"BAA Airport Plan to `Test' Relationship With Lenders"

Friday, July 18, 2003

BAA Airport Plan to `Test' Relationship With Lenders
Bloomberg


BAA Plc Chairman Marcus Agius said the company's 11-year, 8.4 billion-pound
($13 billion) investment program to expand its London airports will ``test''
its relationship with owners of its debt and stock.

BAA is spending the money to help its London Heathrow, Gatwick and Stansted
airports handle 44 percent more passengers by fiscal 2014. This includes a
fifth terminal at Heathrow, costing almost 4 billion pounds and due to open
in 2008.

``This capital program will, without doubt, test BAA's relationship with
lenders, as well as shareholders, but I know that we are up to the job,''
Agius said in a copy of a speech being delivered to investors at BAA's
annual meeting in London.

The U.K. government expects air travel in southeast England to triple in the
next 30 years. It plans draft legislation by the end of the year on how to
cope with the increase, including where to build new runways at BAA's London
airports.

Agius reiterated that southeast England will need as many as three new
runways in the next 30 years. He also reaffirmed that the company has ``no
preferred option.''

The airport operator wants the government to consider three out of four
options: a short third runway at Heathrow, Europe's busiest airport, a
second runway at Gatwick, and as many as two extra runways at Stansted.

U.K. Transport Secretary Alistair Darling is considering an additional short
runway designed for regional traffic at Heathrow, as many as three new
runways at Stansted and as many as two more at Gatwick.

Financial Viability

``Our role is to advise the government on what is feasible in aeronautical
terms and to provide a reliable, objective technical evaluation on other key
issues such as financial viability, surface transport connections and
environmental issues like noise and air quality,'' Agius said.

Neither a fourth runway at Stansted nor a third runway at Gatwick is needed
because ``rail capacity'' limits the number of passengers who can reach the
airports, Chief Executive Mike Clasper told the meeting. Clasper said he
``stands by'' a legal agreement not to add a second runway at Gatwick before
2019.

Clasper said the company had ``made an error of judgment'' about the
``political will'' of the government regarding a third runway at Heathrow
when BAA said previously it didn't want another airstrip at the airport.

The construction of Heathrow's Terminal 5 is ``slightly ahead of time and on
budget,'' Agius said. ``We now have the foundations laid'' and in a year
``we will be starting to see the superstructure emerge.''

BAA's debt has investment grade ratings of A1 from Moody's Investors Service
and A+ from Standard & Poor's. The company's shares have fallen 3.4 percent
this year and have dropped 2.9 percent in the last 12 months.

The airport operator has benefited from the ``exceptionally strong growth''
of low-cost carriers such as Ryanair Holdings Plc and EasyJet Plc at
Stansted and at its Glasgow and Edinburgh airports in Scotland, Agius said.

Agius said he took renewed calls by the U.K. parliament's Transport Select
Committee yesterday to break up BAA ``very seriously.'' The company is
``confident that if we were asked, we could find again the arguments'' for
BAA remaining as a single company, Agius said.

BAA has added 1,400 security officers since the Sept. 11 attacks to help its
airports cope with the threat of terrorism.

``Persistent terrorism around the world has also meant that our airport
security systems have been on permanent high alert,'' Agius said.

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