Europe

Heathrow Owner Plans Terminal Upgrade


Heathrow airport's second terminal is set for a £1bn makeover that its owner BAA says will enable it to handle 30 million passengers a year. However, yesterday's announcement by the airports operator prompted fears among residents' groups that the revamp will be used to raise the number of flights to and from the airport.

The upgrades are part of ongoing improvements at Heathrow. A spokesman for BAA, owned by the Spanish infrastructure giant Ferrovial (FER.F), conceded that Terminal 2 "was designed for a fraction of the number of people that now use it – in simple terms, it is too small".

The work will be paid for out of BAA's regulatory entitlement. While continuing to argue in favour of the controversial third runway at the airport, BAA denied that the opening of the improved Terminal 2, expected by 2013, would lead to a greater number of flights over London and west Berkshire. The company said the airport's capacity was already at 99 per cent.

However, John Stewart, of the anti-expansion group Hacan ClearSkies, said the announcement was "pretty dreadful". "We have no problem with the airport being improved but we are worried about increased air capacity," he said. "BAA has said the revamp has nothing to do with expansion but it has made claims of not wanting to increase capacity in the past."

BAA said the development of T2, which will be home to Star Alliance airlines, was crucial for Heathrow to remain competitive. The airports operator also gave a much-needed tonic to the aviation industry yesterday when it reported that the falls in traffic figures seen in recent months had slowed at all of its UK airports in July.

BAA, which owns seven UK airports, said it handled 14.5 million passengers in July, down 2.4 per cent on the same month last year, but an improvement on the numbers seen in June and May, which saw falls of 5.9 per cent and 7.3 per cent respectively. The company added that the 6.5 million passengers travelling through Heathrow represented a 0.9 per cent increase on July 2008.

While European scheduled traffic and the number of long-haul flights was up, UK flights were down 4.8 per cent, while European charter flights, hit by falling numbers of holidaymakers, fell by 18.6 per cent, the company said.

The July performance figures were announced only two weeks after BAA said losses at its three London hubs – Heathrow, Gatwick and Stansted – had hit £546m in the first six months of the year, with 7.4 per cent, or 4.4 million fewer passengers, using the airports. Underlying earnings in the period were up 28 per cent, helped by BAA's unpopular decision to raise the fees it charges airlines to use its airports.

Industry experts warned yesterday that BAA's July numbers were likely to be boosted by seasonal traffic and that aviation is still struggling.

"It is good to see an improvement from BAA in the reporting period, but sadly it is likely to be short-lived," said Chris Yates, an aviation analyst. "The numbers are not sufficient to say that a recovery is on the way and looking at the news of the last few weeks, conditions are still dire for the airline groups."

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