BAA loses fight to keep Gatwick and Stansted

London airports will be sold along with Edinburgh

BAA, the airports operator, has failed to persuade the Competition Commission that it should be allowed to hang on to Stansted and Edinburgh, as well as Glasgow and Heathrow.

The Competition Commission confirmed yesterday that, subject to a final consultation process, it will require BAA to sell Gatwick and Stansted, as well as Edinburgh.

The commission reached its preliminary conclusion, that BAA's ownership of seven airports constitutes market dominance not in the best interests of passengers or airlines, in August. The following month Ferrovial, the Spanish owner of BAA, put Gatwick up for sale, in an attempt to present itself as "pragmatic" and allow it to hold on to Stansted as well as Heathrow.

But the commission is sticking to its guns. "The most effective way to introduce competition in the South-East and in lowland Scotland is to require the three London airports and the two principal Scottish airports to be separately owned," Christopher Clarke, the chairman of the commission's BAA airports inquiry, said yesterday. "Under the common ownership of BAA, there is no competition. Under separate ownership, the airport operators, including BAA, will have a much greater incentive to be far more responsive to their customers."

But BAA will continue to make its case to the commission, both with regards to Edinburgh and Stansted. There is no "substantial evidence" that Edinburgh and Glasgow would compete under separate ownership, and no justification for specifying which should be sold, the company says. It also warns that the sale of Stansted will put back the building of a much-needed second runway.

Colin Matthews, the BAA chief executive, said: "We do not believe that [the commission] has set out compelling evidence to support its view that selling Stansted as well as Gatwick will increase competition, and we remain concerned that its proposed remedies may actually delay the introduction of new capacity."

The commission is inviting responses to its findings by early January, with a view to producing a set of definitive final recommendations in the early part of the year. The report also puts forward significant changes to airport regulation. The Government should adopt a licence-based regime – imposing a set of duties and giving the Civil Aviation Authority (CAA) greater powers. And the CAA's primary objective should be altered so that the interests of consumers are its first priority.

The proposals are warmly backed by the watchdog, which has been calling for a new approach for some time.

Airlines also support the plans. A spokesman for British Airways said: "It's a step towards creating the right conditions for providing the good service quality standards, cost efficiencies and infrastructure improvements that passengers and airlines need."