UK to force Ferrovial to sell two more airports
By Chris Sleight20 July 2011
Spanish contractor Ferrovial's UK airport operating subsidiary, BAA will be forced to sell two more airports, following a ruling from the government's Competition Commission (CC). The decision, which the CC says will benefit customers by creating more competition in the UK airport sector, has been greeted with dismay by BAA, which says it will consider a judicial review of the decision.
Chairman of the CC's BAA Remedies Implementation Group, Peter Freeman said, "We hope that the sales can now proceed without delay so that passengers and airlines can start to enjoy the benefits of greater competition. Our report has been challenged, reviewed and upheld and it is clear that the original decision to require BAA to divest three airports remains the right one for customers."
However, BAA chief executive, Colin Matthews reacted by saying, "We are dismayed that the Competition Commissions final decision still requires BAA to sell Stansted and either Glasgow or Edinburgh airport. The competition Commission has not recognised that the world has changed and BAA has changed. This decision would damage our company, which is investing strongly in UK jobs and growth. We have a responsibility to protect our shareholders investment and we will now consider a judicial review of the Competition Commission's decision."
A consortium led by Ferrovial acquired BAA in 2006 for UK£ 8.6 billion (€ 9.8 billion), which at the time owned London's three largest airports - Heathrow, Gatwick and Stansted as well as regional airports in Aberdeen, Bristol, Edinburgh, Glasgow and Southampton. Later that year following the acquisition, one of Ferrovial's partners, Australian infrastructure investor Macquarie, exercised a call option to acquire Bristol Airport for UK£ 106 million (€ 121 million).
In 2009 a CC decision forced Ferrovial to sell Gatwick airport to investment company Global Infrastructure Partners r UK£ 1,5 billion (€ 1,7 billion). BAA has since voiced its frustration at having to sell this asset at a low-point in the markets. It says that just 15 months after the acquisition, Gatwick's new owners could afford to pay themselves a UK£ 350 million (€ 398 million) dividend, highlighting the fact that the forced sale had damaged BAA's shareholder value.
It seems likely to challenge the latest decision on the grounds that its two remaining London airports, Heathrow and Stansted, serve different markets, with Heathrow being a hub airport serving 'flag carrier' airlines, while traffic at Stansted is dominated by newer budget airlines.