BAA profits drop 9% after demise of duty-free

THE AIRPORTS operator BAA yesterday reported a 9 per cent fall in first-quarter profits following a sharp drop in retail income at its UK airports because of the scrapping of intra-EU duty-free sales.

THE AIRPORTS operator BAA yesterday reported a 9 per cent fall in first-quarter profits following a sharp drop in retail income at its UK airports because of the scrapping of intra-EU duty-free sales.

Retail income for the three months to the end of June fell 11 per cent to £113m compared with the same period last year. Income per passenger was down 17 per cent. BAA recovered some of the lost income by raising airport landing and parking charges for airlines at Heathrow, Gatwick and Stansted. This resulted in a 9.5 per cent increase in airport charges to £161m. But it was not enough to prevent pre-tax profits for the period slipping from £155m to £141m.

Russell Walls, BAA's finance director, conceded that the group had underestimated the degree of confusion that would follow the abolition of duty-free last July and had failed to plan ahead as well as it could have.

However, he said BAA's retail income during the quarter was still ahead of expectations and pointed out that the impact of the scrapping of duty-free would have disappeared by the time of BAA's next results.

BAA lost £2.8m on its contract to operate Eurotunnel's retail facilities at the Folkestone and Calais terminals. BAA is taking legal action to terminate the contract and losses are likely to have reached around £20m by the time the case reaches court early next year. BAA is losing £700,000-£800,000 a month on the contract.

The Heathrow Express, by contrast, made an operating profit of £2.4m in the three months, compared with profits in the whole of last year of £4.1m. Revenues were up 38 per cent to £15.5m.