Tim Worstall

Breaking up BAA

Randall’s right: BAA should indeed be broken up. That Heathrow, Gatwick and Stanstead are owned by the same company is absurd.

There is one further thing though, rolling around the back of my head. Way back when, when the Ferrovial bid for BAA was first being mooted, I seem to recall that someone said the airports might be worth more separately, rather than as the current near monopoly. Quite why the writer (or who they were) thought this I can’t remember but I thought it an odd assertion. Be interesting if it were true though….

In

9 responses

  1. Serf Avatar
    Serf

    If the company were split up, the regulator may give the resultant competitors far more leeway than he does currently.
    As competitors they would also presumably be able to make investment decisions more easily, without having to worry about cannibalisation. This would benefit the sector, and may make all the businesses more successful.

    Reply
  2. Surreptitious Evil Avatar
    Surreptitious Evil

    Yes, please. And can we actually have them run by people interested in running airports instead of a bunch of sadistic researchers looking at:
    1. The effects of introducing deliberate inefficiencies into queueing theory &
    2. The psychological breaking strain of the modern British business traveller.
    What I still find difficult to believe is that Heathrow which, once you are there, more or less functions, is run by the same cretins that have turned Stanstead, Gatwick and, to a lesser extent, Edinburgh, into such effective outposts of Purgatory.
    S-E

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  3. Roger Thornhill Avatar
    Roger Thornhill

    Anyone who reads my posts will know I am against monopolies and BAA is a stinker of one.
    We not only need BAA broken up, but a NEW AIRPORT in the Thames estuary at Cliffe liked to London, Britain and Yerp by direct high speed rail.

    Reply
  4. John Middleton Avatar
    John Middleton

    It would also really piss the Spanish off 😀

    Reply
  5. john b Avatar
    john b

    S-E – you what? Gatwick has always been awful, true, but Stansted and Edinburgh are nice airports and Heathrow is a horrible, horrible place…

    Reply
  6. Bruce G Charlton Avatar
    Bruce G Charlton

    Hmmm.
    I would have said yes to this idea a few years ago – but having read in Thomas Sowell about the way these kind of antitrust laws work in real life, I wonder.
    The explicit aim is to increase competition.
    In practice, antitrust laws are often used against organizations who have won in market competition, by the losers in markets. So instead of being rewarded for giving the public what they want, the market winners are punished.
    The excuse for this is always market failure. But this is largely in the eye of the beholder. If it is true, then by far the best remedy is to facilitate competition – in this instance, make sure it is possible for rivals to open more airports around London.
    If they could open rival airports but they don’t, maybe it is because they can’t – because the rivals are less efficient/ more expensive than BAA and don’t (or can’t) raise money to compete with them. (If BAA are really inefficient, it ought to be easily possible to raise money to open a more efficient airport under their noses, and steal away their business.)
    At any rate the optimal remedy stands: make sure others can enter the market; but *don’t* get the state involved in fixing the market. Government won’t fix it – but they might use the fixing excuse to allocate favours to their supporters or to buy votes.

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  7. Tim Newman Avatar
    Tim Newman

    You know that Heathrow has turned into a thrid world airport when people from the UK flying to Sakhalin prefer to go through a regional airport and transfer at Moscow Sheremetovo than go through Heathrow and Narita.

    Reply
  8. bgp Avatar
    bgp

    Bruce, The problem is, it’s a privatised state monopoly, not a company that has gained dominance by outcompeting the others. And the state retains control of whether others can enter the market – given the externalities, this is probably unavoidable. Yours might be a fair point in some circumstances, but not this one.
    Tim, If they had been worth more separately, that would presumably imply that competition was not driving margins down, which would undermine the rationale for splitting them. I don’t think you can have your cake and eat it on this. Settle for the main point.

    Reply
  9. Max Avatar
    Max

    The FT has been reporting that Ferrovial will announce the sale of Gatwick on Monday.
    I’m not about to defend the lack of basic standards at Heathrow, but I do think that this is a problem of the governments making – by capping landing fees well below market rates at Heathrow, BAA could only grow revenues through investing in retail rather than passenger facilities.

    Reply

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