BAA advises ministers against new Cliffe airport

BAA, the owner of Heathrow, Gatwick and Stansted, is set to advise the Government against building a new airport at Cliffe in Kent in order to meet increased demand for air travel in the South-east.

Instead, BAA is expected to indicate that a third runway at Heathrow and the expansion of Stansted in Essex would be a more cost-effective and viable means of providing additional capacity.

The company is due to deliver its response by the end of this month to the consultation document issued by the Government in July setting out the options for expanding runway capacity in the South-east.

BAA will be careful, however, to emphasise that any final decision on where to site new runways must be one for the Government. It is likely to avoid making a hard and fast recommendation in favour of building new runways at particular airports for fear of antagonising local residents groups and environmental campaigners.

The Government document put forward three main options: a brand new airport at Cliffe in the Kent marshes next to an important breeding site for water fowl; a third runway at Heathrow to handle short-haul aircraft; and the expansion of Stansted with up to four additional runways.

Mike Hodgkinson, BAA's chief executive, insisted yesterday that BAA was still working on its submission to the Government, and that much would depend on the studies by the Strategic Rail Authority into the cost and building new rail links to support increased runway capacity.

He was speaking as BAA reported a 3.6 per cent dip in normalised pre-tax profits for the six months to the end of September to £326m because of increased security and insurance costs and higher interest charges. BAA shares rose 6 per cent to 586p.

Despite the difficulty of gauging passenger numbers in the second half when BAA is much more reliant on business travellers than the leisure market, the company has not told analysts to amend their full-year profits forecasts which range from £505m to £550m.

BAA said it expected the Civil Aviation Authority to publish final proposals on the landing charges it can levy on airlines, for the five years from April 2003, in the next four to five weeks.

The CAA is in dispute with the Competition Commission over the mechanism for setting charges, with the CAA keen to separate them from the retail income BAA earns and the commission insistent that retail profits should continue to be used to subsidise landing charges.

Mr Hodgkinson said that whichever formula was chosen, the level of charges had to be enough to allow BAA to fund its investment programme, in particular the building of Terminal Five which is due to enter service in 2008.