On 30 June 2006 the Office of Fair Trading (“OFT”) announced that it had launched a study into the UK airport market to assess how well the current structure works for consumers.  This follows its announcement at the end of May that it was considering whether to launch a market study. 

The OFT has a public duty to monitor the markets and review markets that may not work well for consumers. 

John Fingleton, the chief executive of the OFT, commented:

“Greater competition between airlines over the past decade has led to wider choice for air travellers and lower fares.  We now think it is time to explore the potential for greater competition within the airport industry as this could ultimately yield significant benefits in terms of timely and adequate investment in UK airports, a better value service to the UK travelling public as well as potentially relieving the industry – and ultimately its customers - of the costs of regulation that may be disproportionate.”

The main factors the OFT took into account in deciding to launch the market study were:

  • The importance of airports to UK productivity and consumers - the market turnover for 2004 for UK airports was £2.56 billion
  • The high local market shares of BAA and Manchester Airport - almost two thirds of passengers start or end their journey at BAA airports, this number rising to 9 out of 10 in London, and 8 out of 10 in Scotland
  • The need for significant investment in new airport infrastructure - a Government White Paper identifies strong predicted growth in demand.  Investment might be hindered by regulation, competitive pressure or planning restrictions
  • The potential for identifying remedies of any competition concerns
  • The OFT finds itself best placed to undertake this study

The OFT aims to focus its study on the scope for benefits arising from enhanced competition amongst airports (e.g. via divestment of airports) or from enhanced competition within airports.  In doing so, it will also consider the potential for greater competition amongst airports or terminals, the potential benefits of enhanced competition both in the short term and the long term and any constraints which may limit increased competition.

The OFT hopes to conclude the study by late 2006 and it may thereafter refer the matter to the Competition Commission.  Other possible outcomes to the market study include: giving the market a clean bill of health, encouraging firms to take voluntary action and investigation and bringing enforcement action against companies suspected of breaching consumer or competition law.

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