BAA told to sell two London airports : US Business

By John Bowker

LONDON (Reuters) - Airports operator BAA, owned by Spain's Ferrovial , received a tougher-than-expected ruling from Britain's competition regulator on Wednesday, which said it should sell two of its three London airports because of problems created by its near monopoly.

Along with two of its London airports -- Heathrow, Gatwick and Stansted -- BAA should sell either Edinburgh or Glasgow, cutting its portfolio of British airports to four from seven, the Competition Commission said on Wednesday.

The ruling will be subject to a consultation process, but is likely to be rubber-stamped by the Commission in a final report due early next year.

It comes just two days after Ferrovial finalized refinancing of some 13.3 billion pounds ($24.79 billion), most of it money used to buy the airports in June 2006.

"There are significant competition problems arising from BAA's common ownership of seven UK airports. This is evident from .. its lack of responsiveness to the needs of its airline customers and a lack of initiative in planning capacity," inquiry chairman Christopher Clarke said in a statement.

The Commission also criticized Britain's planning process, which is crucial to long-running proposals to expand Heathrow and Gatwick, its government policy and regulation under the Civil Aviation Authority (CAA).

Airlines including British Airways and easyJet had called for tighter regulation.

The report was widely expected to recommend a break-up after a preliminary study in April found that under a single owner there was no competition among some of its airports.

However, it was anticipated that two airports at most would be put up for sale.

BAA, formed in 1965, owns the London trio of airports, three in Scotland, and Southampton.

London's five airports include Luton, owned by Spain's Abertis , and London City, bought by American International Group and other investors in 2006.

Owner Ferrovial has come under fire from British politicians and airline bosses for delays and poor service at Heathrow and Gatwick in the past two years, culminating in the bungled opening of Heathrow's Terminal 5 in March.

BAA responded to the ruling by saying the call for airport sales could delay the building of new runways.

"By calling not just for a fundamental restructure of BAA but also for a review of the Government's Air Transport White Paper, the Commission risks delaying that delivery of new runways and making better customer service less, not more, likely," BAA Chief Executive Colin Matthews said.

(Additional reporting by Ben Harding in Madrid; Editing by Jason Neely)

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