BAA close to clinching breakthrough in US

BAA, the UK airports operator, is close to agreeing a deal to take over management control of Indianapolis airport, giving the company an important breakthrough into the US market.

The news came as British Airways warned that the building of another terminal at Heathrow, the subject of an inquiry starting next week, was vital for thousands of BA jobs.

BAA, whose seven airports include Heathrow and Gatwick, is within a couple of weeks of signing a 10-year contract, which the company said would be used as a showpiece to expand elsewhere in the US. Overseas expansion is crucial for BAA's strategy, but winning business in the US has been difficult and the company had recently turned its attention to Australia. US airports are tightly controlled by the local authorities that run them.

Indianapolis airport is comparatively small, handling 6.5 million passengers a year, against the 50 million at New York's JFK. BAA told the authorities it could save more than $105m over 10 years through operating efficiencies and improve the airport's retail and concession areas.

BAA will not receive a fixed management fee, but share the savings it generates. It would guarantee average annual savings over $3m and would not be paid any fees until it produced annual savings of $6m. In 1994, the cost of running the Indianapolis airport was $52m.

BAA, which already runs the retail operations at Pittsburgh International Airport, put in its bid last September, and faced competition from three other companies and a proposal from the airport staff.

A BAA spokesman said the agreement needed approval from the city's authorities, but he was confident it would go ahead. He said: "It is a good opportunity to show what we can do in the US. We can use it as a showcase."

Meanwhile, Sir Colin Marshall, chairman of British Airways, told the annual Chamber of Commerce conference in Aberdeen that Britain will lose more than £2bn a year in revenue if Terminal 5 is not built.

He again repeated warnings that 7,000 BA jobs were directly dependent on permission being granted following a public inquiry that opens next Tuesday.

In evidence to the inquiry, BA will publish a report it has commissioned which warns that UK-based businesses will face increased costs due to higher fares and longer journey times unless Terminal 5 is built. BA has said it will look for a "second home" on the Continent if it is not built.

Opposition to a new terminal is being led by local residents alarmed about extra noise and traffic.