"BAA could scrap terminal five cash/ No pounds 3.7bn unless fees rise"

Tuesday, November 5, 2002

BAA could scrap terminal five cash/ No pounds 3.7bn unless fees rise
United Kingdom - The Guardian


Airport operator BAA yesterday delivered its starkest warning to date
that it could scrap its pounds 3.7bn investment in a fifth terminal at
Heathrow unless it gets permission from regulators to raise landing
charges for airlines. 

The company's chief executive, Mike Hodgkinson, said all construction
work carried out so far at Heathrow would have been necessary anyway for
the introduction of Airbus's GBP280 "super-jumbo" aircraft. 

In an increasingly tense game of brinkmanship, BAA has refused to give
the civil aviation authority more time to study its application to raise
prices to airlines. It says it must have an answer in January, when it
plans to lay the first bricks for the fifth terminal building. 

Mr Hodgkinson said: "We told them very clearly that we had to have the
answer by the end of January, then we'll be able to get on and do the
site works." 

The CAA and the Competition commission have clashed on whether to allow
BAA to raise its prices by as much as 40%. British Airways, Virgin
Atlantic and other leading carriers are strongly opposed to an increase.


Mr Hodgkinson said that without the extra income, the company would
"reconsider" its pounds 8.1bn 10-year programme of airport improvements,
of which almost half is devoted to terminal five. 

"The country desperately needs that investment programme," he said,
adding that it was "pretty unlikely" that any other company could build
terminal five. 

BAA saw its half-year profits slip 3.6% to pounds 326m, with in come
from airlines down 1.1% to pounds 361m due to a decline in the number of
long-haul flights since September 11. The figures pleased the City,
sending the shares up 31p to 586p, a rise of 5.59%. 

The company spent an extra pounds 13m on insurance and security,
including the recruitment of 700 extra security guards. 

However, its retail income rose 5% to pounds 274m, with takings at
airport shops boosted by thousands of passengers buying snacks and
drinks before catching budget flights on "no-frills" airlines. 

Mr Hodgkinson said it "remains difficult to predict" the rate at which
transatlantic air traffic will recover. 

Irrespective of market conditions, he anticipates the installation of
more hi-tech security equipment over the next five years, including
machines to identify wanted terrorists: "There will, in my judgment, be
some form of biometrics, whether it's palm, iris or face recognition." 

BAA confirmed that it intends to invest pounds 65m in National Air
Traffic Services as part of a rescue package for the part-privatised air
traffic control network, which will be matched by pounds 65m of
government cash. 

BAA's money is contingent on the CAA's latest proposal on Nats' pricing
being rubber-stamped by the government. 

Mr Hodgkinson said it was essential to BAA's business that air traffic
control runs smoothly: "If it goes the way of Railtrack, all that will
happen is that things will get worse, we won't be able to expand our
airports and the service will spiral downwards." 

BAA will publish its submission this month to the transport secretary's
consultation on airport expansion.


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