BAA faces prices investigation

THE Competition Commission has outlined its inquiry into the running of London’s three major airports - a probe airlines hope may scupper plans by airport operator BAA to raise fees.

The watchdog said that it had sent letters to BAA and the Civil Aviation Authority, which regulates the aviation industry, outlining the main issues it would examine at London’s Heathrow, Gatwick and Stansted airports.

But the investigation, undertaken every five years, will not look at the current situation in Scotland, because it has no legislative authority to do so.

Glasgow City Council complained to the Office if Fair Trading last month that BAA’s dominant position in Scotland, where it owns Glasgow, Edinburgh and Aberdeen airports, might not by in the best interests of the city.

But under the terms laid down by the government when BAA was privatised, the Competition Commission is only legally permitted to probe the airport operator’s monopoly position in London.

Yesterday a spokesman for Glasgow City Council said it had not yet received a response from the OFT to its complaint. He added it would be "diving into the deep end" to pursue the introduction of regulatory legislation until the OFT had examined the council’s complaint.

The Competition Commission inquiry comes after BAA proposed in March to increase the fees it charges airlines to use its airports by up to 40 per cent over the next five years.

BAA has said its current fees at the airports are among the lowest in the world, but airlines have opposed the proposed rise as they continue to struggle with higher insurance costs and a slump in revenue after the 11 September attacks.

The commission said it would examine whether there had been any conduct of business that was against the public interest, and whether the three London airports should be regulated individually or as one single entity.

It said it had reached no conclusion on any of the issues but added in a statement that it had already received a "considerable volume of evidence", particularly from airlines.

A CAA spokesman said BAA could raise its charges, as it currently does not charge the maximum amount allowable.

The commission has said it would take into account passenger forecasts, BAA’s cost of capital, whether BAA’s consultation procedures are adequate and whether BAA has made enough investment into the airports.

BAA shares closed down 0.5 per cent, or 3p, at 610p. The stock has outperformed the FTSE transport sector by about 17 per cent during the last year.

Analysts expect BAA to post a full year pre-tax profit of 508 million when it reports today - a dip of about 4 per cent.

Another risk BAA faces is the government’s 30-year aviation policy, to be published later this year. The report is likely to recommend new runway capacity and possibly a new airport.

A new airport for the southeast of England is likely to remove BAA’s stranglehold on London’s existing airports, as regulators are likely to encourage new operators.

BAA has already ruled out a third parallel runway at Heathrow, the world’s busiest international airport, as part of the approval for a fifth passenger terminal at the airport.