August 21, 2008

Flight Path to New Ownership Glasgow Airport is Favourite to Be Sold for the Benefit of Travellers, David Leask Finds SCOTLAND’s AIRPORTS

By David Leask

THE public face of Scottish business was last night united. The country's airport monopoly, the official line went, should be spared. BAA Scotland, the nation's industry lobbies argued, has served the nation well and pumped hundreds of millions into its three main gateways, Glasgow, Edinburgh and Aberdeen.

Privately, business leaders are not so confident that the Competition Commission was yesterday wrong to say BAA's joint ownership of the two central belt airports was bad for travellers. Many now expect one of the two airports, Glasgow, to be sold. Is that good or bad? "That depends who buys it, " said one senior business figure. So why the public words of support for BAA? "It's a bit of the devil you know, " he explained.

Senior stakeholders in Glasgow are understood to be excited about the prospect of a leading operator, like Manchester Airport Group or even Middle Eastern sovereign wealth firms, moving into the city. Edinburgh leaders are relaxed at sticking with BAA.

The Competition Commission, the UK's anti-trust watchdog, has spent 18 months investigating whether BAA ownership of seven British airports hurts competition. Yesterday it came to a "preliminary finding" that it did, both in London, where the Spanish-owned giant owns Heathrow, Gatwick and Stansted, and in Scotland. The Commission's proposed remedy is for BAA to sell two of its assets in south-east England and one in central Scotland. The smart money says that the airports up for grabs will be Gatwick, Stansted and Glasgow.

BAA yesterday said it disagreed with the findings, stressing what it called robust research that Glasgow and Edinburgh served distinct markets and could not, therefore, compete with each other even if they were under separate ownership. Gordon Dewar, one of its top executives and a man about to leave his post as managing director of Glasgow Airport for the same post at Edinburgh, said: "We remain of the view that Glasgow and Edinburgh airports serve separate markets and that competition between the two is highly unlikely, regardless of ownership.

"This is a view shared by many of Scotland's leading business organisations and is based on detailed and robust evidence." Bluntly, market research shows that very few people from the east fly from Glasgow and even fewer from the west opt for Edinburgh. Scots passengers, of course, have already shown a willingness to travel for cheaper flights.

Most airlines have made it clear they want to see the two Scottish airports split - and the London giants too. Their argument is simple: airports fighting for their trade might offer them better deals on landing charges and be more responsive to their needs.

Ryanair, which has a major presence at Prestwick and a growing one at Edinburgh, yesterday said it had never doubted the power of competition. The Irish low-cost giant has done much to forge new routes from Scotland. BAA, of course, points to its recent record too. But the Competition Commission yesterday questioned whether BAA had done enough to bring direct flights north of the border.

Christopher Clarke, chairman of the CC's BAA airports inquiry group, said the company had been "noticeably slow" to develop routes from Glasgow and Edinburgh and suggested its investment plans at Aberdeen were "unambitious". That left BAA officials in Scotland smarting. They passionately believe they have done well by all three businesses and point out their north-east outpost was this year voted as the most improved airport in the world.

Mr Clarke said BAA should hold on to Aberdeen, subject to tougher regulation. That didn't please the company either - or some of its business backers.

BAA for years has plugged itself into Scotland's business establishment. Its senior executives have held leading positions in major lobbies. Managers are always willing to help fellow businesses, even fast-tracking important investors through security.

Lesley Sawers, chief executive of the Scottish Council for Development and Industry, said: "The main issues for business are access, flight options and service, rather than who owns individual airports.

"BAA has been a significant investor and contributor to the growth of the Scottish economy, has attracted many new direct air routes and has a financed, 10-year GBP500m capital programme for Aberdeen, Edinburgh and Glasgow. There is a clear business case for investment in our airports which must not be put at risk. Any new owner must be required to make a similar commitment to Scotland."

Businesses and key civil servants stress Heathrow remains vital to Scotland. Ms Sawers spoke of a need for a third runway at the London hub, which is still the main way most Scots travellers reach the outside world.

Labour yesterday welcomed the commission's findings, but echoed business concerns that investment must be kept up. Transport spokesman Des McNulty said: "It is essential that we safeguard jobs and protect the interests of passengers."

The shadow secretary of state for Scotland, Tory David Mundell, said he believed a break-up would stimulate route development.

Nationalist MSP, Jamie Hepburn, last night called for one of the two airports to be brought into public ownership. He might get his way, but not in the way he expected. The Scottish Government did not respond.

MSP Charlie Gordon, the former Labour leader of Glasgow City Council, has long been lobbying for the company to be broken up.

Mr Gordon famously and only half-jokingly offered to buy back Glasgow airport, which his authority sold to BAA for just GBP1m in the 1970s. The business, even in these straightened times, is now valued at anything from GBP500m to more than GBP1bn.

Local councils in Greater Manchester kept their airport. Last night it became clear they were the frontrunner to buy Glasgow.

Glasgow could end up having an airport owned by the public . . . the public of Greater Manchester.

Competition Commission report Main criticisms of BAA:

. A lack of responsiveness to the needs of its airline customers

. A lack of initiative in planning capacity

. Investment not tailored to the requirements of airport users

. Lower levels and quality of service for both airlines and passengers Core proposed remedies:

. The sale of either Glasgow or Edinburgh airports

. The sale of two of London's Heathrow, Gatwick and Stansted airports

. New regulations for Aberdeen Airport

BAA airports around the UK

1 ABERDEEN Passengers: 3.4m a year Airlines: more than 20 Employees: 2900 Top International destination: Amsterdam Top UK destination: Heathrow Competition Commission findings: Relative geographic isolation deters competition.

2 EDINBURGH Passengers: 9m a year Airlines: around 40 Employees: 2400 Top foreign destination: Amsterdam Top UK destination: Heathrow Competition Commission findings: Common ownership with Glasgow prevents competition.

3 GLASGOW Passengers: 8.8m a year Airlines: around 30 Employees: 5300 Top foreign destination: Amsterdam Top UK destination: Heathrow Competition Commission findings: Common ownership with Edinburgh prevents competition.

4 STANSTED Passengers: 23.3m a year Airlines: around 32 Employees: 11,600 Top foreign destination: Dublin Top UK destination: Glasgow Competition Commission findings: Common ownership with Gatwick, Heathrow prevents competition.

5 HEATHROW Passengers: 67.3m a year Airlines: Around 90 Employees: 70,000 Top foreign destination: New York Top UK destination: Manchester Findings: Sheer size of Heathrow "hub" and joint ownership of other London airports restricts competition

6 GATWICK 7Passengers: 32m a year Airlines: around 90 Employees: 25,000 Top foreign destination: Malaga Top UK destination: Edinburgh Findings: Common ownership with Heathrow, Stansted prevents competition.

7 SOUTHAMPTON Passengers: 2m a year Airlines: 15 Employees: 1200 Top foreign destination: Paris Top UK Destination: Edinburgh Findings: BAA not responsive enough to airline customers because of common ownership with Gatwick and Heathrow.

Originally published by Newsquest Media Group.

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