"American Airlines Says U.K. Should Split BAA's Airport Monopoly"

Wednesday, November 28, 2007

American Airlines Says U.K. Should Split BAA's Airport Monopoly 
By Tracy Alloway
Bloomberg


American Airlines Inc. said the U.K. should break up BAA Ltd.'s monopoly
over London airports including Heathrow and Gatwick because the services are
so poor that carriers are shifting flights to other cities. 

``The only thing worse than a public monopoly is a private monopoly,'' said
Don Langford, managing director of services in Europe and India for American
Airlines, which is owned by AMR Corp. ``Heathrow is so bad that we've
shifted some capacity. There's peeling paint, missing light bulbs, duct tape
on the floor and all manner of poor housekeeping in our terminal.'' 

The comments at a Parliament hearing in London add to pressure on BAA as
Britain's Competition Commission considers a forced breakup while the Civil
Aviation Authority reviews the prices it charges to airlines. 

Prime Minister Gordon Brown's government has joined City of London
financiers and company executives in criticizing BAA's stewardship of London
airports after Grupo Ferrovial SA of Spain bought the company last year. 

At a hearing of the House of Commons Transport Committee today, British
Airways Plc and EasyJet Plc also criticized BAA but stopped short of backing
calls for a breakup. The committee of lawmakers started an inquiry in
October and has the power to make recommendations to government. 

BAA Defense 

BAA, the world's biggest airport operator, defended its performance, saying
it is struggling to cope with years of underinvestment. 

``We have much to do in terms of improving our service, and we are making
those improvements,'' BAA Chief Executive Officer Stephen Nelson told the
committee. The company has cut waiting times at security checkpoints and is
hiring more staff, he said. 

British Airways, the biggest user of Heathrow, is now ``not sure'' whether
BAA should be broken up, said Paul Ellis, general manager of infrastructure
policy and economic regulation for the airline said. 

In December last year, British Airways said it welcomed the possibility of
splitting up BAA. 

``You have to react as the circumstances change. If that means that we have
to change our position then that's the case,'' Ellis said. ``There's clearly
not enough teeth in the regulatory process at the moment.'' 

EasyJet spokesman Toby Nicol said BAA needs better regulation, not a
breakup. The airport operator currently is allowed a regulated return on
investment from its airports, meaning the more it spends the more profit it
makes, Nicol said. 

`Spend, Spend, Spend' 

``It's allowed to just spend, spend, spend, and we have to pick up the
bill,'' Nicol said at the hearing. BAA's profit margin is so big ``that it
would make Tutankhamen blush,'' he said. 

Breaking up BAA's ownership would lead to ``mini- monopolies,'' Nicol said,
since the individual airports would still dominate their regions. 

The Competition Commission said in August it will start an investigation
into whether BAA's ownership of seven U.K. airports allows it to inflate
charges while providing lower levels of service. If the commission finds
that BAA's common ownership or regulation restricts competition, it can
force the company to sell one of its airports or change the rules that
govern it. 

Currently, the company is regulated by the CAA with input from the
commission. The commission will publish its thinking in early 2008 and
provisional findings in August. 



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