British Airways to Examine Claim Against BAA Over T5 (Update1)

April 14 (Bloomberg) -- British Airways Plc will ask its lawyers to examine a compensation claim against London Heathrow airport operator BAA Ltd. following the chaotic opening of a new terminal there.

``I'd need to have more detailed discussions with the lawyers to see whether there is a possibility there or not,'' Chief Executive Officer Willie Walsh said in an interview after a Foreign Press Association luncheon in London today.

The 4.3 billion-pound ($8.5 billion) Terminal 5 opened to passengers on March 27, sparking 12 days of canceled flights after the baggage-handling system broke down and airline employees were stuck in car parks and at security checkpoints. The chaos may have cost at least 16 million pounds, according to London-based British Airways, which has postponed moving a second wave of services to the new concourse.

``The lawyers will clearly have to have a look at it,'' Walsh said, adding that the terminal's ``disappointing'' opening was in part the fault of BAA, which operated the car parks and security checkpoints that saw workers held up on the building's opening day. ``They didn't have that working as it should.''

Walsh said that any claim might be complicated by the fact that British Airways, Europe's third-biggest carrier, pays BAA for its services primarily through landing charges.

BAA, a unit of Spanish builder Grupo Ferrovial SA, said that while legal issues may arise, its main focus is on working with British Airways to further improve operations at Terminal 5.

``There are bound to be discussions of this nature in the future but at the moment we are working hard to deliver the highest levels of service to our passengers,'' BAA said in a statement in response to questions from Bloomberg.

Lengthy Shift

The earliest British Airways will start shifting more flights to Terminal 5 is June 5, Walsh said today, with the move likely to span several months and possibly not finish until October. The switch was originally scheduled to be completed in a day or so from April 30.

Walsh said today that he's ``always been confident'' of meeting a 10 percent operating profit margin target for the fiscal year ended March 31, which the CEO has also set as a benchmark for paying the company's first dividend in seven years. British Airways reports full-year results on May 16.

``That's clearly something that the board will have to consider in due course, but this hasn't changed the board's view in relation to the dividend,'' he said in the interview.

Three days after Terminal 5 opened, an ``Open Skies'' treaty liberalizing air travel between the U.S. and European Union came into effect, ending the lock British Airways and three other carriers had on American flights from Heathrow. Trans-Atlantic flights from Europe's busiest airport account for about half of the airline's earnings.

Prices Holding Up

``We haven't seen any noticeable change in pricing,'' Walsh said in a question-and-answer session at the FPA event. ``We've seen very little evidence of any great change in prices because we haven't really seen any significant capacity change in the market.''

Since Open Skies came into effect, carriers including Delta Air Lines Inc. and Continental Airlines Inc. have started Heathrow flights. The influx means seating between Heathrow and the U.S. for the summer season is up 21 percent from a year earlier, according to Aviation Economics, a London-based consulting company.

Ticket Sales

British Airways is responding to the treaty by starting a subsidiary to exploit a clause allowing EU carriers to fly to the U.S. from any of the bloc's countries instead of just their home nations. The airline, called ``OpenSkies,'' will sell tickets from the end of this month or in May, Walsh said today.

The CEO ruled out making a bid for Silverjet Plc, the business-class-only carrier that flies between New York, London and Dubai, and Alitalia SpA, the Italian carrier that's seeking a buyer to stave off bankruptcy.

The airline is also not ``actively pursuing'' antitrust immunity for a deal with AMR Corp.'s American Airlines Inc., the CEO said today. Regulatory agencies want the airline to give up takeoff and landing slots at Heathrow to get the immunity he said, and the carrier is not willing to do so. Heathrow is 99 percent full in terms of government-allowed flight capacity and slots sell for millions of pounds. Continental paid $209 million for four pairs of takeoff and landing slots at the airport.

British Airways is lobbying the government to approve a third runway at Heathrow that would boost flights to 720,000 a year from the current limit of 480,000. The plans have provoked criticism from environmental and residential groups who say another landing strip will increase noise and pollution.

New Airport `Impractical'

London Mayoral candidate Boris Johnson has said he wants to build a completely new airport in the Thames Estuary, east of London, to avoid clashes with residents. Walsh said today that idea is ``impractical.'' A new airport would cost about 30 billion pounds to build, he said.

``How are any private businesses going to generate significant support to build that?'' he said. ``The government isn't going to provide any support.'' He added that British Airways would not be willing to move to a new airport.

To contact the reporter on this story: Tracy Alloway in London at talloway@bloomberg.net

To contact the editor responsible for this story: Chris Jasper at cjasper@bloomberg.net.