Airports and trains struggle as passenger numbers drop

Airport operator BAA posts a £2bn annual loss, as the train companies lose their battle to freeze fares...

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Last Updated: 31 Aug 2010

BAA said today it made a net loss of £1.95bn in 2008, with operating profits tumbling from £476m in the previous year to £23m this time around. This was partly due to a one-off charge of £1.1bn (resulting from the abolition of a tax relief on its property portfolio), but it also saw a near-3% drop in passenger numbers, with Stansted particularly hard-hit – a clear sign that we’re cutting down on the short-haul breaks. We’re also travelling less within these fair shores: train companies are struggling with falling demand too – and sadly for them, the Government has just turned down their request to freeze prices…

It wasn’t all bad news from BAA this morning: overall sales were actually up 16% to £2.29bn, as the Government allowed it to increase landing charges for the airlines, and its retail income rose by 3% (let’s face it, these airports are little more than shopping malls with runways attached these days). What’s more, the decline in passenger numbers was less marked at Heathrow, perhaps partly because the number of long-haul flights was up 3.5%. This is good for BAA, since Heathrow is the only one of its London airports that it will definitely end up keeping. Gatwick is already up for sale and Stansted is likely to follow – although today’s news of a 6% passenger decline might put off a few prospective buyers…

Meanwhile the train companies have failed in their own bid to deal with falling passenger demand. State regulations mean that many of their ticket prices have to be linked to inflation – and specifically, the retail price index measure, which is forecast to lurch into negative territory in the next few months. This could mean that some train companies would end up having to cut prices at a time when demand is already falling. The prospect of less-crowded trains and lower prices might seem absolutely heaven-sent to commuters – but the chances are that it could lead to cost-cuts, potentially making the service even worse than it is already. Frightening.

Anyway, Transport Minister Lord Adonis was having none of it, turning down their request to ‘relax’ the rules. You might think this is predictable enough, given that backing higher prices is hardly a populist move – except that the Government is allowing BAA to raise landing charges at Stansted in April, much to the airlines’ vocal disgust. Then again, airlines won’t be voting in the next election...


In today's bulletin:
Cadbury Milking the gloom as profits jump 30%
Sir Philip Green to merge Arcadia and Bhs
Airports and trains struggle as passenger numbers drop
SMEs stamp their feet over Royal Mail sale
Non-exec directors getting more for less

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