THE INVESTMENT COLUMN: Monopoly makes BAA a good long-term bet

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The Independent Online
BAA OWNS seven UK airports including the giant Heathrow, where it is three years away from unveiling a fifth terminal to accommodate the inexorable rise in air travel. That project is on time and on budget, while more immediate financial trends within the group also continue on the correct flight path.

Yesterday it revealed its latest passenger numbers, saying it had seen 9.95 million through its gates in January. Investors were most pleased with the numbers at Heathrow, up 6.1 per cent on the same month last year, and Gatwick, up 10.8 per cent. The cheap dollar and the buoyant corporate climate is attracting shoppers and businessmen alike to travel transatlantic, while airlines have been advertising heavily. Meanwhile, the budget airlines are still piling on flights to Continental Europe and Ireland.

In total, BAA's passenger numbers for January were up 7.4 per cent; for the financial year since April, up 6.6 per cent. Recent nine-month results also showed passengers are spending more at BAA's airports.

As a play on increased air travel in the short term, BAA has less to recommend it than, say, British Airways, where extra ticket sales can be added almost wholly to profit. BAA gets only a cut of ticket prices and whatever the passengers spend in the shops. As a longer-term play it will be less volatile and, because of its monopoly, does not face the fierce competition that means airlines often fail to make money. Continue to hold.