Britain's Largest Airport Operator Posts Loss; Delays Expansion


The Guardian is reporting that Britain's largest airport operator, BAA, today posted a pretax loss of $1.9 billion for 2008 and warned of a "challenging year" ahead as the recession hits passenger numbers.

Last week, BAA acknowledged that the opening of a second runway at Stansted airport will be delayed by two years because there are not enough passengers to meet demand. Britain's third largest airport will instead open a new runway in 2017 if it secures planning permission at a public inquiry due to start in April.

The extra runway would allow annual passenger numbers at the Essex airport to increase from 22.3 million to 35 million. However, fewer travelers are using Stansted, as Ryanair and easyJet, the airport's largest customers, scale back operations. However, BAA added that it still expected long-term demand to reach 68 million passengers—on a par with Heathrow—by 2030. The short-term trend is in the other direction, with passenger numbers dropping 6 percent last year, one year after demand grew by just 0.3 percent.

The owner of seven UK airports—including Heathrow, Gatwick and Stansted—was hit by a one-off charge of approximately $1.5 billion relating to the loss of a tax relief on its substantial property portfolio. BAA, whose debt burden of $13.4 billion is not far short of the $17.8 billion valuation of its London airports, saw its operating profit almost wiped about by a further writedown on property values that reduced its profit to $32.8 million, compared with $679 million the previous year. Revenues, boosted by increased landing charges, rose 16 percent to $3.14 billion. But total traffic fell 2.7 percent as BAA's airports handled 151.4 million passengers.

In spite of the possible expansion at Stansted, BAA indicated that it was preparing for a future without the airport or Gatwick, two of the three airports that the Competition Commission has earmarked for disposal as part of an investigation into the group's domination of the market. BAA has already put Gatwick up for sale but, until recently, it has expressed an interest in holding on to Stansted, to the extent that it has threatened legal action against the commission. However, BAA said this morning in a presentation to its creditors that its strategy was focused on improving Heathrow and pointedly failed to mention Stansted or Gatwick. The other airport singled out for disposal is Edinburgh.

If the commission presses ahead with its initial conclusions, BAA will be left with ownership of Heathrow, Aberdeen, Glasgow and Southampton airports within the year. It will also be forced into a mass disposal of three of its biggest assets when the means to finance massive infrastructure acquisitions—cheap and widely available debt—has all but dried up.

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