Competition Commission - Scottish Airports

[Munnyspinner]

The long awaited and much leaked report on the future of BAA has been published today. Whilst the tenor of the report is very much about how BAA has been acting monopolistically and how that's bad for aviation (no surprises there -it was formerly a state controlled monopoloy!) It looks as if Ferrovial have won a much needed concession giving them time to sell - The credit markets are so strapped at the moment that there isn't even enough money around to fund the Gatwick sale let alone all the others.

This has to be good news for the Spanish who must always have considered that the sum of the parts could be greater than the value of the whole they purchased ( pre credit crunch!).

However, with regard to the Scottish Airports I cannot understand the CC thinking. If Either Glasgow or Edinburgh leaves BAA control then it is almost certain that PIK will be forced out of business. Glasgow currently has to balance the need to compete with PIK on price aginst the effect that pricing structure will have on Edinburgh. If they are separated then it will be a free for all. As operators all chase yield surely it is only a matter of time before MO'L takes a bung from Glasgow to relocate from PIK.

Glasgow and Edinburgh are profitable and growing. PIK is losing money because it is so heavily reliant on Ryanair and other LCCs. This might be good news for the flying public but I cannot see PIK surviving for long with only freight and occasional Military ops.

Does anyone else share this concern?

[davidjohnson6]

Munny - I completely understand your concern about the financial viability of Prestwick. However, the current competition in Scotland within the central belt, is Glasgow-Prestwick and (to a limited extent), Edinburgh-Dundee. The 2 BAA airports at Glasgow and Edinburgh do not compete with each other in a significant way.

By ensuring that the 2 principal airports at Glasgow and Edinburgh compete with each other, one should see innovation, quality of service improve and airport fees fall at both airports. Since a very large number of Scottish residents fall within the catchment area of these 2 airports, this should have clear benefits for many people. Since Prestwick and Edinburgh airports are roughly equidistant from the centre of Glasgow, even if Prestwick were to close completely, residents of Glasgow would still have 2 major airports to choose from when flying. Of course, if you live in Ayr, you will have a different point of view !

Turning the question around somewhat, if the population of the central belt can support 3 airports but currently has 4 because competition has failed where people live, what's the rationale for maintaining 4 airports ?

[Munnyspinner]

I see your point. But then why do we 'need' three airport if two will suffice?

Bye, Bye Dundee?

Are you suggesting that PIK survives only due to the anti competitive nature of GLA and EDI as a result of them being in common ownership?

[davidjohnson6]

If EDI begins to compete actively against GLA (and service improves or fees fall at EDI), then I imagine DND will have a tougher time attracting airlines. Routes like DND-LCY should survive, but the chances of routes from DND to mainland Europe seem slim (yes I know AMS was proposed). While DND loses money, its being run by HIAL means that either the Scottish Parliament or Dundee council can choose to provide a subsidy if it so wished.

Once EDI-GLA competition begins, it is true that PIK would find it harder to attract passengers. However it has some competitive advantages:
1) 2 big runways
2) Significant freight operations (Ostend seems to survive on frieght and I haven't heard much talk about Manston closing down)
3) A high frequency rail link to central Glasgow and the rest of Scotland
4) A catchment area in SW Scotland

When competition begins in a serious way, all 4 airports will be forced to innovate, improve service and (mainly for GLA and EDI) reduce fees.

Either consumers are artificially keeping PIK alive in a rather warped manner through artificially high fees at GLA and having to travel further from their home to a strip of asphalt..... or PIK needs some encouragement to find its own niche and stand on its own 2 feet. Competition between EDI and GLA will make the answer to this question much more transparent.

