Shoppers help BAA cope with slump
PASSENGERS spent more in airports as they waited for flights this spring, helping Heathrow, Gatwick and Stansted operator BAA to withstand the continuing post-11 September slump in aviation.
Despite a 2% drop in passenger volumes to 32m for the April to June quarter, retail income rose slightly to £126m, an average spend of £3.96 per passenger, up 4%.
However, the reduction in passenger numbers, combined with higher insurance and security costs pushed BAA's first-quarter pre-tax profits down 6% to £143m. Overall group revenue slipped 1% to £32m.
Extra security measures and higher insurance cost the company an additional £5m in the quarter. Over the year, the figure is expected to reach £25m. BAA shares fell 2 1/2p to 463 1/2p.
Chief executive Mike Hodgkinson said passenger volumes have still not recovered to the levels seen before last September's attack in America but airport retailing 'has continued to perform well'.
BAA, sometimes dubbed Build Another Arcade, because of its increasing dependence on retail income, has been told it must continue to subsidise airline charges from its massive shopping and airport car parking profits.
Hodgkinson said that despite the decision, announced by the Civil Aviation Authority earlier this month, 'higher airport charges are, of course, essential if BAA is to fund its significant future investment programme'.
He also warned that the new price regime that will determine by how much the company can raise its airport charges over the next five years will probably not be announced in December as originally planned.
The decision will slip into January, he said. BAA racked up a £162m airport infrastructure investment bill in the first quarter as it continued preparing the ground for Heathrow's long-awaited fifth terminal.
Passenger volumes are expected to bounce strongly in the third quarter of the year from the highly depressed levels seen in the aftermath of last autumn's terror attack.
Hodgkinson stuck by industry forecasts that passenger volumes will double over the next 20 years. He said: 'Strong retail income and continued tight cost control, despite additional security, insurance and interest costs, mean that BAA is well placed to ride out the current difficult period for the aviation industry.'
The company reported a sharp drop in the net assets of its pension scheme. At 30 June this year net assets were £140m, down from £299m in March and £395m at 30 June last year.
