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More pain for debt-hit BAA as travellers cut back on flying
29.07.09
Heathrow, Gatwick and Stansted airports owner BAA slumped to a loss of £545 million in the first six months of the year, as recession-hit travellers cut back on trips and its pension fund deficit ballooned.
The debt-laden operator, which is owned by Spanish building group Ferrovial, also said that it was still in ongoing talks with several potential buyers of Gatwick, despite recent reports that the two main bidders had walked away.
Colin Matthews, BAA's chief executive, said that given the economic circumstances, with passenger numbers falling for 14 consecutive months, the group's financial results were good.
He said: “We invested more than £500 million in improvements, particularly at Heathrow Terminal Four and Terminal Two, and these results are in line with our expectations.”
Matthews emphasised that BAA is still investing for the future at the three airports and is seeing improved returns where work has been completed.
Cash generated from operations rose 42% in the first six months to £431 million, while pre-tax losses before non-cash exceptional pension charges and depreciation doubled from £71.4 million to £140 million.
BAA was ordered to sell both Gatwick and Stansted by the Competition Commission earlier this year, but last month it was reported that a consortium led by Manchester Airport Group had walked away from a deal after offering £1.4 billion — £100 million less than the asking price.
Analysts are worried that without a sale of Gatwick BAA would have difficulty repaying £1 billion of its £12 billion of debt which falls due in the spring of next year.
Matthews declined to comment in detail on sale talks, but said: “What this level of cash flow shows is that we will be able to repay our 2010 debt maturities with or without a Gatwick sale. We still have multiple players interested in Gatwick and talks are still going on. But we don't have to sell Gatwick if we don't reckon we are getting a decent price.”
Today's numbers clearly show that Heathrow is holding up better than the more holiday-oriented Gatwick and Stansted. Heathrow's passenger numbers are down by less, while the amount spent by customers in terminal shops and bars and on services like car parking has climbed more quickly than at the other airports.
Reader views (10)
I was at Stansted airport yesterday and had time for a quick nap between each take-off and landing. I half expected Michael O'Leary to run through the place screaming what's going on?!!
- Peter Seekings-Foster, Mildenhall, Suffolk.
Flying is now such a miserable experience that many people have simply decided that there's more to life than being humiliated by attempting to go on holiday by flying. Return the airlines to normality and watch the travellers return.
- Scotty, Cambridge UK
What does BAA expect when flying from London's airports is such a thoroughly depressing and tedious experience? I think I last found a departure or arrival at Heathrow a tolerably acceptable thing to do was about 15 years ago, and likewise to a lesser extent, Stansted. Like a lot of people I should think who have become disenchanted with the aviation experience of today, I now only take a sardine-tin crowded commercial flight if all other forms of transport are impracticable. And don't forget, whatever the aviation lobby says, jet aircraft cause undue amounts of pollution, so less BAA traffic means less pollution-QED
- Jon Kent, Hertford. UK
I try not to fly from any BAA airport but sometimes have to see people off there - Heathrow - such a disgusting place, dirty resturants, having to virually climb through shops to get somewhere, terrible signage - do not believe that people have stopped travelling - we have not, but have voted with our feet - away from BAA!
- Alexis H, London, UK
Think Gordo should increase the green taxes for flying some more, think that will be the usual labour helping hand, ie the hand that helps itself, to your money
- Rob Ak, Rock Ferry Uk
So this is the business that is going to build 2 new runways and terminals? This is the business that Labopur belives can actually be trusted with the enormous noise and health implications of its growth? Its time Labour accepted its got into bed with a very bad business partner and that a new airport leveraging the best of UK builing and engineering should build the HUB out in The Thames - good for everyone but this very poor excuse for a business. What aviation has failed to grasp is that it is a transport business that has passed its peak - we are seeing the beginning of an industry decline - and BAAs answer build in capacity that is not and will not be needed - such denial is understandable for the businesses with shareholders but not for government departments
- Christian Ball, London UK
This is happening while the government is trying to insist on huge extra capacity for mass aviation. Even when (if) this slump passes, world demand for flying may well never return to previous levels, as environmental, health and quarantine issues predominate, and electronic communication makes business flying redundant. That's good news, by the way: perhaps Londoners will get decent sleep again, and cleaner air.
- Mdj E10, london uk
how the hell does a company lose that much money?
- Alan, London
I think the headline to this story should have been 'More pain for passengers as BAA cuts back on services'. Heathrow just gets scruffier and scruffier.
- Simon Ellis, London E8
How much longer can BAA hold this all together? It looks like a house of cards to me. If the recession drags on then BAA will surely go brankrupt.
- Rich, London
