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Operator ordered to sell British airports

  • Story Highlights
  • UK airport operator BAA told to sell 3 of its 7 airports, including two in London
  • Britain's competition watchdog said sale of airports will encourage competition
  • BAA must sell airports in sequence, beginning with Gatwick then Stansted
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LONDON, England (CNN) -- Britain's competition watchdog has ordered airport operator BAA to sell three of its seven airports, including two in London.

BAA must sell Gatwick Airport first.

BAA must sell Gatwick Airport first.

BAA must sell Gatwick and Stansted airports in London and either Edinburgh or Glasgow airports in Scotland within two years, the Competition Commission said Thursday.

In publishing its decision Thursday, the commission said the sale of the airports will encourage competition "where today there is no competition at all."

BAA owns seven airports in the United Kingdom, including London's Heathrow, Gatwick and Stansted. The Competition Commission says there are competition problems at all seven airports, with adverse consequences for passengers and airlines.

Finding new owners for the three airports will result in lower prices and improved customer service, said Christopher Clarke, chairman of the study. All three must have separate buyers, the commission said.

"The precise pace and the precise ways in which the benefits from such competition will emerge may be uncertain, but we are confident that the benefits will build over time, driven by the momentum of the development of competition, and will be significant," Clarke said.

In London, for instance, BAA's ownership of three airports prevents them from building more capacity and keeps prices high, the commission said.

"The intensity of price competition may initially be limited by current capacity constraints and price controls, but these constraints are themselves at least in part the result of common ownership," the commission said.

BAA said it acknowledged the need to change but did not agree with all of the commission's findings.

"We believe the commission's analysis is flawed and its remedies may be impractical in current economic conditions," BAA said in a statement, adding it needs more time to consider the report before responding further.

Carrier Virgin Atlantic, a longtime critic of BAA's ownership of the airports, welcomed the commission's decision.

"It will undoubtedly benefit consumers," said airline spokesman Paul Charles. "Better airport facilities in the UK and lower prices will be the result. ... The important next step is to ensure that there is adequate oversight of the divestment process."

BAA must sell the airports in sequence, beginning with Gatwick -- which went up for sale in September -- then Stansted and then either Edinburgh or Glasgow, the commission said.

The Competition Commission is an independent public group that investigates mergers, markets and regulated industries. The Office of Fair Trading, a government department, asked the commission to look into airport competition in March 2007.

The once-state owned BAA, which used to be known as the British Airports Authority, was privatized in 1986 and floated on the stock market in 1987. It is now owned by Spanish property group Ferrovial.

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