BAA sets up pounds 102m windfall provision

BAA, owner of Heathrow and Gatwick airports, yesterday became one of the first privatised companies to make provisions to pay the Government's windfall tax, setting aside pounds 102m in its first quarter results.

The company said the provision was its final estimate of the tax liability, which had yet to be calculated by the Inland Revenue. Other privatised groups have also pledged to set aside their windfall tax liability as a single provision, despite the Treasury's decision to allow them to pay in two installments. British Telecom has already said it will set aside the pounds 500m windfall tax cost in its next set of quarterly results.

The provision almost wiped out BAA's pre-tax profits between April and June, which rose by 4.5 per cent to pounds 136m. The results are the first since the company agreed a new price formula with the regulator, the Civil Aviation Authority, which cut charges at its three London airports, Heathrow, Gatwick and Stansted by pounds 2.5m a year.

BAA said underlying earnings had grown by 13.1 per cent, after taking into account the pounds 8m cost of a scheme which reduces the daily variation in airport charges during heavy demand. The company's move to stop capitalising interest on investment projects through its balance sheet had cost a further pounds 3m.