THE rivalry between the cities of Glasgow and Edinburgh is as old as the hills but it has never quite taken to the skies before. While the two regularly jostle for sporting, cultural and business honours, their respective airports are not generally considered a natural point of competition.
But this may change after the UK competition watchdog's ruling that their joint ownership by BAA may be harming passenger interests.
Along with breaking up BAA's dominance of the London airports, the Competition Commission argues that selling ei
ther Edinburgh or Glasgow airport will result in a better deal for everyone.
It is hoped that a sell-off would create greater competition between the two airports, leading to lower fees for airlines and cheaper ticket prices, as well as possibly a push for greater investment in long-haul facilities at Edinburgh.
The monopoly is clear. BAA's airports account for 88 per cent of all air passengers in Scotland, but opinion is divided as to whether this is good or bad.
The airlines are fed-up with BAA's monopoly but the Spanish-owned operator's investment record at Edinburgh Airport – £45 million of capital investment in the city this year alone – is not to be sniffed at.
BAA insists there is limited scope for competition between Edinburgh and Glasgow because they serve largely different markets.
It is hard, however, to argue with the Commission's research, which found that 22 per cent of passengers travelling via Edinburgh were from the catchment areas of Glasgow, while 16 per cent of Glasgow's customers were from the Edinburgh area.
Since the Commission's interim ruling last month there has been much speculation about possible suitors for Glasgow Airport, but not so for its east coast rival. One aviation insider said this was because the smart money is on Glasgow Airport being sold off when the final recommendations are published next year.
He said: "BAA would rather hold on to Edinburgh as it has greater growth potential and higher earnings, and as such is more valuable. This would be reflected in the sale price. On an industry multiple based on current earnings, Edinburgh could be valued at around £1.2 billion and Glasgow at around £800m. These are relatively flat figures and should a number of bidders become involved the price could rise quite dramatically.
"If the aim was to raise the most money then Edinburgh would generate more income but it is more likely that BAA would take a view on which had better development potential and that is Edinburgh.
"Ownership matters only in respect of who buys an airport and what they are prepared to do with it. But there is little point in buying either Glasgow or Edinburgh without a plan to develop services.
"There is an argument that the sale of either airport will make little difference to passengers, but without doubt the dynamics will change and there may be greater competition, which will give airlines the opportunity to negotiate better deals."
Any sale of Scotland's two main airports is likely to be a long drawn-out process, particularly if BAA decides to appeal the Commission's final verdict.
Recent claims that either airport could be sold off within six months of the decision are thought to be wide of the mark.
A more realistic timeline would see Glasgow or Edinburgh put on the market in late 2009 and sold at some point the following year.
The airlines are keen to see the break-up of BAA's dominance in Scotland, hoping the move will lead to lower fees and a better service from the airport operator.
But Mike Rutter, chief commercial officer at Flybe, has gone against the grain and called for Edinburgh, rather than Glasgow, to be sold off.
He said: "During the Competition Commission investigation, we argued strongly that there should be no monopoly and that there should be a break-up of the Scottish airports.
"We believe it would have been better if BAA was instructed to sell Edinburgh Airport because it is the stronger of the two and it would have the greater impact. If it sells Glasgow, BAA will, in essence, treat Edinburgh as a form of cash cow and seek to hold back on investment and growth."
Aside from the obvious damaging environmental impact, the rapid expansion of Edinburgh Airport has been a real boon for the Capital.
The city now has direct links to nearly all of Europe's major cities and the diversity of airlines has seen Edinburgh ease into its crown as Scotland's number one airport.
The ambitious expansion plans put forward by BAA, along with Scottish Government recognition that this is a major planning priority, mean this position is likely to be cemented.
But Ron Hewitt, chief executive of Edinburgh Chamber of Commerce, fears all of this progress will be undermined if Edinburgh Airport is sold off. He said: "Glasgow and Edinburgh airports really serve separate markets and all the research bears this out. The concern of business is that the proposals in the (Commission's] preliminary findings completely pull the rug out from under the feet of some of our most important assets for trade.
"BAA's investment of over £500m, £45m in Edinburgh alone this year, cannot be guaranteed from an enforced sale. This has been directly responsible for the airport's ability to grow direct flights to crucial world markets at a truly enterprising rate. Remember, just one flight from Atlanta is enough to fill an Edinburgh hotel."
The full article contains 921 words and appears in Edinburgh Evening News newspaper.
