After a long legal battle, Stansted Airport has been sold to Manchester Airports Group (MAG). The Essex airport was previously owned by Heathrow Airport Holdings (HAH), formerly BAA.
Seven become four
The deal follows HAH's sale of Gatwick Airport in 2009, and of Edinburgh Airport in April 2012. The three sales were ordered by a 2009 Competition Commission report, following an investigation by the Commission into the competition law implications of BAA's ownership of seven UK airports, including three of its biggest - Heathrow, Gatwick and Stansted.
The Competition Commission is an independent public body that helps to ensure healthy competition between businesses in the UK for the benefit of consumers and the economy. When the 2009 report was published, BAA's ownership of all of Britain's major airports was having a negative effect on both, says Rory Taylor of the Commission: "There was no competition. If [passengers and airlines] were dissatisfied with the deal they were getting from one of the airports, they didn't really have the choice to go somewhere else as all the airports were owned by the same people."
Rory adds that this problem manifested itself in a number of different ways, on small details like customer service standards, and also on big issues. For instance, decisions about future investment in BAA's airports, particularly increases in airport capacity, were being governed by the fact that the owner of the UK airport in question also owned a large number of others. "BAA was taking a sequential approach to capacity," says Rory, that is, increasing it at each airport in turn rather than simultaneously, "which is not what would happen with separate airports; you'd have them all pushing. It was a company behaving in a different way because it owned its competitors to how it would be behaving if it were making decisions solely based on what was good for an airport and on attracting customers to that airport."
Power of sale
After the publication of the Commission's report and its decision, BAA mounted a series of legal challenges that led to hearings both at the Competition Appeal Tribunal, a review body with the power to overturn decisions made by the Commission, and the Court of Appeal, the main appeal court of England and Wales.
Resisting the Stansted sale, BAA argued that Stansted and its main other airport Heathrow catered to different markets. It also said that the decision of the coalition government in 2010 to rule out a third runway at Heathrow changed the business landscape in which the UK's airports operate significantly enough to make the Commission's decision invalid.
All its arguments were rejected, however, and the upholding of the Commission's decision can be seen as a confirmation of the extent of its legal authority: "This is the first big breakup of a company the Competition Commission has done under the powers given back in 2003/4, which enabled us to look at a particular market and, if necessary, take some direct action to rectify that market," says Rory. "What happened to BAA shows the sort of powers we've got - extensive powers, but ones we use very carefully."
Following the settlement of the competition law issues, several leading City law firms advised on the sale of Stansted. Seller HAH was advised by Freshfields, and also by Herbert Smith on the real estate and planning aspects of the transaction. Slaughter and May advised buyers MAG, and Allen & Overy advised the banks and financial institutions providing funding to MAG to finance the deal. The Commission itself was advised on the corporate law aspects of the sale by Bristol-headquartered Burges Salmon.