CMA says BAA breakup shows how competition leads to benefits while adding further gains can be realised if runway capacity restraints can be lifted
The breakup of BAA is an example of how competition can lead to benefits for business and personal customers, the Competition and Markets Authority (CMA) has said, while adding further gains can be realised if runway capacity restraints can be lifted.
The CMA published an evaluation of the decision to break up BAA, which found a range of improvements that led to benefits for customers and businesses.
Following an investigation by the CMA in 2009, BAA sold Gatwick, Edinburgh and Stansted airports, which led to passenger growth over and above levels observed at comparable airports, as well as improved service quality, increased investment and innovations to maximise limited runway capacity.
Read more: Business groups rally on government again after Heathrow accepts conditions for expansion
"Our assessment has confirmed that with the freedom to make independent commercial decisions to attract passengers and airlines, the airports now under separate ownership have taken a very different approach from their predecessors. It shows just what a competitive environment and the need to be responsive to customer needs can deliver," said CMA chief executive Alex Chisholm.
"We have been told by those we spoke to that many of these changes would not have happened under monopoly ownership."
Independent estimates in the report suggest the quantifiable benefits associated with the remedies, relating to the benefits from increased passenger numbers such as improved connectivity and choice and downward pressure on fares, would reach around £870m by 2020.
However, Chisholm also said that if further gains are to be realised, airport capacity needs to increase.
"These changes are strong examples of how competition can bring a more dynamic and innovative approach, benefiting business and personal customers. Further gains for customers from competition can be realised if runway capacity restraints can be lifted," he said.
Read more: Exasperated business bosses want second runway at Gatwick if Heathrow expansion faces further delays
David Leam, infrastructure director of London First, made the point more strongly. He told City PM: "Competition has been fantastic for passengers. Gatwick and Stansted have flourished under new ownership. Now all that’s needed is for the dead hand of government to get out of the way and allow airports to grow."
The CMA report continues to state that although the Competition Commission foresaw the immediate advantages from greater competition between airports, when it made its decision it was also clear the full benefits could only be realised by an increase in runway capacity.
Likewise, Dan Lewis, senior infrastructure policy advisor at the Institute of Directors said: "Competition improves services and drives down costs for customers, so it is no surprise the break-up of BAA has borne fruit. As the CMA says, true competition will be inhibited until we get more runway capacity in the South East, so we urge the government to make a decision as soon as possible following the EU referendum."
It was also today revealed that a cross-party group of 66 MPs have signed a House of Commons motion to say that the decision on airport capacity is "vital for the prosperity of the nations and regions of the UK", and that the government needs to make a final decision on a new runway by the time of the parliamentary break at the end of July.