Business Weekly - Cambridge, UK

Spanish infrastructure group Ferrovial, which controls BAA, says it is confident of crushing the credit crunch and raising the finance it needs to push through expansion plans at Stansted and Heathrow.

Rather than bowing to Competition Commission suggestions that it should sell off Gatwick or Stansted to dispel an alleged monopoly of London airports, Ferrovial is pressing ahead with a refinancing of BAA.

Royal Bank of Scotland, a sponsor of Business Weekly’s East of England Business Awards, and Citigroup are reportedly in talks with a consortium of eight banks – tipped to include Spain’s Santander and the Bank of Montreal.

City sources expect the deal to be done in two stages, with the second, larger stage raising about £10 billion against the three London airports. It will be structured in order to allow the easy separation of one of the airports – most probably Gatwick – if Ferrovial is forced to sell.

But Ferrovial will continue to push the hard line that selling any of its airports would dilute the collateral needed to win the cash required to grow Stansted and Heathrow.

We understand BAA is delivering a hard-hitting message to the Competition Commission that breaking up the group could not only torpedo plans to expand capacity at Stansted and Heathrow but also the UK government’s entire ‘economic growth through aviation’ strategy.

BAA is submitting what amounts to a written challenge to the Commission to prove UK airport capacity can be expanded without the financial firepower of Ferrovial.

Rather than waving a white flag following the Commission’s announcement that BAA’s monopoly is hindering fair competition, BAA has come out with all guns blazing.

It will argue that the system – principally Government policy and airport regulation – is strangling capacity growth. It will say that the airlines themselves are militating against equal competition between airports by their pricing policies and commitment to growing from hand-picked hubs.

And in what could be described as a crunching boot in the cockpit, BAA will ask the airlines, the Competition Commission and the Government how they can tally commitment to slashing the UK‘s carbon footprint with asking commuters to spend hours on Britain’s roads network trekking to airports they don’t even want to use.

A BAA insider said: “People from Cambridge and Essex don’t want to go to Heathrow or Gatwick if they can get the flights they want on their doorstep at Stansted – just as people from Slough would rather use Heathrow than slog round the M4, M25 and M11 to use Stansted.

“Besides which the airlines all target certain flights at certain catchments and market types and we would argue that freedom of choice is worth fighting for.

“Our London airports don’t compete against each other because they are all full at peak times. Nor do they compete in terms of catchment areas.

“Whatever happened to the argument for sustainable growth – or has the debate over Britain’s carbon footprint been kicked into touch?

“Our stance will be that no-one is better placed than BAA and Ferrovial to deliver the Government’s aviation policy, to fund improvements without sapping UK taxpayers and deliver the most cost-effective options to the people who count – the passengers.

“We are over the period of hype and posturing for position. The Competition Commission has until August to deliver a ruling on the so-called monopoly – but now we are all dealing in hard facts.

“If it can produce a solution to do what BAA intends to do – and find a miracle solution to do all that and still make flying cheaper then we would say good luck to them. To us it would appear quite a challenge.”

Business Weekly understands that Ferrovial is not even preparing  a contingency plan for selling off one of its London airports.

It will argue that it cannot be expected to finance the growth projects at Stansted and Heathrow, including new runways, if the group is broken up, because its collateral would be diluted.

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