Is the aviation market around London ‘competitive’?

In the past London’s main airports were owned by the public; airports provided a public service. Not any more. UK airports are privately owned, mainly by huge foreign consortiums. Even the Civil Aviation Authority, which supposedly helps oversee the procedures and practices of everything planes is majority owned by the same set of aviation investors. There’s a huge question mark over what, post Margaret Thatcher, we actually have left in terms of the UK aviation market. Can it be said that UK airports operate in a free aviation market in full competition with each other?

Heathrow remains in the ownership of the Ferrovial-led consortium since first being sold. The BAA name was dropped and the company is now known simply as Heathrow Airport Ltd. That sale left many in the civil service establishment unhappy: partly because the purchase was helped by an EU tax loophole. The Competition Commission was duly wheeled in for the sale of Gatwick and Stanstead, and while Luton remains in ownership of Luton Borough Council it’s managed by the Spanish firm Aena.

Gatwick Airport Ltd (GAL) was sold in December 2009 to a consortium led by Global Infrastructure Partners. GIP since sold 58% of GAL to a variety of foreign investors, including the Abu Dhabi Investment Authority. After much legal argument, BAA sold Stansted Airport to the Manchester Airport Group in February 2013. It’s this particular finance group that Boris hoped would back his estuary airport scheme – but they have been a little reluctant to throw their full weight behind his PR machine. Wonder why? It’s because they nearly went bankrupt building a second runway at Stanstead, which so far far hasn’t given them much by way of reward.

Suffice to say that we now have a situation where there is in fact little competition between the London airports. Except of course in terms of the decision of the Davies Commission i.e. the final big sell off deal. What we have is what economists term ‘imperfect competition’ – (and perhaps a salute to Karl Marx?) – just a couple of really big players completely dominating a comparatively small aviation arena.

If you are thinking of taking that holiday of a lifetime my advice is do it sooner rather than later. With the Davies commission to deliver another London runway the competition isn’t particularly fair, and nor does it matter who wins in terms of the economics of general public service. My guess is that aircraft travel is all set to become much, much more expensive pretty much as soon as Davies’s decision is announced.

 

(Posted with thanks and acknowledgement to Brendon Sewill, author of Who would pay for a new runway? March 2014 for Aviation Environment Federation (AEF).)

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