Competition Commission made the proposals in provisional findings published Wednesday. It will now hold a consultation period, and a final decision is due by March next year, commission spokesman Rory Taylor said.

In addition to selling Heathrow » and Gatwick, the commission also proposed that BAA sell one of its Scottish airports -- either Edinburgh or Glasgow.

A BAA spokeswoman said the company is not considering selling any of its airports and that it will argue its case during the consultations. Ultimately, the government can force BAA to sell the airports even if BAA disagrees, said the spokeswoman, who declined to be named in line with company policy.

BAA's ownership of the seven airports has resulted in a lack of responsiveness to the needs of airline customers and a lack of initiative in planning capacity, said Christopher Clarke, chairman of the commission's BAA Airports inquiry group. Watch how pressure is growing on BAA »

"We believe that separate owners would be more active than BAA in exploiting existing opportunities," he said.

Clarke said aspects of government policy and regulation also play a role in the problems.

BAA said it recognizes the need for improved service but that the commission's plan is the wrong way achieve it. BAA said it should be allowed to increase airport and runway capacity to better serve its customers.

BAA Chief Executive Colin Matthews said restructuring BAA "risks delaying that delivery of new runways and making better customer service less, not more, likely."

Carrier Virgin Atlantic says BAA's ownership of the airports is harming passenger interests.

"Here we are at Gatwick Airport, it has suffered investment-wise because BAA has focused more on Heathrow Airport," said Virgin Atlantic spokesman Paul Charles.

Low-cost carrier RyanAir, based at Stansted in northeast London, has often complained that BAA overcharges airlines and passengers while delivering a "third-rate service."

Some observers say forcing BAA to sell airports won't fix the problems because they don't have to do with competition.

"There are problems here which go beyond the monopoly, which are to do with regulation, the way investment is managed, the capacity at airports, runway capacity and so forth, and also more broadly just the absence of any kind of grand plan since BAA was privatized more than two decades ago," said Michael Peel, a legal correspondent at The Financial Times newspaper.

BAA, which began as the British Airports Authority but now goes only by its initials, is owned by Spanish property group Ferrovial.

CNN's Jim Boulden contributed to this report.

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