August 24, 2008
The Battering Taken By BAA is Enough to Give Any Chairman Air Rage
By Margareta Pagano BUSINESS EDITOR
The Competition Commission's report is ill timed and ill conceived, blaming the airports authority for a situation beyond its controlSir Nigel Rudd was seething on the grouse moors when I spoke to him on Friday after one of his most infuriating weeks since taking over as BAA chairman a year ago. A fine shot, Sir Nigel says he wasn't thinking about Christopher Clarke, who chairs the Competition Commission inquiry which so annoyed him, when he took aim at the grouse.
As always, Sir Nigel remains polite. But he's still furious, describing Clarke's findings as "flawed, ill thought out and damaging to the future of Britain's airport industry."
He is right. If I were him I would be more damning of the report which has not only ordered BAA to sell off Gatwick and Stansted but claims the airport operator is to blame for the UK's lack of capacity. This is simply not true, as airport expansion is controlled by the Government, and in the case of Gatwick, BAA is prevented from building a new runway until 2019.
Nor am I the only one who doesn't fully understand all Clarke's arguments or who finds the regulatory issues unnecessarily complex - there were as many transport bankers still scratching their heads last week as aircraft stacking at Heathrow. Here's one inconsistency: the report agrees that competition between Heathrow, Gatwick and Stansted is likely "to be constrained, at least in the short term, by limitations on capacity". This is precisely BAA's argument: that it's not lack of competition between airports causing congestion and delays at Heathrow and Gatwick but capacity restraint.
There is also the issue of what constitutes the real market - the domestic or the international one? Heathrow's competition, as Sir Nigel says, does not come from Gatwick or Stansted but from "fast- emerging super-hubs across Europe and the Middle East. Paris or Schiphol - which have four runways each - could act as Britain's hub and would be delighted to do so."
One of the ironies of the report could be that the changes could usher in new monopolies and concentrations of new mini-hubs that could also be deemed anti-competitive. For example, should Fraport, Frankfurt's main operator, be allowed to bid for Gatwick or should the owners of London City, already bidding for Southend, be allowed to bid for Stansted, which has a growing number of business passengers? We all admire Michael O'Leary for his brilliance at running the cut-price Ryanair. But should he be part of a consortium running Stansted - and would easyJet let him? I'm not so sure, though O'Leary's ideas for improving airports should be taken on board.
The last thing BAA wants is a forced sale in these troubled markets. Neither do the buyers - most bidders, other than cash-rich sovereign funds, are equally stymied by the credit crunch. BAA is reviewing its options - if a good offer came along for either Gatwick or Stansted it would probably sell.
Equally, it may seek to delay the process in the courts by appealing against any decisions made by the Competition Commission in its full report next year. It may be that BAA is crying crocodile tears as it has always known that selling one of the three London airports was on the cards. But the commission's intervention does seem unfair now that Sir Nigel and his new chief executive, Colin Matthews, are in place and a proper, long-term strategic plan could be implemented. The timing couldn't have been worse.
Reading between the lines, it's not likely Clarke will let BAA off the hook. He's drawn blood, giving BAA the mauling the public and the media wanted after the Terminal 5 fiasco, and punished it for airport congestion.
My crystal ball is a little cloudy. But there is no doubt that the Commission's report has raised as many questions as it sought to answer. The future of Britain's airports - including the need for new runways at Heathrow and Gatwick - deserves a far-more sophisticated and long-term solution than this report sets out.
Wounded Woolworths needs a cool dose of Walker's chutzpah to recover
Woolworths is one of my favourite shops. I love the cheerful chaos of the pick'n'mix sweets next to the DVDs, cut-price garden chairs or children's games. There always seems to be a bargain to be had: jumbo notebooks for 1, or three wooden hangers for 2.
Actually, I am wrong. According to some of the industry's top analysts, Woolies is no longer cheap - you can get better deals just about anywhere else. Nor is it the right shop to be selling mobile phones or other gadgetry. It can't compete on price, and it certainly doesn't have the technical know-how.
And that's the main reason why the 815 Woolworths stores are in such trouble. It's also why analysts reckon the chain could be heading for a 30m loss this year. Woolworths has always been about price, going back to its US origins in the 1870s. Frank Woolworth opened his first store in 1879 - filled with five-cent merchandise. Until then most stores did not display prices, leaving the customer to ask, and the assistant to decide on the amount.
Woolworths also knew that you had to be in the centre of town - and that your customers had to know the reason why they were going. About 700 of its shops are in town centres, and those in small market towns do very well - but, even so, only four million people visit its shops a week, buying an average basket worth 7.50. That's much too low.
Iceland's Malcolm Walker thinks he has the answer to bring back customers - and get them spending more. Looking at his track record, he probably could pull it off. A retailer to the bone, he has done the most fantastic job in turning around the frozen-food chain. Many of the things he did are obvious: he got rid of hundreds of product lines, cut head-office numbers, restored morale, cleaned carpets, trained shop assistants to smile, and gave store managers a decent pay rise.
But just because such changes are obvious, doesn't mean they are easy. Woolies needs someone with chutzpah, passion and energy. Walker has all of that. Let's hope he has the chance to give it a go.
Katherine the Great can't resist conquering Dundee
It didn't take long for top fund manager Katherine "the Great" Garrett-Cox to be lured back into the fast track. Garrett-Cox is taking over as chief executive at Alliance Trust, the Dundee-based investment manager she joined a little over a year ago from her high- profile Morley job in pursuit of a better "lifestyle". The slow road may not have been all it's cracked up to be for someone with four children under nine. As she says, her childcare arrangements are "probably a little more complicated than fund management". Just as interesting is how adept women are at investment, something we've known for years but the academics now confirm. A University of California study showed that women take a broad approach, investing in companies that are ethically sound as well as successful and thus a better long-term bet. It also found that men trade their portfolios 45 per cent more than women - churning rather than earning.
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