BAA set for Chicago stake: Airport group seeks to expand in Europe, the US and China

Click to follow
The Independent Online
BAA, the privatised airports group, is in discussions to take an equity stake in Chicago's O'Hare airport, the biggest in the world handling 60 million passengers a year.

The deal would form part of a big international expansion that could see it running passenger terminals and part-owning airports as far apart as Europe, the US and China.

The company is understood to have drawn up a shortlist of half a dozen airports, including two in Europe, in which it is interested in taking stakes.

A team of senior BAA executives has also just returned from a fact-finding mission in China, where the 25 per cent annual growth in air travel offers huge potential for airport and airline operators and aircraft manufacturers alike.

BAA, which owns seven British airports including Heathrow, Gatwick and Stansted, began its foray into the international scene last year by taking on the retailing activities at Pittsburgh airport in Pennsylvania.

Now, however, it wants to expand from running the retail side of overseas airports into terminal management and joint ownership.

Under its chief executive, Sir John Egan, the overseas expansion drive will help to compensate BAA for the loss of income when intra-European Community duty-free sales, worth pounds 50m a year to BAA, are abolished at the end of this decade.

It will also enable BAA to expand without embarking on a potentially risky strategy of diversification or attempting to add to its 75 per cent share of the UK passenger market in the face of competition obstacles.

Although BAA last month announced a 50 per cent increase in profits to pounds 285m in 1992-93, its shares have been under pressure lately because of what some analysts see as its overly conservative outlook and worries about its earnings growth potential.

BAA is looking to strike a deal with one of its overseas targets in the next 18 months. The possibility of establishing a presence in the Chinese market is still at research stage although BAA is confident that over the longer term it could provide facilities and expertise to help China develop its fledgling aviation industry.

Meanwhile, one of BAA's biggest domestic investments - the pounds 300m Heathrow Express rail link to London's Paddington station - is set to move ahead this week with formal board approval for the project due on Thursday. British Rail, which has a 30 per cent equity share, is due to give board authorisation early next month.

Tenders for construction of the link, which will cut the journey time from central London to 16 minutes, are due to go out in the next fortnight. Building work is expected to begin this October, enabling the line to open around December 1997.

(Photograph omitted)

Comments