Tougher price curbs will delay airport schemes, warns BAA chief

The new chief executive of the airports operator BAA warned yesterday that much-needed investment programmes, including the fifth terminal for Heathrow, would be slowed down if the industry regulator imposes tougher price curbs.

Mike Clasper, who formally takes over from Mike Hodgkinson in June, said a tighter price cap would not necessarily result in projects being abandoned but they would take longer to complete. "The pace of doing Terminal 5 would change and other projects would be reviewed such as the preparations for the A380 super jumbo at Heathrow," he said. BAA is spending £3.7bn on T5 and a further £200m to accommodate the new Airbus aircraft which enters service in 2006.

He was speaking as BAA announced a 6 per cent increase in operating profits to £495m for the nine months to the end of December and said it had £1.3bn in cash to help withstand any prolonged conflict in the Gulf.

The Civil Aviation Authority (CAA) is due to announce its final price controls for BAA's three London airports in the next month. In December, it proposed that BAA be allowed to increase landing charges at Heathrow by 6 per cent in real terms from this April. Mr Clasper insisted that the CAA's proposals were "only just doable".

But a group of airlines at Heathrow, led by British Airways, bmi British Midland and Virgin Atlantic, has made a last-ditch attempt to persuade the CAA to impose much smaller increases.

Nigel Turner, the chief financial officer of bmi, said it would be "obscene" to allow BAA to increase charges by 40 per cent over the next five years given the profits it is making and the uncertainty facing the aviation industry.

Mr Clasper said that BAA's ability to cope with the impact of a new war against Iraq would depend on how long military action lasted and what form it took. But he pointed out that traffic levels at its seven UK airports had recovered within a year of both the first Gulf War and the 11 September terrorist attacks in New York and Washington.