BAA faces opposition to retail accounting change

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Airports group BAA lost the latest round of a review of aviation charges this week when the Competition Commission said the operator should carry on subsidising its landing fees with income from retailing

Last year BAA's aviation revenues for UK airports were £667m ($980m) compared to £712m ($1,047m) in retail revenues - approximately half of which comes from World Duty Free Europe and half from other retail management.

The Civil Aviation Authority (CAA) regulator had wanted to separate money generated from commercial activity in calculating how much the airports should charge airlines in user fees: the so-called dual till approach which BAA has lobbied for. That would significantly increase the cost to airlines and has been opposed by British Airways and Virgin.

In a statement today BAA chief executive Mike Hodgkinson said: "The core issue in this review is the need for airport charges to rise to fund investment in new and improved airport facilities, including terminal 5."

BAA planning and regulatory affairs director Mike Toms said: "The total cost per passenger is under £5 ($7.25) at Heathrow, well below our overseas competitors." Toms said it was common practice in the US and Australia to strip out retail revenues when setting user fees. A number of European airports have also adopted the method. The Competition Commission will make a final decision in the autumn.