Budget air travel gives BAA boost

BAA, THE airports group which owns Heathrow, Gatwick and Stansted, yesterday raised its passenger growth forecasts for the year on the back of a surge in air travel fuelled by low-cost carriers.

Sir John Egan, BAA's chief executive, said it now expected traffic levels at its seven airports to rise by between 4.5 per cent and 5 per cent this year. The previous forecast was for growth of 4 to 4.5 per cent.

The raised forecast came as BAA announced a 10 per cent increase in pre- tax profits for the second quarter and said its retail income was holding up well despite the abolition of intra-EC duty-free last month.

Profits before tax for the three months to the end of June rose from pounds 141m to pounds 155m as traffic grew by 4.4 per cent to 29.8 million passengers.

The strongest growth came at Stansted where profits for the period rose 40 per cent to pounds 7m. Stansted is the hub for British Airways' new budget airline, Go, and the low-cost Irish airline Ryanair also has an extensive route network from the airport.

Russell Walls, BAA's finance director, said although the initial explosive growth in low-cost travel was behind it, the budget airlines were still growing strongly year-on-year.

BAA said its strategy of maintaining tax-free prices had an encouraging start with sales of exclusively-branded products proving exceptionally strong.

Apart from alcohol and tobacco, BAA is planning to keep the prices of most duty-free goods the same and make up for losses by higher sales. It is still forecasting a net fall in income of pounds 30m-pounds 40m this year following the end of duty-free.

The company is increasing retail space at its long-haul terminals by 15 per cent and plans to open duty-paid facilities in arrivals this September. BAA confirmed it was part of a consortium bidding for Rome's airport operations but said it did not expect to take more than 25 per cent of the venture.

The privatisation of the remaining 54 per cent stake in Aeroporti di Roma is expected to raise about pounds 500m and BAA's partners are the Italian holding company CIR and Banca di Roma.

The group's new chief executive, Mike Hodgkinson, who takes over from Sir John in October, is aiming to increase BAA's portfolio of overseas airports by one or two a year.

Quarterly profits at Heathrow rose 3 per cent to pounds 90m and at Gatwick they increased by 11 per cent to pounds 41m. Net retail income for the period was up by 7 per cent to pounds 129m, or pounds 4.33 per passenger.