News: OFT set to study UK airports market
Flights > News > # 832 (30/06/2006)
The Office of Fair Trading (OFT) has announced it is to investigate the UK airports market in order to establish whether passengers get the best possible deal from the current market structure.
Currently nearly two thirds of UK air passengers begin or end their journey at airports run by the British Airports Authority (BAA). In Scotland over eight out of ten air passengers fly from a BAA airport, and within the London area this rises to nine out of ten passengers.
The OFT has not reached a decision on whether a reference for a more in-depth investigation by the Competition Commission is warranted.
OFT chief executive, John Fingleton, said: “Greater competition between airlines over the past decade has led to wider choice for air travellers and lower fares. We now think it is time to explore the potential for greater competition within the airport industry as this could ultimately yield significant benefits in terms of timely and adequate investment in UK airports, a better value service to the UK travelling public as well as potentially relieving the industry - and ultimately its customers - of the costs of regulation that may be disproportionate.”
The news comes as many airlines, including Easyjet and Ryanair, continue to voice fears over the predicted cost of a new runway at BAA’s Stansted airport. The new runway is expected to cost £4 billion, and the airlines claim that this cost will inevitably be passed onto their customers through higher handling charges at the airport.
Easyjet have welcomed the OFT’s decision to look into the British airports market. A spokesman for the no-frills airline said: “The OFT will have its work cut out but this investigation is welcomed and we look forward to this long-anticipated opportunity to ensure that the UK’s airports give better value to the travelling public.”
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Comment:
After the failed opportunity to look into airport ownership as part of the "Future of Aviation" White Paper, which was published at the end of 2003, this Office of Fair Trading study is long overdue. Previous investigations into the market dominance of the big four supermarkets did little to challenge their oligopoly, so it would be easy for the cynics to have little faith in this study. Most passengers are not direct customers of airports - handling fees are collected on their behalf by the airlines, whereas much of the contact with staff at airports is in concession stands, bars and car rental offices. However, airports are able to operate with substantial profit margins, with little prospect of competitors being able to gain much share of the market. This is most notable in London, where BAA's ownership of Heathrow, Gatwick and Stansted enables them to handle over 90% of the capital's flights. The prospect of BAA being taken over by Ferrovial, who already have interests in Bristol and George Best Belfast City airports, will do little to bring in any further competition.
