Airlines must pay more, says BAA

Robert Lea12 April 2012

LONDON airports operator BAA told its airline customers to stop whingeing about planned increased landing and take-off costs today, warning that unless airport fees go up it cannot afford a £8.1bn spending splurge which has Heathrow Terminal 5 as its flagship investment.

'There are some who want this massive investment programme for nothing,' BAA chief executive Mike Hodgkinson said of airlines' complaints to the Competition Commission over plans to allow BAA to increase fees by 38%.

'If we are to pay for this investment, charges have to go up. We have the lowest charges among major airports and all we are asking for is to get up to the level of fees charged by the likes of Frankfurt. It's quite simple: if there is no increase in charges, there is no increase in expenditure.'

BAA's regulator, the Civil Aviation Authority, is planning to scrap the current regime which demands BAA subsidises its airline charges through its retail income. The airlines, however, are complaining to the Competition Commission that BAA's alleged service does not warrant increases in take-off and landing fees of 38% over the next five years at Heathrow and Stansted and by 24% at Gatwick.

Ironically, a strong performance from BAA's airport retail interests offset the decrease in the number of airline passengers since 11 September and the general economic slowdown. Underlying pre-tax profits in the year to 31 March came in down 6.4% at £512m. Passenger numbers fell 2.2% but retail income rose 2% to £479m as passengers increased their spending by 4%. That, said Hodgkinson, was down to an increase in the number shopping-happy travelling Britons, compared with American and overseas visitors.

BAA has been paring back its short-term passenger number and said forecasts indicated a return to 'strong growth' from the autumn. Major work on the £3.7bn Terminal 5 is expected to commence in September.

Hodgkinson also said BAA is expected to wrap up a £65m investment in cash strapped air traffic controller Nats by the end of the month. Extra security and investment costs are expected to put £30m on operating costs from the current financial year.

Pre-tax profits were down 42% to £318m, following the £187m loss on disposal of the World Duty Free Americas business. The dividend is up 3.4% at 18.3p.

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