The end of BAA's monopoly?

This week I will be talking about a story that will possibly lead to substantial changes in the way airport businesses are conducted here in the UK. Gatwick’s sale negotiations seem to be coming to a deal as BAA’s appeal hearing is just a week away.

The company, which has maintained a 40-year monopoly of London’s main airports, might have already sold LGW by October 19, when The Competition Appeal Tribunal hearing is due, and although Gatwick negotiations are well advanced, BAA will appeal over the order to sell some of the other ones it owns (Stansted and either Glasgow or Edinburgh).

Ferrovial, Spanish infrastructure company controlling BAA, is expecting a deal of about £1.6 billion and an investment fund started by Credit Suisse and General Electric is said to be the most interested. Global Infrastructure Partners (GIP), as it is called, already runs London City Airport and offered 1.36 billion pounds earlier this year. This time, however, both parts seem to be moving to a final deal, which will finally meet Ferrovial’s price and conditions.

In the financial media I could find three different approaches to this story. I found it at the Financial Times, the Telegraph and The Sunday Times.

As careful and clear as it could be, the FT correspondents in London and Madrid gave me a broad view of this story, attempting not to speculate about it. They explain the past events surrounding the negotiation and mention the possible acquisition by GIP, though they also alert about another bidder that is still being considered by Ferrovial. The article finishes with a brief preview of how the deal would positively affect BAA’s troubled finances.

The Telegraph chose a similar style but it actually published a smaller article for this story. It tells straightly about the bidding process so far by GIP and its anticipated move for LGW this week, including a quick description of BAA’s appeal over the Competition Comission’s decision that is coming up.

Finally, The Sunday Times was the one that mostly called my attention, since its article relates the story as if the negotiation was decided by now. It basically focuses on how the GIP acquisition will take place. Thus, it showed to be a pretty biased piece of news as its journalist is not very careful about telling how the negotiation has been going. Mr. O’Connell leaves the date for the deal as uncertain – even though speaking about “the next few days” – and mentions the possibility of the talks falling through. On the other hand, he surprised me by telling in one the first lines: “The new owner and operator of the airport will be Global Infrastructure Partners (GIP)”.

Therefore, after reading these three sources of financial media my opinion is that a deal between BAA and GIP seems to be imminent. Since May, when the other bidders abandoned the “race” to Gatwick, it is now the moment that is felt to be closer to a final deal and, to be honest, my view is that it will probably be a good thing for everyone. BAA will solve one of the orders of the Competition Commission and will find a way to meet its existing bank debt that is due in March. For the GIP, they will then be in control of two important airports in Britain, which is expected to stimulate the competition against BAA and finish the monopoly that lasted 40 years and proved not to be positive – with the resolution of the CC to force BAA to pass the control of some airports in order to improve passengers and airlines’ services. Thus, for me, as a traveler that did not have a great experience in LGW, the long-run outcomes of a successful negotiation look as bright as a clear sky.


The Sunday Times:

http://business.timesonline.co.uk/tol/business/industry_sectors/transport/article6869413.ece

Telegraph:

http://www.telegraph.co.uk/finance/newsbysector/transport/6300422/Gatwick-sale-back-on-as-talks-progress.html

Financial Times:

http://www.ft.com/cms/s/0/fbf07dd0-b68d-11de-8a28-00144feab49a.html