[NorthSouth]

dj6:what's the rationale for maintaining 4 airports?I'd say the answer is along the following lines:
1. Edinburgh serves the capital of Scotland. Airlines are desperate to operate out of there, even at allegedly high fees. In the past, Edinburghers were prepared to travel to Glasgow (and, even further back, to Prestwick) for long-haul flights and some holiday charters, but the range of services out of Edinburgh now makes that largely unnecessary. In other words, Edinburgh is now effectively competing with Glasgow in terms of range of services, it's just that people don't need the choice.
2. Glasgow serves Glasgow. Glaswegians don't want to travel to Edinburgh to fly (on public transport it means into town and back out again) and mostly don't need to. Transatlantic airlines moved to Glasgow at the drop of a hat when Prestwick went downhill in the 1980s/90s and aren't likely to move back.
3. Prestwick's always been a niche airport (transatlantics of all sorts except pax, low cost operators, airline crew training). Despite being cheaper than Glasgow, Prestwick hasn't been able to attract any significant pax traffic beyond Ryanair. Making Glasgow cheaper is as Munnyspinner says unlikely to improve choice (the apparent motivation for all this CC stuff) because there's a risk it'll cause a reduction in services from Prestwick.
4. Dundee? You're joking right? The new LC/Flybe services have no doubt taken a small amount of traffic away from Edinburgh but making Edinburgh and Glasgow compete is hardly likely to affect the amount of traffic generated at Dundee.
In my view the Competition Commission is driven by a mythical construct beloved of free market economists for hundreds of years - the notion that consumers need/want maximum choice and that striving for this maximises economic growth.
Now, if an airport was to do away with the terminal airside areas where you don't know whether you're in a shopping mall or a prison; with the endless queuing, frustration and humiliation of security; and with the rip-off prices for 5 mins parking and a cup of tea - that would be competition, especially for domestic pax.

Coming back to your question, what they should do if 4 (3 really) airports is too many, is to close Glasgow. It's an environmental monstrosity for the people of Drumchapel and Bearsden and has a significantly shorter runway than Prestwick. Prestwick already has a rail connection whereas Glasgow's will cost hundreds of millions.

NS

[davidjohnson6]

Glaswegians don't want to travel to Edinburgh to fly (on public transport it means into town and back out again) and mostly don't need toSuppose NationalExpress or Stagecoach, or maybe even easyBus sets up a high frequency (every 30 mins) non-stop coach or minibus service between the centre of Glasgow and Edinburgh airport, taking about 45 or 50 mins (go visit the bus station at STN to see how this can work !). Such a coach service requires minimal fixed investment - coaches can always be redeployed - but doesn't currently exist in a significant way, because there is no competition between EDI and GLA.

Would Glaswegians then still be reluctant to fly from Edinburgh, and could this see GLA and EDI compete against each other to some degree ?

Further, from where do the people of Falkirk and Stirling fly ? Resident of the eastern suburbs of Glasgow who drive to the airport ? I would argue that both EDI and GLA can compete for these passengers provided they are under separate ownership.

[raffele]

Mods - suggest this is merged with this thread

http://www.pprune.org/airlines-airports-routes/366628-competition-commission-releases-final-report-baa.html

[davidjohnson6]

raffele - with the greatest respect to your comment and this is just my own opinion, I'd suggest that the issues surrounding competition relating to BAA in London and Scotland are somewhat different, and retaining 2 threads might be an idea

[Munnyspinner]

DJ6 - I would agree.

Totally separate issues and, for the record I would point out that GLA and EDI are not actually regulated but operate effective voluntary regulation. If the CC are wrong, and I think thay are, then the opposite might occur and we will have two new monopolies each working in their own distinct market sector.

Why would EDI and GLA actually compete when evidence suggests ( CC ) otherwise. Surely they will both put up prices?

[theredbarron]

I am no lover of monopolies but as someone who until recent retirement flew a round trip through Edinburgh on average once a week for many years I do have to say that from a passenger point of view they do provide us with a 1st class airport. Yes, it could be better - sometimes far too long queues at security - but overall when I compare it with other UK and foreign airports that I've travelled though it really isn't too bad. However, investment needs to continue and this is where my concern for the future lies if Manchester Airport Group (MAG) were to make a bid and be successful.

MAG also own East Midlands, Bournmouth and Humberside. Have any of you been at any of these airports recently and noticed what distinguishes them from other comparable sized airports? Yes, it's a complete lack of investment in quality passenger facilities. Even at EMA, a busy regional airport, not one airbridge, just a long wet walk from the aircraft into arrivals. OK, they have opened a new departure lounge, but at ground level and with yet another wet walk out to your waiting aircraft.

