Improved sales and lower costs helped airports operator BAA drive up earnings in the three months to March but cautioned that Heathrow passenger numbers could suffer this year.
Retail income is forecast to “continue outperforming previous expectations” for the rest of the year but passenger numbers at Heathrow could be lower than initially expected over the peak summer season, due to limits in the airport’s capacity.
The company said it had “a more cautious outlook” for passenger traffic at Heathrow.
Adjusted EBITDA was up 15.4% to more than £200 million for the three months but the company’s pre-tax loss widened from £195.5 million to £211.5 million in the period.
Traffic in the first quarter was affected “to a certain extent” by unrest in the Middle East and North Africa and the earthquake and tsunami in Japan.
However, due to the different timing of Easter – with pre-Easter traffic that occurred in March in 2010 likely to have shifted to April in 2011- accurate assessment of underlying year on year performance is difficult, the company said.
“It is also possible that the recent significant increase in the oil price has started to affect levels of passenger traffic,” BAA said.
Heathrow traffic rose 2.5% from 14.6 million to 15 million passengers with European scheduled traffic being the most significant driver of overall performance, growing 5.4% to 5.5 million passengers.
Domestic traffic grew by 5.7% to 1.2 million passengers, although this was driven by the absence of the impact of the adverse weather and industrial action in early 2010.
But Stansted continued to suffer a decline in business with traffic down by 6.6% to 3.7 million.
BAA admitted that this reflected airlines’ ongoing redeployment of capacity from the UK to other European markets.
The company should discover within the next two months whether it will be forced to sell Stansted. The Competition Commission is due to rule whether there has been a material change in circumstances since it initially ordered BAA to dispose of the airport in March 2009.
BAA chief executive Colin Matthews said: “Our strong performance reflects growth in traffic, an improving international economic outlook and the efforts of everyone working at our airports to improve passengers’ journeys.
During the first quarter, Heathrow achieved strong service standards including some of the best statistics for departure punctuality in recent years and passengers continue to compare Heathrow favourably with other European hub airports.”
He added: “But we must do better, and that is why I have established a Heathrow partnership to ensure BAA, airlines and their partners work more closely together for the benefit of our passengers.
“Our £5 billion investment programme at Heathrow continues to improve passenger journeys and airline operations through more modern facilities.
“In the coming weeks, the opening of Terminal 5C will ensure more passengers have a smoother journey through Terminal 5 while we continue to make good progress in constructing the brand new Terminal 2.
“As the UK’s only hub airport, Heathrow has a vital role to play in supporting the economic recovery. By keeping our focus on continuous improvement, I believe we can play our part in supporting business links with emerging markets and in ensuring that London continues to stand up to the threats from other hub airports in Amsterdam, Frankfurt, Madrid and Paris.”