U.K. Airports Operator Narrows Losses

The airports operator BAA revealed smaller first-half losses yesterday despite the impact of the volcanic ash cloud and the British Airways (BAIRY) cabin crew strike.

Passenger numbers dropped by 4.5 per cent to 38.7 million at the Ferrovial (FRRVY)-owned group's Heathrow and Stansted airports in the six months to the end of June. And the week-long closure of European airspace because of ash cost the company £36m. But BAA's revenues rose by 2.2 per cent to £958m, and the group's loss of £260m was a 34 per cent improvement on last year's £392m.

The biggest boost came from a 10 per cent rise in retail income per passenger at Heathrow and Stansted, helped by a £1bn annual capital investment programme at the hub airport, the company said.

Colin Matthews, the chief executive, stressed that investment in Heathrow will continue despite the coalition Government's scrapping of plans for a third runway at the congested hub.

"We have huge construction programmes under way at Heathrow terminals which are of huge significance for the airport with two runways, and also for the country as a whole, in the context of constrained government expenditure," Mr Matthews said.

BAA stressed that the cancellation of plans for a third runway will have no adverse impact on its debt investors, and also said that plans for a direct high-speed rail link to Heathrow will increase demand at the London airport from British fliers currently travelling via other European hubs.

Within the group's total revenues, aeronautical income fell by 1.1 per cent, while gross retail income rose by 2.8 per cent and "other" income – including the Heathrow Express rail link – shot up by 9.6 per cent.

The UK domestic market saw the most savage declines in the six months to June, with passenger numbers down by 13.5 per cent to just 3 million at BAA's two London airports. The company blamed BA's focusing of strike-induced service reductions on its domestic network. Excluding the BA strikes, passenger traffic at Heathrow would have increased by 2.3 per cent, BAA said.

The airports group faces industrial relations issues of its own with the Unite trade union. Some 6,000 BAA employees are being balloted about possible strike action in a row over a pay offer derided by Unite as "paltry."

EasyJet weathers the storm

EasyJet's third-quarter revenues rose by 5.3 per cent to £759m, despite an 8 per cent drop in passengers blamed on the volcanic ash cloud. The total cost of the ash disruption was £65m, as the budget carrier cancelled 7,314 flights, the company said.

It also reiterated full-year profit forecasts of between £100m and £150m.

EasyJet (EJETF) came in for sharp criticism last weekend after data from its Gatwick hub showed less than half its flights took off on time, a worse record than Air Zimbabwe. Its newly appointed chief executive Carolyn McCall said yesterday that improving punctuality is a top priority for the company.

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