The ghastly state of London's airports, particularly Heathrow, is having an impact on the economy. The answer is to get tough with BAA
BAA has never had a summer like it. Almost every writer passing through its airports felt outraged enough about the appalling conditions to put pen to paper. Indeed, in these pages last week John Humphrys topped it all with a tale of raw sewage pouring into the dingy luggage hall at Heathrow as he set about tracing his lost bags.
The great fear must be that the chaos at London's airports could do lasting damage to the City and the nation's economy by causing businesses to think twice about preserving jobs here, let alone moving in new ones.
There is already some evidence that Heathrow is suffering as an airport hub attracting lucrative transit traffic. British Airways reported that in its most recent trading period there was a sharp drop in such traffic as carriers diverted to airports that work, such as Amsterdam's Schiphol.
London's airports never used to be like this. For many years there was a cosy cartel, with the Civil Aviation Authority, the airport operator BAA and BA working in harmony to keep landing charges low and profits for BAA and BA high, and to keep out Johnny Foreigner and interlopers such as Richard Branson's Virgin Atlantic. All that has changed.
"No-frills" carriers offering cheap flights have squeezed into the vacant landing slots, whatever time of day they may be. Open-skies agreements have given overseas carriers more access to our main airports. And airlines that seek to put customer service first, such as Virgin and British Midland, have grabbed market share from BA. As if this were not enough, a foreign owner, the Spanish group Ferrovial, was allowed to grab control of BAA with a bid financed by an £8.5bn loan that it is now having trouble renewing.
So why is it that the Heathrow experience has become so ghastly? There are three main factors: the changing security environment, a falling-out among the main players, and extraordinarily weak regulation. Moreover, so much money has gone into building the much-delayed Terminal 5, of which BA will be the sole tenant, that Gatwick, Stansted and the other terminals at Heathrow have been starved of investment.
Certainly, Whitehall-dictated security at Heathrow has played a part in the process. Passengers arriving at London's airports now face the kinds of queues at immigration control that once were the prerogative of the United States. Paradoxically, the Americans have increased their security checks, requiring fingerprints and photographs, but speeded up at the same time. In contrast, Britain requires less information, but has managed to create 90-minute queues on entry.
As one leaves the country, security is the responsibility of BAA alone. It is now more than a year since extraordinary measures were put in place covering liquids and hand luggage. BAA has found it impossible to cope. Among the reasons for this is that it decided some years ago to turn the airports into giant shopping malls. Security checking came second. In fact, making shopping a priority can be put down to ridiculous regulation.
The un-Civil Aviation Authority created a pricing formula under which, the more profits BAA made from shopping, the lower it could make its landing charges. Thus, there has been a conspiracy between the carriers and BAA to keep shopping a priority, yielding high profits for BA and BAA, but at the expense of the traveller.
The ultimate insult is the luggage hall. Almost every other airport in the world seeks to ease the anxiety and frustration of collecting bags; BAA has conspired to make it worse. It has adopted a 1970s trade union approach. In its view, it is the responsibility of the airlines to clear bags. If a pile builds up on a carousel or in the luggage hall, it refuses to touch it, store it or process it, for fear of having to take responsibility. Hence London's airports have come to resemble giant luggage depositories.
The only way to deal with a cosy monopoly with profit-maximising tendencies is to demolish it. The Competition Commission, which is currently looking at the issue, should consider not only selling off London's airports, but breaking BAA's stranglehold at Heathrow, too. The Civil Aviation Authority, like other regulators, needs to adopt performance measures, with fines for every broken escalator, each faulty luggage carousel, all security checks that take more than the prescribed time, and so on.
However, it also needs to reshape pricing policy in favour of airport efficiency and the green agenda. Subsidising flights through retail is just potty. The airline operator has recognised that it has problems and embarked on a clear-out, which has led to the Spanish owners being removed from the board they control. Sir Nigel Rudd, the serial chairman who sold Boots to private equity, has been put in charge. He just might have the ruthless streak necessary to tear up the present disastrous structure.
Alex Brummer is City editor of the Daily Mail
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