Bankers have held talks with potential buyers of London's Gatwick and Stansted airports before a UK competition watchdog report which could lead to a break-up of airport operator BAA, a Sunday newspaper reported.

BAA, owned by Spain's Ferrovial, owns seven British airports including London Heathrow.

A report due this week from the UK's Competition Commission is expected to support an Office of Fair Trading recommendation for a full investigation, which could ultimately recommend that Ferrovial sell at least one of its London airports.

The Mail on Sunday, citing no sources, said investment bankers had held talks with unnamed interested parties from India and the Middle East as well as Singapore state investor Temasek.

A spokesman for BAA declined to comment on the report.

The Sunday Telegraph separately reported that retailers operating from Heathrow's Terminal 5, whose opening last month was marred by chaos, lost luggage and cancelled flights, were demanding rent reductions from BAA.

The paper said the disruption meant sales fell well below budget and retailers now fear delays in transferring long-haul flights to the new terminal could damage sales further.