BAA gets foreign management offers: Higher revenues from retailing cancel out restrictions on air traffic charges

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The Independent Online
The privatised airports group BAA has received inquiries about possible management contracts from operators of up to 30 overseas airports, Sir John Egan, chief executive, said yesterday.

He was speaking as BAA, which runs Heathrow, Gatwick, Stansted and four other British airports, reported an 8.7 per cent increase in half-year pre-tax profits to pounds 237m.

Rising revenues on airport retailing offset a squeeze on air traffic charges from the Civil Aviation Authority's tight price cap.

Profits were struck after a lower charge of pounds 2.2m against property values and a pounds 2m shortfall of income from duty-free shops, due to new concession terms. The interim dividend rose by 8 per cent to 6.75p.

For the first time revenues from airport shops, which jumped by 53 per cent to pounds 249.5m in the six months to 30 September, exceeded income from traffic charges. These fell slightly from pounds 245.7m to pounds 244m despite a 4.6 per cent rise in the number of passengers as traffic charges were pegged at eight points below the rate of inflation.

Stansted saw passenger numbers rise by 14.8 per cent. Its operating loss halved to pounds 6.9m and BAA expects it to break even by 1996-97.

Gatwick has been losing scheduled airline custom to Heathrow, but its holiday market remains strong, with October charter traffic up 15 per cent.

Retail income was distorted by changes in the terms of tax-free concessions run by Allders and Forte from a turnover-related to a management-fee basis. Underlying revenue rose by 10 per cent.

Sir John confirmed that BAA was talking to IRI, the Italian state holding company, about buying a stake in Rome's Fiumicino airport and a management contract. But it was 'early days' to talk of a deal.

BAA's existing overseas contract, at Pittsburgh in the US, is expected to generate a net profit of dollars 1m this year. Sir John said some overseas operators regarded their airports as a millstone and were attracted by BAA's management skills.

BAA added 50 shops during the half year, bringing the total to 400 and increasing floor space by 7 per cent to 570,000 square feet. Another 20,000 square feet is set to open this year. Income from specialist shops such as Aquascutum, Jaeger and Bally has risen by 44 per cent. Lillywhites and Liberty are due to open at Heathrow before Christmas and Dixons will follow in the spring.

The company forecasts growth in passenger traffic through its seven airports of 3.8 per cent a year until the end of the century, slightly faster than its last long-term forecast in 1991. Traffic through Heathrow, Gatwick and Stansted is estimated to rise by a third to 91 million.

Sir John said BAA was not interested in acquiring further municipally owned airports such as Manchester, preferring the route of overseas expansion.