Heathrow plans at risk as BAA faces attack on profits
The chances of BAA making good on threats to cancel its £3.5bn redevelopment plans for Heathrow Airport rose sharply yesterday after the Competition Commission recommended a slashing of the profits it is allowed to reap from Europe’s busiest airport.
In a highly critical statement that accused BAA of acting “against the public interest” in its running of Heathrow and Gatwick, the watchdog suggested a reduction in the allowed cost of capital from 7.75 per cent at the two airports to 6.2 per cent at Heathrow and 6.5 per cent at Gatwick. The cut comes despite furious lobbying by BAA and its Spanish parent Ferrovial, who argue that such cuts reduce the incentive for the proposed multibillion pound development schemes for the airports.
Stephen Nelson, chief executive of BAA, reacted furiously to the ruling. “We see little in the CC’s report which delivers the incentives to transform the airports,” he said. “Nor do we believe that the CC recognises the scale and nature of the challenges we face in seeking to deliver a step change in the passenger experience.”
The Civil Aviation Authority, which suggested the same cut earlier this year, will consider the CC’s ruling before issuing its firm price control recommendation by 20 November.
Mr Nelson’s comments echoed those made earlier this year by Rafael del Pino, the chief executive of Ferrovial. At a meeting with journalists in Madrid, Mr del Pino, who paid £16bn in a highly leveraged deal to take over BAA last year, said the CAA had “not given us the incentive” and that it could be forced to abandon the redevelopment plans.
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