The Competition Commission is preparing to force BAA to sell three airports including Gatwick, where a new owner would be likely to revive plans for a second runway.

The commission indicated yesterday that the Spanish-owned company’s airport monopolies in London and Scotland would be broken up because they were failing to provide passengers with a good service. It will publish recommendations in August that are expected to include the requirement for BAA to sell either Gatwick or Stansted, or possibly both, and also to sell either Glasgow or Edinburgh. The commission also hinted that BAA would have to sell Southampton airport.

BAA is widely expected to act before the commission forces its hand, possibly by selling Gatwick within months. However, Ferrovial, BAA’s heavily indebted owner, is determined to retain control of Heathrow.

The commission said that splitting up ownership of the three main London airports would result in greater efforts to create extra capacity and relieve overcrowding. “Separate ownership would itself create a greater incentive to expand capacity.”

A commission source said: “It is very odd that BAA has belatedly supported expansion of Heathrow and Stansted but not Gatwick. The first thing a new owner of Gatwick would do is look at options for expansion, including a new runway.”

In 2003 the Department for Transport published possible locations for a new Gatwick runway, to the south of the existing one. The new runway would almost double the number of flights to 486,000 a year, 10,000 more than at Heathrow last year.

BAA signed a legal agreement in 1979 with West Sussex County Council in which it agreed not to start building a new runway until 2019. But this could be overturned by Parliament.

The commission strongly criticised BAA for being slow to promote expansion since it was privatised 20 years ago. It said that the company had been too willing to wait for the Government to express its preference. BAA had “been too prepared to accept or even offer to have constraints placed on it, including commitments not to expand further at an airport, in order to secure planning permission for the more immediate development”.

It added: “We are therefore minded to conclude that BAA’s actions throughout the 1990s exacerbated delays in the delivery of runway capacity in the South East.”

Brendon Sewill, chairman of the Gatwick Area Conservation Campaign, said: “It is alarming to find the prospect of a second runway being revived.”

The commission said that BAA appeared to be unable to cope with more than one big building project at a time. Christopher Clarke, the chairman, said: “We are particularly concerned by [BAA’s] apparent lack of responsiveness to the differing needs of its airline customers, and hence passengers, and the consequences for the levels, quality, scope, location and timing of investment and levels and quality of service.”

The commission also expressed doubts about the effectiveness of the Civil Aviation Authority’s “light-touch” regulation of BAA’s London monopoly. But it said this was a secondary issue and indicated that tougher regulation could only be part of the solution, not an alternative to a break-up.

Ruth Kelly, the Transport Secretary, announced a review yesterday of airport regulation, which she said had “potential shortcomings”. The Government is focusing on improvements to regulation because it is worried that breaking up BAA would disrupt its plans for a third runway and sixth terminal at Heathrow and a second runway and terminal at Stansted.

Douglas McNeill, transport analyst at Blue Oar Securities, said: “The break-up of BAA is moving steadily closer, and Ferrovial now has about a year to make disposals before the commission forces its hand. There is a strong argument for taking action at a time of its own choosing.”

BAA rejected the commission’s view that London airports could compete with each other to the benefit of passengers.Colin Matthews, chief executive, said: “BAA remains of the view that its ownership is in passengers’ interests, both in terms of tackling the shorter-term service problems, and in following through with major commitments to investment in new facilities and capacity.”

Theresa Villiers, Shadow Transport Secretary, said: “BAA’s monopolistic grip on so many of the UK’s major airports has not been serving passengers or airlines well. The case for breaking up BAA gets stronger by the day.”

Norman Baker, Lib Dem transport spokesman, said: “BAA should be required to sell some of its airports. In particular it should not be able to operate both Heathrow and Gatwick.”

Main findings

— BAA’s three London airports: Heathrow, Gatwick and Stansted, might operate better under separate ownership

— Scotland could be better served if Glasgow or Edinburgh were owned separately

— Southampton might compete better with Gatwick and Heathrow if owned by a rival

— Airport regulation may have to be tightened, though the main problem is BAA’s monopoly

— BAA has failed to invest in more than one big project, such as Heathrow’s Terminal 5, at a time

— The commission expresses concern that BAA depends too heavily on its parent company’s balance sheet and “that could constrain the ability of the airports adequately to invest or maintain service standards”

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