Jeremy Warner: BAA would struggle with third runway

Outlook: Brave of all those high-powered business leaders to come leaping out of the closet to confess they have always been against a third runway at Heathrow, isn't it? Once apon a time when there was still some possibility of the third runway getting built it might have looked dangerously risqué to have broken ranks with the rest of the business lobby in this way. Today it seems like little more than political opportunism.

By writing their open letter, the likes of Charles Dunstone, Justin King and James Murdoch are only betting on a game they already know the result of, and in the same breath toadying up to the next government.

There is almost zero chance of a third runway being built any longer. The Tories are publicly opposed, while the airport's owners – the Ferrovial-controlled BAA – would seem by the look of yesterday's numbers to be a busted flush. Sinking under a £9.5bn mountain of debt, BAA lost £316.2m in the first three months of this year, with passenger traffic at its three London airports plunging an astonishing 10 per cent.

Under orders from the Competition Commission, BAA is being forced to sell both Gatwick and Stansted, but the sales won't raise enough to solve the debt problem, acquired as part of Ferrovial's highly leveraged takeover of BAA three years ago. The recession has made BAA look operationally stretched as well.

To top it all, the company seems to have been dabbling in things it shouldn't. The losses include £104m of "fair value adjustments" on financial instruments, principally "index linked swaps". BAA is struggling to run airports successfully. What made it think it could beat the investment bankers at their own game is anyone's guess.

In any case, yesterday's figures suggest BAA will be lucky to survive at all, let alone build a new runway at Heathrow. The Tories are determined not to let it happen anyway. Only a government as politically inept as Gordon Brown's could have sanctioned such a controversial project.

Still, the open letter does serve at least some purpose – besides that of the hours of fun it provides in trying to work out how many of the signatories live beneath the threatened flight path. Despite the present collapse in passenger numbers and the longer-term environmental pressures, it seems highly likely that London will eventually need more airport capacity. This doesn't need to be delivered through a single "hub" airport, but rather can be added piecemeal to existing airports around the capital. The sooner everyone accepts that the third runway is dead, and gets on with the serious business of delivering decent alternatives, the better.