BAA spreads wings in Indianapolis

BAA yesterday signed a management contract to run Indianapolis airport in the US, and said its ambitions to expand in Australia could cost up to pounds 300m.

The company, desperate to build an earnings stream independent of the crowded UK market, has taken a 49 per cent stake in a consortium that will bid on sell-offs in Australia.

Gordon Edington, chairman of BAA International, said he does not expected the sell-offs to begin until the end of 1996. Sydney, Melbourne, Brisbane and Perth airports are expected to be first on the block.

The purchase of Sydney and Perth could cost BAA up to pounds 300m, he said, "though it is difficult to see that we could invest much more than pounds 300m in Australia. Any major expansion for BAA would have to involve talking to shareholders about finance."

BAA yesterday won the 10-year contract to run Indianapolis airport against tough American competition after guaranteeing to make savings to the city authorities of at least $32m (pounds 20.5m) over 10 years.

The company will earn income by sharing any savings above this guaranteed minimum with the airport's airlines. Mr Edington estimated the contract would be worth $20m to BAA over the 10 years, but believed the deal's significance outweighed its size.

"This is a shop window for us to demonstrate our skills. It is an important step towards the fulfilment of our long-term ambitions in the US. What Indianapolis has done will put pressure on our US airports to accept similar arrangements."

The contract involves limited financial exposure for BAA as the Indianapolis authorities will fund any capital expenditure at the airport.

Sir John Egan, chief executive, has often said that future real growth at BAA has to come from international expansion. However, progress has been slow and the deal is the most significant overseas development since the company took control of retail operations at Pittsburgh airport in 1992.

Meanwhile, BAA has also disclosed details of a contract to design a second terminal to handle 12 million passengers a year at Shenzhen, BAA's first venture in China.Mr Edington said he is in the early stages of discussing possible joint venture management of the terminal.