BAA to sell London Stansted Airport

BAA Ltd., the U.K. airport operator partly owned by Spain's Ferrovial SA, said it would sell London's Stansted Airport, ending a four-year legal campaign to overturn an antitrust ruling aimed at creating more competition in the British air travel market.

BAA said on Monday that it still believes the 2008 ruling by the U.K. Competition Commission fails to recognize that Stansted, north of London airport and northeast of Heathrow airport, serve different markets, but it will now proceed with the sale of Stansted, London's third-busiest airport.

The airport operator had already sold Gatwick, London's second-busiest airport, and Edinburgh Airport to comply with the Competition Commission's concerns over the company's dominance of the U.K. sector. Selling Stansted will leave BAA with a portfolio that includes four U.K. airports: Heathrow, BAA's major asset and the world's busiest airport for international passenger traffic; Southampton in the south of England and Scotland's Aberdeen and Glasgow airports.

"We believe that both passengers and airlines will benefit from the introduction of new ownership and increased competition," said Laura Carstensen, an executive at the Competition Commission.

A spokeswoman for BAA said: "It is very early days in the sales process and no banks have yet been mandated."

Though Stansted's recent operating performance has been poor, with the airport's traffic down 7% to around eight million passengers in the first half of the year, there has been considerable investor appetite for U.K. infrastructure assets, including airports, in recent years.

Stansted has been valued at up to £1 billion ($1.57 billion).

BAA sold Edinburgh Airport to Global Infrastructure Partners LLC in April for £807.2 million after a hotly contested auction. GIP had previously bought Gatwick from BAA for £1.5 billion in late 2009.

On Friday, Qatar Holding LLC, the Middle Eastern country's acquisitive sovereign-wealth fund, agreed to buy an aggregate 20% stake in BAA for £900 million, marking its first foray into the airport sector.

Qatar bought shares held by BAA's holding company, which is controlled by Ferrovial and partners—Britannia Airport Partners LP, controlled by Canada's Caisse de dépôt et placement du Québec, and Singapore's GIC Special Investments—as well as stock held directly by Britannia Airport Partners and GIC. Ferrovial's indirect stake in BAA will drop to 39.37% from 50% as a result of the transaction, which still requires regulatory clearance.

"Despite the sale of Stansted and the uncertainty surrounding London airports generally, Qatar will be attracted by BAA because of its long-term annuity of cash flows," said John Lawson, analyst at Investec Securities. "Heathrow remains one of the most important and busiest airports in the world," Mr. Lawson said.

Manchester Airports Group is seen as a possible buyer of Stansted. MAG owns a handful of U.K. airports, including Manchester, East Midlands, Humberside and Bournemouth.

"Following a strategic review of the group's performance and future prospects, MAG is pursuing two key recommendations: one to explore the opportunity to add a quality airport to the group, and the other to bring in new equity investment as part of the deal," MAG said Monday.

Ryanair Holdings PLC has also expressed interest in buying a stake in Stansted; the budget airline is the main carrier using Stansted Airport. Earlier this month, Ryanair Chief Financial Officer Howard Millar repeated the airline's interest in Stansted Airport, saying it had been approached by a number of groups about joining a bid.

Ryanair declined to comment on any potential interest Monday but said it welcomed BAA's decision to sell Stansted.

"The sale of Stansted into separate ownership will lead to more competition, lower passenger charges, improved passenger services and the rollout of additional and much-needed traffic growth at competitive prices in Stansted," spokesman Stephen McNamara said.

BAA's decision to sell Stansted comes amid growing frustration among U.K. aviation chiefs about government air-transport policy. They have regularly accused U.K. ministers of dragging their feet over a future plan for the industry, saying failure to address airport-capacity problems would see the country fall further behind rivals in competition for lucrative routes to and from fast-growing markets like China and Brazil.

The U.K.'s coalition government is set to launch the latest in a long series of consultations on the country's aviation policy next month amid fears over a looming capacity crunch, particularly in southern England.

Moves to expand London's Heathrow Airport, whose runways operate at full capacity, were scrapped when the government took office in 2010. A third runway has been ruled out until at least the next election in 2015.

Meanwhile, the addition of a second runway at London's Gatwick Airport, as well as further growth of Stansted Airport, also have been ruled out.

(Published by WSJ - August 20, 2012)