The company said it had decided to stop capitalising interest on the project in light of delays in gaining approval for T5. The move will result in a pounds 40m exceptional charge for the year just ended. Together with the pounds 13m interest charges incurred on the project this year, the total hit on BAA profits will be pounds 53m.
However, BAA's finance director, Russell Walls, rejected suggestions that the change in policy reflected worries that the marathon planning inquiry into T5 might come down against BAA.
"It's not a lack of confidence on our part. It's just that with the delay the capitalised interest is becoming 30 per cent of the total amount spent and it is compounding all the time."
The inquiry began in 1995 and BAA had originally expected a government decision to have been reached by now. However, the inquiry is not now expected to end until mid-1998 because of the level of opposition voiced by environmentalists and local residents. This means that a final decision is unlikely to be reached before 2000. The inspector is expected to take a year to write his report and then it will be studied for at least six months by the Departments of Transport and the Environment before a decision is made.
Up to the end of last year BAA had spent pounds 178m on preparatory work on T5 of which pounds 49m was capitalised interest. Although interest will no longer be capitalised, the ongoing development costs, running at pounds 30m a year, will continue to be capitalised. BAA said it would resume capitalisation of interest if and when planning permission was granted.
BAA announced earlier this week that British Airways and its alliance partners would, subject to planning approval, become the new occupants of T5. BAA says that without the new terminal it will not be able to cope with the increase in demand for air travel in the South-east. It claims that traffic levels at the three London airports will double between now and 2013. Although Gatwick and Stansted will continue to grow, BAA says it will only be able to meet demand if its gets the go-ahead for T5, which will have a capacity of 30 million passengers.
Last year the three London airports handled 85.6 million passengers, of whom 56 million went through Heathrow.Reuse content