BAA warns of second half impact as retail bolsters results

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BAA today reported an operating profits rise of 5% to £355m ($522m) in the six months to September 30, but warned that passenger traffic and retail performance in the second half would be hit by the troubled aviation market.

Pre-tax profits for the group rose 1.5% in the period compared to the first six months of last year, while revenues from continuing businesses rose 0.5% to just over £1bn ($1.47bn). The company said UK airport retailing had contributed strongly. Net retail income rose 7% to £261m ($383m) while net retail income per passenger rose 7% to £3.76 ($5.50). World Duty Free Europe reported revenue growth of 9% to £183m ($269m) as operating profits rose 10% to £11m ($16m).

But BAA chief executive Mike Hodgkinson warned that "it may be difficult to maintain the excellent performance of the first half year" and said that income per passenger is unlikely to be maintained in the second half.

He said that passenger traffic had fallen less sharply to date than during the Gulf War, but added that it was impossible to predict the length and profile of the dip in performance.

Hodgkinson said: "It is too soon to predict the future for aviation with any degree of certainty. Passenger traffic continued to be down 12% in the first 20 days of October, similar to the decline in the last week of September. BAA's financial position is fundamentally strong and profits from continuing businesses for the first half continued to grow. While the company has a high proportion of fixed costs, we are seeking cost reductions in both revenue and capital areas of the business. However, investment in our airports is essential if we are to meet long-term demand for air travel." This year's capital investment in UK airports will be £550m ($808m), he said. The cost of additional security measures will be around £10m ($14.7m) this year, added Hodgkinson.

Hodgkinson said the exit from World Duty Free Americas resulted in an exceptional loss of £190m ($279m), and the division recorded an operating loss of £3m in the period, compared to a £5m ($7m) profit the previous year.