Wednesday, October 28, 2009

BAA "Better Placed" To Deliver UK Airport Improvements

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The British Airports Authority (BAA) has responded to last week's Competition Commission (CC) report by saying developments at UK airports would stagnate if it was broken up.

The airport operator last week criticised by the CC, which said BAA's ownership of seven major UK airports "may not be serving well the interests of either airlines or passengers".

However, BAA has defended itself by saying the situation at UK airports in terms of capacity and long-term investment in facilities would actually be worse if the group did not exist in its present form.

The company said its size brought many benefits for both airline and passenger users, and that it was "better placed" than others to bring about the necessary improvements to airports.

Business Weekly quotes a "BAA insider" as saying: "Whatever happened to the argument for sustainable growth?...No-one is better placed than BAA and Ferrovial [BAA's Spanish owners] to deliver the Government's aviation policy, to fund improvements without sapping UK taxpayers and deliver the most cost-effective options to the people who count - the passengers.

"If it can produce a solution to do what BAA intends to do - and find a miracle solution to do all that and still make flying cheaper then we would say good luck to them. To us it would appear quite a challenge".

BAA Defends Airport Ownership

The source said that if BAA were broken up, as it may well be depending upon the final outcome of the CC (due to be released in August), then it will not be able to finance the planned projects for growth at two of its London airports - Heathrow and Stansted.

The "BAA insider" also defended the company against the Competition Commission's inference in its interim report that its concentrated ownership of airports in particular geographical regions (the company runs the three major London airports at Heathrow, Gatwick and Stansted, and the three major Scottish airports at Edinburgh, Glasgow and Aberdeen), was bad for airlines.

For airlines, the source said, BAA's ownership of airports enables "airlines...[to] target certain flights at certain catchments and market types, and we would argue that freedom of choice is worth fighting for".
The company also said the reason why there was a perception of "no competition" in the London airports market was because they were operating at full capacity.

BAA Refinancing Plan

Meanwhile, it has been reported that Ferrovial is pressing ahead with the plans to refinance BAA in order to help the company fund its planned investments at Heathrow and Stansted, despite the uncertainty cast on BAA's future by the Competition Commission report.

The Royal Bank of Scotland and Citigroup are reportedly in talks "a consortium of eight banks" to develop a refinancing package for BAA.

City analysts say if the refinancing deal goes through, then it will most likely be completed in two stages - with the second expected to secure about £10 billion against the three London airports. These analysts say that the refinancing plan will be structured so as to expedite easy separation of an airport property in the event that BAA is forced to sell one or more of its airports.

Source - Airport International's Aviation Correspondent

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