BAA finances look bleak, says City analyst

BAA owner Ferrovial is struggling to refinance the £9 billion debt it took on to buy the operator of Heathrow, Gatwick and Stansted in 2006, with a City analyst predicting BAA could face administration.

The interest payments wiped out half of Ferrovial’s profits last year and Blueoar Securities analyst Douglas McNeill told a Channel 4Dispatchesprogramme shown on Monday: “Administration is one outcome for BAA.”

BAA announced the departure of chief executive Stephen Nelson this week, and his replacement from April 1 by former British Airways technical director and boss of Severn Trent water group Colin Matthews.

BA is the airport operator’s biggest customer, with more than 40% of the traffic at Heathrow, and the appointment may please the carrier. Matthews’ time at Severn Trent, which he left in June last year, saw profits rise 9% in a year, but was also marked by fines imposed by water regulator Ofwat for failing to tackle leaks.

BAA remains under investigation by the Competition Commission, and the Civil Aviation Authority is due to announce new price caps on landing charges at Heathrow and Gatwick next month. BAA has warned this could lead to cuts in investment.

The operator has been under severe pressure since a security alert in August 2006 led to intensified security measures.

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