As for competition between Glasgow and Edinburgh, I believe that Glasgow will either under BAA or a new owner eventually kill off Prestwick. The latter's freight business is rapidly diminishing and will all but disappear in the next 24 months. I suggest that they will be unable to survive on Ryanair's business. Ryanair know that and hence they are rapidly building up an alternative base at Edinburgh. That's leaves us with a straight Glasgow v Edinburgh, which quite simply because of its location much closer to the centre of the country and with far superior transport links makes Edinburgh the undoubted winner. Glasgow will still be there of course, and so will Dundee, each serving their own niche markets but Edinburgh is the airport which is most likely to attract the critical mass of passengers needed to develop and sustain a wide range of successful international services and it therefore needs an owner who is up to that challenge. Unfortunately it is highly unlikely that airport users (passengers or airlines etc) will have any say in who that will be; it will be down to the accountants and bankers (oh dear oh dear!!)

I'm now running off to my air raid shelter in anticipation of sustained attacks from the West !:p

[james170969]

Prestwick Airport's transport links could be improved but at least it has it's own train station which, I admit, badly needs investment. Why is everyone determined that Prestwick is going to close? One less airport in the central belt would mean less competition, less choice and higher charges.

[theredbarron]

I have to disagree with you James. Prestwick may have a train station, but it is served only on the Glasgow via Ayr to Stranraer line; it has no direct rail links furth of Glasgow and with this and previous governments refusing to fund the Glasgow Crossrail project no such links are likely in the forseable future. For example, travellers from Aberdeen or Inverness or Dundee, Stirling or Perth will be able to get to Edinburgh Airport with one simple interchange onto the tram at Cogar. For them to get to Glasgow (even with its forthcoming rail link) or Prestwick means a long walk dragging cases, or a taxi, from Queen Street to Central, or hike up Buchanan Street to the bus station. What would you rather do ?

The simple question for you is: if PIK is to survive where is its revenue going to come from? As I said, it's cargo business is about to be administered the last rites and Ryanair certainly dont pay top whack. I honestly do not believe that PIK can survive on Ryanair alone and I do not see any new revenue streams on its horizon. Nostalgia alone, and there is plenty of it for our fog free gem on the Ayrshire Coast, doesnt pay the bills or give the investors a return on their money.

The other point I make is that even with projected passenger growth over the next decade, I dont believe that we have the population or business base to support more than one major airport in the central belt and that airport will undoubtedly be Edinburgh. Glasgow will also decline to become a largely domestic airport, augmented by holiday charter flights.

PS I note that the press are reporting that Glasgow is the most likely of the two to be offered for sale by BAA. Looks like they share my opinion and want to hold onto the Scottish Jewel in their crown..

[PIK3141]

Same old arguments trotted out by the GLA and EDI lobbies for the past what, 40 years - lets close PIK. Its this Scottish thing- that you can't value an asset - you must talk it down. PIK's lost money in November & December according to Infritil, ie winter, credit crunch etc, so lets just assume PIK has always lost money and always will.
So Ryanair is moving to GLA, leaving straight in / straight out approaches / departures at PIK where they pay 50p a head supposedly, for busier GLA (more fuel burnt) at what - £15 a head ? So GLA cut Ryanair's fees to £5 a head - 10 times more than at PIK. And every other airline would therefore pay £5 a head, enforced by court action if necessary ?
The Herald reported this morning that GLA has 5400 employees, and EDI 2500 !!!! So 3000 redundancies at GLA under new ownership ? Seems to me that GLA has a much bigger change coming than PIK has ?
Why don't you people just wait and see what happens, which will probably be determined by influences not even yet on the horizon ?

[pikman747]

It is probably also worth noting that it is not many months ago that both Glasgow and Edinburgh were looking for extra runways to cope with the expected growth. The recession will not last forever and, without the additional runway capacity Edinburgh and possibily Glasgow will become so congested at peak times that there will be no need to offer special deals to the Ryanairs of the aviation world. Taking the longer term view there will remain a need for all three airports.