BAA reaches agreement with Star Alliance on Heathrow

The airports operator BAA is close to settling its long-running dispute with the Star Alliance group of airlines over facilities at London's Heathrow airport.

The airports operator BAA is close to settling its long-running dispute with the Star Alliance group of airlines over facilities at London's Heathrow airport.

BAA disclosed yesterday that it expects to sign a memorandum of understanding in the next few weeks with the 14 airlines which make up Star under which they will agree to move into Terminal One when British Airways and its partners in the Oneworld alliance relocate to the new Terminal 5 in 2008.

The agreement is likely to end a lengthy and fractious row with the Star members, led by Lufthansa, United Airlines, Singapore Airlines and Bmi, which had threatened to end up in the courts.

Star had accused BAA of treating it unequally by refusing to provide it with competitive facilities at Heathrow to BA and its partners, who will have sole use of the new T5, which is costing £4.2bn to build and will be bigger than most other airports in Europe in its own right.

Mike Clasper, BAA's chief executive, declined to say how much it would spend on Terminal One to prepare it for the Star airlines. But he indicated that a significant proportion of the £3bn BAA intends to invest in other areas of Heathrow apart from T5 would be earmarked for the upgrade, which will involve the rebuilding of a number of piers and an increased number of aircraft stands.

The relocation of Star to Terminal One and Oneworld to the fifth terminal will free up Terminal Four for use by the Skyteam alliance, led by Air France, KLM, North West and Continental and Alitalia.

Terminal 3 will continue to be used by long-haul airlines which are not part of any alliance such as Virgin Atlantic, while Terminal 2 will house non-aligned short-haul carriers.

It is unclear whether the agreement with Star will end the separate row over landing charges at Heathrow between BAA and Bmi, which is objecting to the 40 per cent increase in charges in the five-year period up to 2008.

BAA reported a 16 per cent increase in pre-tax profits to £363m for the six months to the end of September. Passenger traffic rose 7.5 per cent while retail revenues were up by 9 per cent.