BAA may appeal against the Competition Commission's ruling that it must sell both Gatwick and Stansted airports, as well as either Edinburgh or Glasgow, within the next two years.

In a long anticipated report intended to increase choice for both passengers and airlines, the competition regulator also stipulated that the operator, owned by Spanish group Ferrovial, must sell the airports in sequence, starting with Gatwick, then Stansted, followed by its choice of Scottish airport. They must be sold to different buyers and be approved by the commission.

Colin Matthews, BAA chief executive, said the company would make a decision within the next two months. “We might have to appeal if we reach the conclusion that it is simply not practical to proceed,” he said. “It is not just a question of whether we agree or not with the Competition Commissioner’s analysis, it is also a question of the practicalities of selling three airports in the current, extraordinarily tough conditions.”

However, the commission has said it may give BAA more time to sell the airports should market circumstances change.

The commission said it had taken into account the substantial evidence received from BAA but that it had decided the only way to address comprehensively the detriment to passengers and airlines from the complete absence of competition was to force airport sales. It added that it was confident different ownership would boost competition and bring substantial benefits to both passengers and airlines, including lower prices and improved service.

Moreover, it is making a number of recommendations to the Government on aspects of airport policy and the shortcomings of the current airport regulatory system.

The commission also ruled that at Aberdeen airport, BAA needed to improve consultation with airlines as well as publish certain financial and other information. It is recommending to the Civil Aviation Authority, the airports regulator, that the company should take certain action at Heathrow, the UK's only hub airport, where BAA continues to have substantial market power even after the sale of its other London airports.

In response, BAA, which has already put Gatwick up for sale and claims to have improved customer service, said that it would consider the report carefully before deciding whether to challenge the ruling but that it accepted the need for change.

Manchester Airport Group, which operates Manchester, East Midlands, Bournemouth and Humberside airports, is one of the companies in the running to take over Gatwick, with a sale figure likely to be about £2 billion. The group is also thought to be also interested in buying either of the Scottish airports BAA must sell.

A number of infrastructure funds are also believed to be interested in BAA's airports, although a lack of financing has already hampered some bidders in their attempts to buy Gatwick.

Theresa Villiers, Shadow Transport Secretary, welcomed the commission's recommendation to break BAA's London monopoly. “We will continue to keep pressure on BAA to ensure it improves the quality of service it gives customers in the airports it retains. Only then will it be possible to address the Heathrow hassle that can cause so much frustration to business passengers and holidaymakers,” she said.

Paul Charles, Virgin Atlantic communications director, said: “The break-up of BAA is something Virgin Atlantic has requested for many years and it will undoubtedly benefit consumers. Better airport facilities in the UK and lower prices will be the result and we therefore congratulate the CC on its findings. We hope the commission will remain fully involved to ensure that the sales process is a fair one."

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