BAA’s £9.6bn debt mountain weighed it down in the first three months of 2009 despite a boost from higher airport fees, the firm has said.
BAA saw a 10% fall in passengers at its London airports to 24.8 million in the first quarter — nearly three million fewer than a year earlier — due to the impact of recession and the worst snowfall for 18 years. Although the higher airport charging regime at Heathrow and Gatwick lifted the group’s underlying performance, soaring interest payments meant BAA’s losses widened.
Following a major refinancing of its debts last summer — two years after Spanish construction giant Ferrovial bought the group — BAA’s interest bill quadrupled to £327.2m. This pushed pre-tax losses to £316.5m — against a £55.6m reverse for the same period last year. This compared with a 28% rise in underlying earnings to £185.8m, due to the increased fees and “robust” retail revenues.
Chief executive Colin Matthews said factors such as this year’s later Easter and 2008’s extra leap year day also hit passengers. But he added that the decline was in line with expectations.
“The rest of the year will be difficult and will present more challenges but our focus remains on raising service standards and maximising efficiency,” he said.
The Government is supporting a third runway for the airport, although some business leaders signalled their opposition to the move. BAA has been the subject of a lengthy inquiry which raised “significant competition problems” over its domination of airports in the South East.
In March it was ordered by the Competition Commission to sell Gatwick and Stansted as well as either Glasgow or Edinburgh Airport in the next two years. It is currently reviewing bids for Gatwick airport and will announce the results in the next few weeks.