Yes sir, yes sir, 20,000 bags full.

They’d be in Milan too. Following on from the Terminal 5 fiasco, the Competition Commission has been triggered to publish a damning “emerging thinking” report on the (in)competence of BAA’s airport monopoly. It criticises them for “failing airlines and customers” and may eventually lead to the forced sale of several airports.

And the CC isn’t alone in its criticism. BAA has been lambasted for its inefficiency long before Terminal 5’s disastrous opening week, even before Grupo Ferrovial took it over. The general public complains about Heathrow every summer, with its omnipresent delays, flight cancellations and luggage handling (or lack thereof). Both Virgin Atlantic and Ryanair applauded the CC report, deeming the 20-year old regulatory system to be “inadequate” and requiring an update. Ruth Kelly, our Transport Secretary, has finally announced a plan to conduct a government review into BAA’s economic regulation.

At the moment, BAA has a monopoly stranglehold over seven of Britain’s airports: Heathrow, Gatwick, Stansted, Southampton, Edinburgh, Glasgow, Aberdeen. The whole point of giving BAA ownership of the London airports after the 1987 privatisation is to make sure that there would be sufficient airport capacity in SE England, but that has not been the case. It has become complacent and focused on lobbying the government rather than serving the people’s best interests. Bringing more competition into the market would encourage growth in capacity.

And here is a graph drawn on Paint(!) by my creative advisor, demonstrating perfectly how monopolies are allocatively inefficient despite her inability to spell “efficiency”. At price P and quantity Q, the monopoly is profit maximising (MC = MR) but allocatively inefficient (P ? MC). Thanks Amy, you’re beautiful.

So what have we learnt? Privatisation does not work simply because it’s called privatisation, it only works because one is introducing competition and markets into something that was previously a nationalised monopoly. You can see another such half-assed attempt in the shape of the London Underground PPP, where the infrastructure is maintained under 30(!)-year contracts.

If a break-up does occur, BAA would prefer to sell Stansted rather than Gatwick. But one thing we can be certain of is that there won’t be a shortage of bidders. Aéroports de Paris, Fraport AG, Amsterdam Airport Schiphol and Port Macquarie Airport are all eyeing up the juicy prize, with a consortium bid deemed “likely” due to the credit crisis.