LONDON (Reuters) – Airport operator BAA said on Tuesday it planned to axe 700 jobs under a cost-saving programme and posted higher first-half earnings despite rising utility bills and slowing passenger growth.
BAA, which owns London”s Heathrow, Gatwick and Stansted airports, reported a 5.2 percent rise in pretax profit, as expected, after higher sales at airport shops helped to offset the impact of the July 7 bombings in London and a strike at Heathrow.
"It looks a pretty good performance. They are doing the right thing, getting the retail revenue up, getting the costs down and still doing well from Heathrow," BNP Paribas analyst Nick van den Brul said.
BAA said pretax profit for the six months to end-September was 366 million pounds compared with 348 million a year ago.
The result excluded the impact of investment property revaluations and accounting changes, which drove down the net profit result.
Analysts were expecting 375 million pounds, according to the average of six brokerages polled by Reuters.
The company said it would cut about 700 management and back office jobs out of its 12,000-strong workforce under plans to reduce costs by 45 million pounds per year from 2008/09.
The programme would result in 90 million pounds of one-off operating costs, it said.
The Transport & General Workers Union (T&G), which represents BAA workers and was at the centre of a strike at Heathrow in August, said it was shocked by the news of job cuts and would take up the issue with the company.
"It does give us cause for concern that a company like BAA has by-passed normal consultation and told 700 staff they have an uncertain future," T&G National Secretary Brendan Gold said in a statement.
BAA”s passenger growth is easing from record levels in recent years, when numbers were swelled by the expansion of low-cost airlines and a recovery in long-haul travel from a downturn caused by the Iraq war and the outbreak of the SARS virus.
The July 7 bombings in London and a strike by British Airways staff which grounded flights in August cost it 500,000 passengers, BAA said.
The company is also grappling with higher utility costs and a move away from short-haul to long-haul flights out of Heathrow.
But faster check-in and security facilities at its airports are giving passengers more time to shop before boarding flights.
BAA owns a duty free business which operates 64 stores across its UK airports and gets fees from retailers for developing, managing and marketing shops at its airports.
Net retail income per passenger rose 1.2 percent in the period, above BAA”s earlier forecast for 1.0 percent growth.
Finance Director Margaret Ewing said she was comfortable with market consensus forecasts for full-year pretax earnings of 580 million to 650 million pounds, and operating profit of 680 million to 740 million.
"We have been trading well and managing our costs well in the last six months," she told reporters on a conference call, but added that growth at Heathrow was likely to remain sluggish this year.
BAA has also been selling property, and needs strong profit growth to fund its heavy capital-investment programme, including a new terminal at Heathrow Airport.