Debts drag BAA earnings lower

STANSTED Airport owner BAA's �9.6 billion debt mountain weighed heavily on its bottom line during the first three months of 2009 despite an income boost from higher airport fees, the group said yesterday.

STANSTED Airport owner BAA's �9.6 billion debt mountain weighed heavily on its bottom line during the first three months of 2009 despite an income boost from higher airport fees, the group said yesterday.

BAA reported a 10% fall in passenger numbers at its three London airports to 24.8 million in the first quarter - nearly three million down on the same period last year - due to the impact of recession and the worst snowfall for 18 years.

Although the higher airport charging regime at Heathrow and Gatwick which came into force a year ago benefited the group's underlying performance, soaring interest payments meant BAA's pre-tax 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 increased four-fold to �327.2 million.

This pushed pre-tax losses to �316.5 million, against a �55.6 million reverse for the same period last year. This compared with a 28% rise in underlying earnings to �185.8 million, 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 - along with February's heavy snow which crippled much of the country.

But he added that the decline was in line with expectations given the tough economic conditions.

“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.

Among the London airports, Heathrow recorded the smallest decline in passenger numbers - down by 6.4% or one million people to 14.4million. Numbers at Stansted fell by 700,000 to 4.1million and at Gatwick by 1.1million to 6.3million - a reduction of 14.6% in each case.

Mr Matthews said the stronger performance at Heathrow was down to the airport's attractive status as a global transport hub.

The Government is supporting a third runway for the airport, although some business leaders signalled their opposition to the move over the weekend.

In March, BAA 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.