BAA will choose which Scottish airport to sell

Published on Saturday 14 March 2009 13:16

THE Competition Commission is expected to give BAA a choice of which Scottish airport it will sell when it delivers its final report on the company's future this week.

The Commission is expected to confirm that Stansted and either Edinburgh or Glasgow must be sold to improve competitive pressures in the industry.

BAA has effectively conceded that it faces a break-up of the business, though the forced sale of airports will allow it to raise funds to help pay off its 9.4bn debt.

The Commission's report is expected to echo its earlier criticisms of BAA that the group's monopoly ownership of the three leading London airports, Heathrow, Gatwick and Stansted, and two Scottish airports is harmful to competition.

It is understood BAA, a subsidiary of Ferrovial, the Spanish construction group, is confident that it has persuaded the Commission to let it make a decision over which airport to sell in Scotland. It is rumoured that Spanish officials visited Scotland in the summer and have decided that, if pushed, Glasgow would go. In recent years the airport has not performed as well as Edinburgh.

Offloading Glasgow would leave Edinburgh with the lion's share of scheduled services in Scotland.

But any sale is likely to be hindered by global economic downturn and the fact that air traffic has registered a sharp decline. BAA's UK airports handled nine million passengers last month, a reduction of 12.5% on February 2008. In Scotland its three airports saw a 14.6% drop in passenger numbers last month to 1.19 million while traffic at Gatwick has been falling steeply since September.

BAA has appointed Grant Thornton as auditors for the disposal of Gatwick but its hopes of fetching 2bn have been delayed as bidders struggle to meet the asking price. It has already postponed the final deadline from March 30 to the end of April in a move to help bidders secure both equity and debt financing. Analysts say Ferrovial would probably settle for a price slightly above the airport's 1.6bn regulated asset base.

The remaining bidders are London City Airport owner Global Infrastructure Partners; a Citigroup-led consortium; and a joint venture between Manchester Airports Group and Canada's Borealis.