The Competition Commission said yesterday airport operator BAA's ownership of seven UK airports may not be best serving the interests of airlines or passengers.
It said it would publish possible remedies in August, which could include ordering BAA to sell one or more airports.
BAA, owned by Spain's Ferrovial since 2006, is the owner of the three main airports in southeast England, namely Heathrow, Gatwick and Stansted, as well as Scotland's Edinburgh and Glasgow airports.
"There is no competition between BAA's three London airports, and only very limited competition from non-BAA airports (London City and Luton)," Chairman of the inquiry Christopher Clarke said in a statement.
"Similarly, there is no competition between their two airports in lowland Scotland," he added.
He said areas of concern included "the apparent lack of responsiveness to the differing needs of its airline customers, and hence passengers" and BAA's approach to planning airport development.
"It (BAA) seems largely to have limited itself to one major project at a time, for example Terminal 5," he said.
BAA is currently under pressure from airlines for the amount it charges them to use its airports, which is capped by regulator the Civil Aviation Authority (CAA) but part determined by what BAA says it needs for investment.
The operator has also come in for widespread criticism for the botched opening of Heathrow's Terminal 5, which left thousands of passengers stranded and baggage lost.
Paul Charles, Director of Communications at Virgin Atlantic, welcomed the commission's statement.
"It seems the Competition Commission has seen the light. They support the views of every airline and every passenger, that there is no competition at our major airports. We now need to see a roadmap laid out for changing their ownership structure and tightening the regulation of BAA," he said.
Meanwhile low cost airline easyJet said yesterday it wanted to withhold part-payment of recent price rises by operator BAA at Gatwick airport until the outcome of its legal challenge to the hikes is known.
The company said it had written to BAA chief executive Colin Matthews proposing the creation of a bank account for payments that could be returned to easyJet or passed onto BAA, depending on the result of the appeal.
"EasyJet and other airlines have been incensed by the dramatic price increases that the UK Civil Aviation Authority (CAA) is allowing BAA to charge at Gatwick and Heathrow and has informed the CAA of its intention to challenge the Gatwick prices rises through a judicial review," it said in a statement.