Two of its three busy London airports, Heathrow, Gatwick and Stansted, plus one in Scotland, will have to go, said the UK Competition Commission, which wants to attract new owners to create more competition and improve the lot of air passengers.

Ferrovial has come under fire from British politicians and airline bosses for delays and poor service at Heathrow and Gatwick in the past two years, culminating in the bungled opening of Heathrow's Terminal 5 in March.

The ruling will be subject to a consultation process, but is likely to be rubber-stamped by the Commission in a final report due early next year.

It comes just two days after Ferrovial finalized refinancing of some 13.3 billion pounds ($24.8 billion), most of it money used to buy the airports in June 2006. The shares were up 0.6 percent at 33.9 euros by 0732 GMT.

"There are significant competition problems arising from BAA's common ownership of seven UK airports. This is evident from .. its lack of responsiveness to the needs of its airline customers and a lack of initiative in planning capacity," inquiry chairman Christopher Clarke said in a statement.

The Commission also criticized Britain's planning process, which is crucial to long-running proposals to expand Heathrow and Gatwick, its government policy and regulation under the Civil Aviation Authority (CAA).

Airlines including British Airways (BAY.L) and easyJet (EZJ.L) had called for tighter regulation, with analysts suggesting being the setting of targets for delays.

BAA responded to the ruling by saying the call for airport sales could delay the building of new runways.

"By calling not just for a fundamental restructure of BAA but also for a review of the Government's Air Transport White Paper, the Commission risks delaying that delivery of new runways and making better customer service less, not more, likely," BAA Chief Executive Colin Matthews said.

But Irish low-cost airline Ryanair (RYA.I) hailed the break-up, saying it would lead to new capacity and better service for passengers.

"We are delighted by the decision, which we have been calling for years," Ryanair director of legal and regulatory affairs Jim Callaghan told Reuters.

The report was widely expected to recommend a break-up after a preliminary study in April found that under a single owner there was no competition among some of its airports.

However, it was anticipated that two airports at most would be put up for sale.

BAA, formed in 1965, owns the London trio of airports, three in Scotland, and Southampton.

London's five airports include Luton, owned by Spain's Abertis (ABE.MC), and London City, bought by American International Group (AIG.N) and other investors in 2006.

Germany's Fraport (FRAG.DE) and construction group Hochtief (HOTG.DE) both reiterated an interest on Wednesday, and London City Airport co-owner Global Infrastructure Partners, Australia's Macquarie (MQG.AX) and Manchester Airports Group are also expected to play a part.

Macquarie owns a string of airport interests worldwide including Bristol in the UK, although earlier on Wednesday its airports fund (MAP.AX) said it would reduce its stakes in Brussels and Copenhagen airports to cut debt and added it would not be chasing any upcoming airport privatizations.

(Additional reporting by Ben Harding in Madrid; Editing by Jason Neely)