August 21, 2008

Reach for the Sky Glasgow Airport Could Enjoy a Bright Future

IT IS the case, then. Glasgow Airport's future is very much up in the air. That much was confirmed yesterday when the Competition Commission said BAA should not be allowed to continue to own both Glasgow and Edinburgh airports. The watchdog also recommended that the operator, owned by Spain's Ferrovial, should sell two of its three airports in the south-east of England. BAA will want to hold on to Heathrow and Edinburgh, so the candidates for an auction are likely to be Glasgow in Scotland's central belt and Gatwick and Stansted around London.

The commission will not announce its final recommendations until the spring of next year, taking account of responses to yesterday's findings, but Glasgow's future might be settled before then. As The Herald reveals today, Manchester Airports Group (MAG), the second- biggest operator in Britain, has put together a bid team to acquire Glasgow Airport. If the price and timing were right for Ferrovial, it could divest itself of the airport without waiting for the commission's final verdict. Uncertainty is bad for any business. There would therefore be much to gain from sorting out the airport's future as promptly as possible.

But would MAG be the right fit? BAA says it would like to keep all of its airports but the commission has compiled evidence to show that the operator's near-monopoly in the south-east of England and central Scotland has resulted in a poor level of service for passengers and airlines. A lack of competition has produced a sluggish response to investing in facilities and expanding routes. Crucially, from a Scottish perspective, the commission highlights Manchester Airport, MAG's flagship, as being more responsive to customer needs, in part by expanding and lowering charges. MAG has built a reputation as an airline-friendly operator whose airports offer good transport connections.

BAA has argued, unconvincingly in the commission's view, that capacity constraints at its major airports militate against competition. While capacity is a major issue at the London airports, it is not so at Glasgow and Edinburgh, where there is scope to develop new routes. Edinburgh is growing at a faster rate than Glasgow and appears to be on a firmer footing as it dominates the scheduled domestic business market. Under the right ownership, Glasgow could have a brighter future, particularly if it were able to offer more transatlantic and other charter flights on the back of lower landing charges.

Manchester Airport is owned by the 10 local authorities of Greater Manchester and there would be strategic, planning and "feel- good factor" advantages if a deal for Glasgow were concluded that gave the councils around Abbotsinch a stake in the business. MAG's track record suggests it would seek to exploit the full connectivity potential of the Glasgow Airport Rail Link when completed.

There are outstanding issues that would need to be resolved before any deal. It would not be in Glasgow's long-term interests if it were to become a formal feeder for Manchester Airport under MAG. There would be implications for Prestwick, separately owned, if a resurgent Glasgow, guaranteed the necessary levels of investment over the next decade, were to encroach on the Ayrshire airport's traditional territory. So long as there is a satisfactory solution to these issues, MAG might put up the most convincing case.

Originally published by Newsquest Media Group.

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