The monopoly has always been real enough. Now, too, is the threat to that monopoly. BAA, the giant of Scottish air travel, was last night resisting pressure to sell off either Glasgow or Edinburgh airports after a damning interim report by the UK's competition watchdog.

The company, the long-privatised national airports corporation, processes four out of five Scottish air passengers. But the Competition Commission said its two central belt airports failed to compete with each other. That, the commission signalled, could mean a bad deal for both passengers and airlines.

Not so, BAA said yesterday. Its chief executive, Colin Matthews, gunned down speculation of a quick sale to stave off a forced one, perhaps as early as this year.

"We're not looking to sell any airports," Mr Matthews said, although he admitted that recent problems - not least the disastrous launch of Terminal 5 at BAA's Heathrow - hadn't helped his company's case. One of his Scottish lieutenants, Glasgow Airport managing director Gordon Dewar, was even more confident: there was nothing, he said, that any other operator could do to make Glasgow and Edinburgh compete with each other more than now.

The Competition Commission too has still to make up its mind. But yesterday's "Emerging Thinking Report" suggested it was not as sure about Scotland as Mr Dewar. "BAA's common ownership of seven airports in the UK may not be serving well the interests of either airlines and passengers," the commission said, as animated, it seemed, by the company's position in lowland Scotland as in the south-east of England, where it owns Stansted and Gatwick as well as Heathrow.

The UK Government moved quickly. Ruth Kelly, the Transport Secretary, yesterday ordered a review of the economic regulation of the entire aviation industry. Landing charges are regulated in London. They're not in Scotland. Here BAA has imposed its own self-regulation, effectively cutting its fees every year for the last decade-and-a-half, perhaps, say insiders, to make sure nobody tries to force it to make even more radical reductions.

BAA - which was still a government holding when the current round of aviation regulations were introduced in 1986 - welcomed Ms Kelly's intervention. Why? The company believes the state's economic levers on the industry will be loosened, not tightened.

But it was the Competition Commission's report - and the now realistic prospect of a break-up of BAA Scotland - that excited Scottish aviation watchers the most. "It's Manna from Heaven," said Gil Paterson, a Nationalist back bencher at Holyrood and retired businessman who co-led his party's Fair Fares campaign of the late 1980s.

"BAA has not served Scotland well for a long, long time. The time has come for its stranglehold to be broken."

Charlie Gordon, the former leader of Glasgow City Council, once half-jokingly asked BAA executives if Glasgow Airport was for sale. Mr Gordon, now an MSP, has long questioned whether the company should be allowed to own both central belt airports. Yesterday he praised the commission for its "well researched and thoughtfully argued" report.

David Mundell MP, the Tories' Shadow Secretary of State for Scotland, said: "BAA's monopolistic grip on so many of the UK's major airports has not served passengers or airlines well - as the debacle at Terminal Five and the annual hassle at Heathrow during the summer months demonstrate.

"Tough action is needed to inject much-needed competition into the airport market, to give consumers and airlines the option of voting with their feet if the service they get is poor."

The Scottish Government hasn't made up its mind. "We're steering a non-committal course, bearing in mind this is not a final report," said a source close to First Minister Alex Salmond,.

Airlines could barely contain their glee yesterday. For years many have complained of BAA's power over their industry. Some, including bmi and Virgin Atlantic, last night openly called for the giant to be broken up.

Scotland's biggest home-grown airline, flyglobespan.com, effectively backed the sale of one of the central belt airports. Its chief executive, Rick Green, said his firm had always enjoyed a good relationship with BAA but warned of "concerns about what lies ahead the next time we are around the negotiating table".

"As far as Scotland is concerned, we can certainly understand why the commission have made particular mention of BAA owning both Glasgow and Edinburgh Airports," Mr Green, a former senior executive at Direct Holidays, said.

"Should they come to the conclusion that one should be under independent ownership, it would be hard to argue how that could be anything but a benefit to the Scottish traveller."

BAA has its allies north of the border, especially among business groups worried about anything that would inject uncertainty into the future of Scottish airports.

The Scottish Council for Development and Industry - a body chaired by a senior BAA Scotland executive for the first few years of this century - highlighted the company's massive investment in recent years - and future plans.

Iain Duff, the SCDI's chief economist, said: "BAA is committed to significant future investment plans for the three main Scottish airports and we would need assurances that any change in ownership would not threaten this investment and the planned improvements to access and service."

BAA has a simple argument in its defence: It can't have a monopoly over the central belt market because there is no single central belt market. "We remain strongly of the view that Glasgow and Edinburgh Airports serve distinct and separate markets and have provided the commission with robust data to support this," said Donald Morrison, its spokesman.

"The existence of these two distinct markets makes competition between Glasgow and Edinburgh Airports very unlikely."

Some figures do back up BAA on this. According to the SCDI, the overlap between the two airports is small: Roughly 4% of passengers at Edinburgh are from the west; about 5% of people flying from Glasgow are from the east. There is substantial duplication in services between the two. The two airports are served, to a large extent, by the same airlines going to the same destinations.

Would that be the case if there were in different ownership? Yes, said Mr Dewar of BAA Scotland. "There is nothing an individual airport could do to make a substantial difference in volume," he said. "People want to fly from their local airport." That leaves Glasgow and Edinburgh, were they independently owned, scrapping for trade from Falkirk or North Lanarkshire, the communities who straddle the 49-mile distance between the two airports.

Surely an independently owned airport could, say, cut landing charges or improve service, to lure passengers away from the other side of the country? The commission did its own research.

They asked passengers. Nearly half of those in Edinburgh said they would fly from Glasgow if there was no service from their own airport. More than one-third said they had considered Glasgow as an alternative when booking their flight. Glasgow passengers too said they would fly from Edinburgh.

Central-belt passengers, of course, have already shown they can vote with their feet. Fully 17% of passengers flying out of Prestwick Airport, the low-cost airport in Ayrshire, are from the Edinburgh area.