Microeconomics Case Study

BAA, UK Airport Operator's Break-up: End of a Monopolistic Reign?

OR

Abstract:
Monopolies are never healthy, they do not help anyone other than the monopolists. BAA, formerly known as the British Airports Authority, was the UK's largest airport operator with seven airports in its portfolio and handling two-thirds of all UK flights. It dominated the south east of England with 90% of all air traffic while in Scotland its share was 80%. However, this commercial dominance was not matched by either high standards of customer service or value for money. On 20 August 2008, after a 16-month long investigation, the UK airline regulator, Competition Commission, ordered BAA's break up which would see the airport operator divesting as many as three airports. The case highlights BAA's cumbersome, complacent structure and its incapability in serving the best interests of its customers. Though the Commission's call for the break up was appreciated by many airlines, the case encourages students to question whether it was the right decision.

Pedagogical Objectives:

• To discuss the challenges involved in the management of airports.
• To analyse BAA's structure and management of UK airports.
• To analyse the impact of BAA's monopolistic hold on UK airports.
• To examine the Competition Commission's decision to break up BAA.
• To understand the impact of BAA's break up on airlines, passengers and BAA's future
• To discuss whether new ownership could fix the UK airport's myriad of problems.

Keywords :  Monopoly, BAA, British Airports Authority, UK Airports, Competition Commission, Airport sale, Ferrovial's mismanagement, Competition, Break up, Airport regulation, Divestitures, London Airports, Ferrovial, Airport infrastructure, Captive market