AN £8.8 billion bid for BAA, the owner of Britain’s main airports, was thrown into doubt yesterday after an intervention by the Office of Fair Trading.

The OFT said only that it was considering looking into the UK airports market but John Fingleton, the watchdog’s chief executive, has such a reputation for deregulation that BAA’s shares plunged 5.6 per cent to 787½p on the news.

Analysts speculated that a consortium of bidders led by Spain’s Grupo Ferrovial would be put off pursuing their takeover ambitions in the face of the uncertainty. BAA was surprised by the OFT’s announcement but indicated that it was sanguine about the prospect of an investigation.

Mike Clasper, BAA’s chief executive, said: “We don’t see how our London airports could be more heavily regulated than they already are. We will co-operate with the OFT’s review and make the point that there are opportunities for lighter regulation, which would only increase shareholder value in the group.”

Ferrovial, the Spanish construction group, declined to comment on the OFT’s move yesterday, saying it was consulting its consortium partners.

The OFT said that it would confirm by the end of June whether it would launch an investigation into the airports market.

Mr Fingleton said: “BAA currently owns and operates airports which handle 63 per cent of air passengers beginning or ending their journeys in the UK, with 86 per cent of passenger journeys in Scotland undertaken through Scottish airports operated by BAA.”

He added that the OFT was aiming to establish whether the present market structure delivers best value for air travellers.

However, analysts called the OFT’s move “disruptive and unhelpful” to industry partners. Four or five investigations of the airports market have been carried out in recent years by bodies including the Department for Transport and the Civil Aviation Authority.

All have found that a break-up of BAA is unnecessary while its three London airports continue to be regulated.

Damian Brewer, analyst at JPMorgan, said that Ferrovial now faced a “two-pronged counter-attack from the OFT and BAA”.

A break-up is a potentially positive move for BAA because it would be selling assets in a climate where regulation had a lighter touch, therefore creating more shareholder value.

If the OFT decided to deregulate aspects of the market, perhaps by withdrawing Stansted from the regulatory environment, BAA would be free to push airport landing charges higher.

The worst-case scenario is that BAA is left regulated, or that regulation is increased, perhaps in Scotland. However, most analysts believe the threat of an investigation increases uncertainties for the bidder.

GEARING UP

• BAA will finance the dividend payout and return of capital to shareholders by raising its gearing to 140 per cent. Five years ago, before construction of T5 began, gearing was only 33 per cent
• Mike Clasper said he believed that BAA had found the “regulatory sweetspot” that allowed a capital return that would not alarm the regulator
• The increased dividend payout will cost the company £60 million

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive