A crush of passengers at London's Heathrow airport in August 2006. Regulators may force the sale of three of the seven airports managed by the BAA. - Contributed

Britain's competition watchdog said Wednesday it may force airports operator BAA to sell three of its seven airports around the country - including two in London - following fierce criticism of the company for poor customer service, overcrowding and long delays.

The interim report from the Competition Commission, which argues that problems at London's Heathrow, Gatwick and Stansted airports are a result of BAA's monopoly, was harsher than the industry had expected.

The commission said that significant competition issues arose from BAA's common ownership of the seven airports, which are rounded out by Edinburgh, Glasgow and Aberdeen in Scotland and Southampton in southern England.

"This is evident from a large number of factors, including its lack of responsiveness to the needs of its airline customers and a lack of initiative in planning capacity," said Christopher Clarke, chairman of the inquiry.

Service quality

"This has resulted in investment that is not tailored to the requirements of airport users and lower levels and quality of service for both airlines and passengers."

The commission will now hold consultations with industry players on which two of BAA's London airports should be sold and which one of Edinburgh or Glasgow should be divested, before it announces its final decision in the first quarter of next year. It will also discussing potential changes to the regulatory framework to improve competition.

Several airlines have long been pushing for the break up of BAA's stranglehold on Britain's airports. The company handles about 90 percent of passenger flights taking off or landing in southeast England and 63 percent of all flights to and from Britain.

"Monopolies clearly don't work and the BAA monopoly has done huge damage to competition and the traveling public, and it is high time it was broken up," said Jim Callaghan, director of regulatory and legal affairs at budget carrier Ryanair Holdings PLC, adding that Stansted was the most expensive of the 150 airports that Ryanair uses throughout Europe.

Virgin Atlantic said the interim report was a "major victory for passengers".

BAA, however, was defiant, saying that it has no intention of selling Heathrow, Europe's largest airport.

Heathrow has been the target of the most virulent criticism from passengers after the botched opening of Terminal 5 earlier this year, when a glitch in the baggage handling system led to thousands of lost bags and hundreds of cancelled flights.

Competition Commission

"This is not the end of the Competition Commission process," said Colin Matthews, BAA's chief executive.

"We will continue to point out to the commission the many areas where we believe its analysis is flawed and its remedies would be disproportionate and counter-productive."

Shares in BAA's owner, Spanish construction company Grupo Ferrovial SA rose 0.5 per cent to euro33.53 (US$49.35) on the Madrid Stock Exchange.

The sale of airports could be a vital cash injection for the company, which took on around US$20 billion in debt to buy BAA in 2006.

Among the potential buyers for BAA airports are the Manchester Airport Group and Global Infrastructure Partners, the joint venture between Credit Suisse and General Electric's GE Infrastructure fund, which took a stake in London City airport in 2000.

Runways

Analysts also named Germany's Hochtief, which bought Budapest airport from BAA, and Australia's Macquarie Group, which owns Brussels and Copenhagen airports.

BAA's Matthews said that the commission risked delaying the delivery of new runways that would improve customer service at the airports. New runway capacity is currently scheduled for Stansted in 2015 and Heathrow in 2020.

He added that BAA would seek "urgent clarification" from the government about how the commission report could be reconciled with the government's own review of regulation at airports.