On 30 June 2006, the Office of Fair Trading (OFT) announced that it would carry out a study under the Enterprise Act 2002, to consider the UK airports market.

Having completed this study and consultation, in April 2007 the OFT formally referred BAA to the Competition Commission (CC) and invited the CC to investigate the supply of airport services within the UK under section 131 of the Enterprise Act 2006.

Since then, we have made over a thousand submissions to the CC. We responded to the CC's statement of issues in September 2007 and its Emerging Thinking in May 2008.

Our response to CC initial findings

Competition Commission website

• BAA's ownership of seven* UK airports does not distort competition.
• Planning and development restrictions have had a much greater impact on preventing, restricting and/or distorting competition.
• The regulatory framework within which we work is a feature of the airports market that prevents, restricts or distorts competition.

The CC published its provisional findings in August 2008 and provisional remedies on December 2008. The final decision has to be made by March 2009.

Some of the main documents BAA has published can be found here:

BAA/CC2008/099 – BAA’s initial submission

BAA/CC2008/500 – BAA's response to CC's issues statement

BAA/CC2008/800 – BAA's response to CC's emerging thinking

BAA/CC2008/650 – BAA's response to CC's allegations

BAA/CC2008/1066 - Strategic policy overview

BAA/CC2008/1109 - Comments on British Airways response to Emerging Thinking

BAA/CC2008/1119 - Response to allegations made by Ryanair

Responses to CC’s working papers:

BAA/CC2008/930 - Market Definition

BAA/CC2008/936 - Scottish Substitutability

BAA/CC2008/948 - Potential for competition

BAA/CC2008/949 - Benchmarking

BAA/CC2008/954 - Profitability and Investment

BAA/CC2008/961 - Switching

BAA/CC2008/969 - The Planning System and Airports Policy

BAA/CC2008/998 - Airline Yields

Under an Act of Parliament, our regulators – the Civil Aviation Authority (CAA) and the Competition Commission – review price caps at our three London airports every five years (known in this context as a quinquennium). The review covers two major aspects of our business:

• Annual increases in revenue from airport charges per passenger restricted to not more than the rate of inflation (Retail Price Index) plus or minus x percentage points
• Our conduct in relation to customers, business partners and suppliers. The regulator is required to ensure that the company does not act in a way that might work against the public interest.

The CAA has completed its review of prices at Heathrow and Gatwick. Copies of the decision document can be found on the CAA website.

The quinquennial review of prices at Stansted is currently underway. Before the CAA can set new price controls, it has to refer BAA to the Competition Commission.

The Commission's investigation is currently in progress (more information can be found on their website) and it is expected to report back to the CAA in October 2008.

Related links

BAA/CC2008/750 – BAA’s main submission to CAA on Stansted

BAA/CC2008/1080 - Response to working paper on Assessment of competition at Stansted Airport

BAA/CC2008/1120 - Response to CC paper on Assessment of LRAIC-based Price Cap

CAA's referral of STN to CC

BAA welcomes the DfT's review of economic regulation, which comes 22 years after the Airports Act was written. This is a good opportunity to review the regulatory regime.

In BAA's initial submission to the DfT, we emphasise three main points:

• There are valid lessons to be drawn from other sectors, however the differences between airports and other sectors should be clearly understood and reflected in any outcomes
• The institutional framework needs to change. There is no clear alignment around airports expansion policy or environmental policy Regulation must be considered as a spectrum
• Heathrow's unique role as a hub must be understood in terms of how it should be regulated. The need for regulation at the other airports seems less clear.

Related links

BAA/RER/001 - BAA's response to the DfT’s review of economic regulation

DfT website

*At time of publication BAA owned seven UK airport - London Gatwick was sold on 3 December 2009 and therefore BAA now owns six UK airports.

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