The Government will review the economic regulation of the UK airports system, under the Civil Aviation Authority, after the Competition Commission published a damning report into BAA, the owner of Heathrow's disastrous Terminal 5, criticising its poor customer service.

Ruth Kelly, the Transport Secretary, said today that the Government “recognises the points made by the Competition Commission in their interim report ... about the potential shortcomings of the current regulatory system”.

BAA, the owner of seven UK airports, including Heathrow, Gatwick and Stansted, was heavily criticised by the Competition Commission, which found that it "may not be serving well the interests of either airlines or passengers".

Most recently, BAA, alongside British Airways, has overseen a horrendous start to service at Terminal 5, which cost £4.3 billion to build, only to lose thousands of customers' bags and delay hundreds of flights.

As a result of poor service, BAA could be forced to sell one of its airports.

The operator has also drawn fire from the airlines that use its terminals who have made strong objections to the new pricing regime at the London airports, with some threatening court action and withholding payments.

Ms Kelly recognised that there was an “urgent need” to update the powers of the Civil Aviation Authority, the regulator governing UK airports, which were set more than 20 years ago.

“I welcome the Competition Commission's views, amongst others, that the current system needs to be reviewed to ensure it is effective for the 21st century,” she said.

But she added that no changes would be made to the basis on which current price caps at Heathrow and Gatwick airports were set.

The Competition Commission said that it looked forward to receiving the Government’s submissions, but emphasised that it alone would decide whether BAA should sell its airports.

Earlier today, the commission published its damning report into BAA, which said: "We are particularly concerned by its apparent lack of responsiveness to the differing needs of airline customers, and hence passengers, and the consequences for the levels, quality, scope, location and timing of investment and levels of quality of service."

On delivering the report, Christopher Clarke, the chairman of the Competition Commission's BAA Airports Inquiry, insisted that no conclusions had been reached ahead of publication of the inquiry's provisional findings in August.

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