Michael Harrison's Outlook: The Spanish armada docks at Heathrow but will it be good news for air travellers?

To judge from the headlines in Madrid, anyone would think that Spain had just won the World Cup. There's no stopping the "Invincible Armada" trumpeted El Mundo, shamelessly rewriting more than four centuries of history.

Spain's second-biggest daily newspaper was referring, of course, not to the month-long football fest which begins today in Germany but to Ferrovial's successful takeover of BAA. Another notch on the bedpost of Rafael del Pino, the smooth but steely chairman of the Spanish construction and road tolls group. Another nail in the coffin of UK plc as one more famous industrial name disappears into the belly of foreign ownership.

The Spanish should remember, however, that pride comes before a fall. The takeover of BAA is not like the Spanish acquisitions which have gone before it. Unlike Abbey and O2, BAA is a heavily regulated monopoly. And, unlike a mortgage bank or a mobile network operator, it is an owner of strategic assets.

More perhaps than any other privatised company, BAA remains a creature of government, in thrall to ministers and their appointed regulators. The Government asks for a new runway at Stansted and BAA's duty is to deliver. The Civil Aviation Authority says charges can go up by only so much at Heathrow, and BAA must comply.

At his monthly press conference in Downing Street yesterday, the Prime Minister insisted that politics had no place in the takeover of utilities such as BAA. Believe that if you want (they certainly don't in Spain, incidentally, where the airport industry remains state-owned).

Mr Blair probably thought the regulators had done enough to ward off the Spanish without the need for heavy-handed political interference. First Ferrovial was warned that it could be in trouble if it pursued a highly leveraged bid. Then came the almost casual announcement that an investigation into BAA's South-east airports monopoly was under consideration.

Mr del Pino, like his father the "king of bricks", is obviously made of sterner stuff, and he pressed on undeterred. The result, however, is that Ferrovial has almost certainly paid much more than it planned to. It has also been forced to finance much more of the deal with its own equity rather than someone else's money.

The atmosphere in the Ferrovial camp yesterday was as much one of exhaustion as elation. But if they reckon the past four months have been hard work, it will seem as nothing compared to the grind the Spanish face from now on.

Ferrovial will be able to recoup some of its money by selling off BAA's overseas assets and perhaps even one or two of its UK airports. But what's left will have to be sweated mercilessly if the Spanish are to make a return on their own investment and service their debt.

They can expect no help from the regulator to make the numbers add up and even less from their airline customers who, almost to a man, seem to regard airport operators as an unfortunate but necessary evil. Ryanair's Michael O'Leary says he is not interested in exchanging one lot of highwaymen for another and he is not alone.

The Spanish have hinted there may be a much cheaper way of building a second runway at Stansted than the current BAA management envisages. But they have made no commitment to the next big investment which BAA had planned at Heathrow once Terminal 5 is complete - the £1.5bn redevelopment of the airport's central terminal area. Saddled with so much debt, Ferrovial will be hard pressed just to meet the bare minimum of investment needed to cope with the ever-increasing demand for air travel.

Under BAA, Britain's airports have come to resemble shopping centres with the odd runway attached. What will they look like under Spanish ownership? There aren't too many airlines who will lament the demise of BAA. But will they be any better served by the new management? As they say, sometimes it's best to keep tight hold of nurse for fear of finding something worse.

Rose trousers it at M&S

Stuart Rose is comfortably over six foot so it's a fair bet that he, too, finds it difficult to buy trousers in Marks & Spencer that are long enough. Now the board has decided that the executive remuneration scheme doesn't fit him very well either. M&S's chief executive has been rubbing along on an annual bonus plan which pays out only 150 per cent of salary and a long-term one which pays 200 per cent.

So stellar has the M&S recovery been that the board has now agreed to raise the maximum payouts to 250 per cent and 400 per cent respectively. That means Mr Rose could trouser £7m for 12 months' work next year.

At the same time as raising the payout, M&S has lowered the bar that Mr Rose and the company's two other top executives have to jump. Whereas earnings per share had to rise by 15 per cent to guarantee the maximum bonus, they now have to increase by a more modest 12 per cent.

Bonus schemes based on earnings per share are, in themselves, controversial among some investors because they are easier for management to manipulate. M&S itself had a bonus plan based on the more demanding target of total shareholder return until it was dropped for the current scheme.

Should shareholders kick up a fuss? The rewards for Mr Rose and his colleagues might seem beyond the dreams of avarice to most mortals. But they are still distinctly second division compared to the riches offered by the private equity firms which nowadays own much of the British high street.

Shareholders have not done badly from the ride either. Before the Philip Green bid, which Mr Rose was brought in to see off, M&S shares were trading at 280p. Although they are off their peak, they are still worth almost double that amount today. As long as Mr Rose keeps his shareholders satisfied by keeping his customers happy, no one is likely to complain too much. So don't forget about those of us with 35-inch inside legs, Stuart.

Sir Ken's role at Morrisons

"My knowledge is freely available and it will be generously given." Oh dear, is that a threat or a promise from Sir Ken Morrison?A day after the eponymous supermarket group finally appointed a new chief executive with overall responsibility for the business, it is far from clear whether its 74-year old chairman has surrendered his executive role or not. Sir Ken took to the airwaves yesterday to clear up the position, but succeeded only in leaving it more confused. He will still work a five-day week, he will still draw a £675,000 salary and, one suspects, his hand will still somehow be on the tiller until the moment he checks out in January 2008.

Interregnums such as this rarely work in conventional companies, let alone ones where the chairman is a family member and still one of its biggest shareholders. The sooner Sir Ken shuffles off to tend his roses the better for Marc Bolland, who arrives in a month's time. At one point, it looked as if the fund manager Paul Manduca was being lined up for the chairman's slot but that looks less likely now. A successor needs to be found quickly and the board, bereft as it will soon be of David Jones, must ensure it is not one of Ken's cronies.

m.harrison@independent.co.uk