Holiday revival helps to lift BAA result: Airports management group banks on continuing strong growth in passenger flow

A RESURGENCE in the holiday charter flight market, continued buoyancy in retail income from airport shops, and a tight grip on costs have lifted BAA's pre-tax profits 11 per cent to pounds 111m in the first quarter.

Overall revenues rose 5 per cent to pounds 305m but operating profits rose faster, by 7 per cent, as BAA increased productivity 5.7 per cent in the period to 30 June.

Pre-tax profits received an additional boost from a drop in interest charges from pounds 13m to pounds 10m after capitalising pounds 9.7m against pounds 6.2m of finance costs.

BAA shares, strong in the run- up to the results, fell 20p to 953p yesterday on the back of profit-taking rather than disappointment with the figures.

Passenger numbers through Heathrow, Gatwick, Stansted and smaller regional airports in Scotland and Southampton rose 6 per cent, with particularly strong growth in charter and long-haul markets. BAA is sticking to its forecast of traffic growth of 5 to 6 per cent this year.

The rise in passenger numbers was led by Gatwick, experiencing its strongest first quarter for three years. Charter flights usually make up about 50 per cent of flights at Gatwick and this summer has seen a revival in British holidaymakers' interest in traditional European locations in Greece, Spain and Italy. Long-haul flights to the US for the World Cup had a negligible effect.

Business travel has also shown an increase, both in domestic flights and in trips to Continental Europe, although the figures do not reflect increased activity as a result of the current rail strikes.

The first quarter ended on a high note with growth of 10 per cent in June in comparison with a depressed month in 1993, and BAA says that this has continued into July and is expected to be matched in August.

Revenue from airport charges, regulated by a price cap, rose by 5.6 per cent to pounds 117m.

Retail revenue from airport shops, one of the success stories at BAA, grew by 8.5 per cent to pounds 125m and remains the company's biggest single source of income. Sales were held back by disruption caused by redevelopment at some airports. At Heathrow's Terminal 4 revenue grew 14 per cent, or 7.3 per cent for each passenger, and Terminal 3 saw growth in income of 17 per cent or 4.4 per cent for each passenger.

New services, such as the combined operations centre for British Airways at Heathrow, helped to lift airport property income, which rose by pounds 4m to pounds 40m.

Capital spending, poised to increase sharply in the next few years, increased by 73 per cent in the first quarter to pounds 88m. After a pounds 33m cash outflow in the quarter net debt increased to pounds 72m.

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