BAA suffers from perfect storm - but losses narrow

UK airports operator BAA lost £317m in 2010, thanks to volcanic ash, strikes and snow. Though that's a lot better than 2009...

by Dave Waller
Last Updated: 19 Jul 2011
After losing a staggering £822m in 2009, Spanish-owned BAA must have hoped for an easier ride last year. Unfortunately, thanks to the Icelandic volcano eruption, which closed Heathrow and Stansted for five days, BA’s cabin crew strike, which disrupted services at Heathrow for 34 days, and finally December’s snow, which closed airports and left flights grounded and cost the operator £24m, it didn’t get one. You could hardly blame boss Colin Matthews et al for leaving on a jet plane, without stipulating exactly when they’ll be back again.
 
BAA said these disruptions meant 2.8m fewer passengers passed through its airports last year. To compound matters, it also suffered a financial hit courtesy of a £218m charge for its pension deficit, and the forced sale of Gatwick. And it had to pay £696.4m of net interest on the big fat debts incurred when Spain’s Ferrovial bought it back in 2006. Crikey.
 
But it’s not all bad news. Revenues actually increased 4.9% to £2.07bn – thanks in part to an ‘exceptional’ retail performance. That suggests it sold an awful lot of perfume, booze and travel plugs. Who knows: if it had spent more money on snow ploughs, turnover might have been even higher…
 
Yet BAA knows it’s not out of the fog yet. The company has spent two years trying to convince the Competition Commission that it shouldn’t have to flog Stansted and either Glasgow or Edinburgh airports, but last week it lost its latest court challenge. There is an air of inevitability about the whole thing now– but the operator would’ve been keen to delay the sale as long as possible, at least until the value of its infrastructure assets started to climb again.
 
Still, BAA remains bullish about the future, predicting it can deliver a decent increase in profits and cash flow for 2011, despite the nation’s financial woes. We salute the positive thinking, but it’ll be easier said than done: even if the ash or snow doesn’t fall, the airport operator still has BA’s HR issues to contend with, not to mention a hefty interest bill and the unwelcome attentions of the regulator…

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