BAA seeks to raise charges at Heathrow: Certain aircraft may be restricted Capacity could run out by 1997

BAA, the airports operator, is asking the Government for authority to increase airline charges at Heathrow and impose restrictions on which aircraft may use the airport.

The move, designed to tackle a looming capacity crisis at what is the world's busiest international airport, is certain to cause controversy and comes just a year after the Government imposed new price controls at Heathrow and BAA's two other airports in the South-east, Gatwick and Stansted.

Speaking as BAA announced a near 50 per cent increase in pre-tax profits last year to pounds 285m, Sir John Egan, its chief executive, warned that capacity at Heathrow could run out as early as 1997 - four years before the new pounds 800m fifth terminal is due to open.

Even if planning procedures could be speeded up BAA doubts whether it could bring the extra capacity on stream before spring 2001, by which time Heathrow will be experiencing severe overcrowding.

Sir John has already broached the difficulties with John MacGregor, Secretary of State for Transport, and the Civil Aviation Authority, the regulatory body that sets charges at the three airports in the South-east.

In those discussions, BAA has proposed that it be allowed to 'premium price' at Heathrow to reflect its position as the world's busiest international airport.

It also wants the right to permit only the quietest and most modern aircraft - those meeting what are known as stage three noise requirements - to operate from Heathrow.

This would immediately reduce the threat of overcrowding at Heathrow, which handled 45.5 million passengers last year and has been under increasing pressure since the Government abolished restrictions on new airlines entering Heathrow in 1991. Since then 20 new carriers have started services.

But it would almost certainly cause an outcry from smaller airlines since the result may be to favour long-haul operators at the expense of short-haul European and domestic airlines, which might find themselves increasingly pushed out to other airports.

BAA estimates that flying into Heathrow as opposed to another London airport is worth pounds 5m- pounds 15m to intercontinental operators because of the increased passenger levels it guarantees.

Premium pricing at Heathrow would also force the CAA to revisit the existing price cap formula agreed with BAA 18 months ago.

The formula, which runs until 1997/98, requires BAA to limit increases in landing and parking charges across the three airports to the rate of inflation less 8 per cent this year, RPI-4 next year and RPI-1 in the following two years. This is when spending on capital projects such as Terminal 5 and the Heathrow-Paddington express link will begin to rise.

If BAA was not given the freedom to vary charges at Heathrow and if the growth in passenger numbers outstripped terminal capacity, then the airport would become more congested, and levels of discomfort would increase.

'The inevitable result will be that many airlines and passengers will choose to fly - not to or though London - but to our European competitors,' Sir John said.

Meanwhile BAA defended an attack on its airport charges from the operators of London Luton airport, who claimed that BAA was overcharging customers at Heathrow and Gatwick to cross-subsidise Stansted.

London Luton has lodged a formal complaint with the CAA, which it is obliged by law to investigate, claiming that charges at Heathrow and Gatwick have been pounds 75m higher than they need be.

Sir John said there was no substance to these claims, adding that Heathrow and Gatwick were becoming cheaper and were 24th and 30th respectively in the league table of costs at the world's 40 busiest airports.

BAA's leap in profits, aided by a 27 per cent increase in productivity and a 10 per cent increase in retail income, pleased the markets, the shares ending 5p higher at 770p.

Of BAA's pounds 952m in income, pounds 321m came from retail activities such as airport shops, restaurants and car parks, against pounds 369m from airport charges.

(Photograph omitted)

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