"BAA says Heathrow future is in the bag"

Thursday, February 23, 2006

BAA says Heathrow future is in the bag
By Alistair Osborne
United Kingdom - The Telegraph


Airports operator BAA has completed a key part of its flagship £4.2bn
Terminal 5 project at Heathrow as it hones its defences against a potential
£9-a-share takeover bid from a Spanish-led consortium.

Van Der Lande, the Dutch contractor for the £230m baggage handling system,
yesterday handed over the "early bags store" more than two years before the
terminal opens in March 2008.

This part of the highly automated system stores luggage checked-in early -
such as on transfer flights - in computerised yellow racks and directs it to
the aircraft when it is ready to load.

Tony Douglas, managing director of the Terminal 5 project, said: "Seeing
this up and running makes me feel a lot better. 

"What prevents airports opening on time - top of the list is the baggage
system." 

The nightmare example is America's Denver airport, which opened a year late
due to continuing gremlins over the baggage system.

The Terminal 5 system, the "biggest on the planet" according to Mr Douglas,
will handle the luggage for around 30,000 British Airways passengers per day
after the airline moves its entire Heathrow operation there in 2008.

The "early bags store" takes such luggage out of circulation and stops it
"clogging up the system", Mr Douglas said. 

Including technology reminiscent of scenes from the movie Monsters Inc, the
Terminal 5 conveyor belt boasts DCVs - Destination Coded Vehicles - which
transfer bags at speeds of up to 30mph to the terminal's two satellite
buildings.
   
Spanning 265 hectares - the size of London's Hyde Park - Terminal 5 is now
74pc complete. 

It is big enough to be Europe's fifth largest airport in its own right,
capable of handling about 30m passengers a year and increasing Heathrow's
capacity to around 100m travellers annually.

"Name one other construction project in the UK costing over £1bn that is on
time and on budget," said Mr Douglas, who is responsible for spending £4m a
day on a project that has 8,500 workers on site.

A key reason the project is within budget, Mr Douglas said, is that BAA
opted for modular construction, whereby key components are assembled and
tested off site and then transported to Terminal 5.

"We have used large scale modulisation, similar to that in the offshore oil
and gas industry," Mr Douglas said, including for the air conditioning,
power and elevator systems. 

He said it was much more efficient to use contractors' factories to build
such kit than develop them the "old-fashioned way" on the construction site.

"Some 6,800 separate modules have gone into Terminal 5," he said, with
52,000 people working on the project, including all those employed off-site.

The Richard Rogers-designed main terminal building is designed to be
"intuitive" to navigate, Mr Douglas said, with no pillars, huge video
screens and half as much retail space as the Bluewater shopping centre in
Kent. 

"We have tried to take the stress out of the experience," he said, adding
that relaxed passengers spend more in the shops.

Terminal 5 is the main project in an investment drive by BAA, which will
take gearing - the ratio of debt to net assets - to 108pc by 2008 when the
company's net debt will reach £8bn.

Such leverage raises the stakes for the consortium led by Spanish
construction group Ferrovial, which will need to line up towards £18bn of
financing for a serious offer of about £9 per share. 

At last night's closing price, down 4 at 817p, BAA's equity was valued at
£8.81bn.

Moreover, the £8bn net debt does not include the £1.5bn Heathrow East
project - the key component of a plan to reorganise the rest of the airport
- or the £2.7bn for the mooted second runway at Stansted airport.

Ferrovial is due to publish annual results on Monday but these are not
expected to be accompanied by an offer for BAA.

Attached Photo/Graphic:

Terminal 5's baggage handling system is in place.

T5 Facts.

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