BAA’s London airports buoyed by strong H1 retail performance

UK. As the city of London gears up for the Olympics, BAA (SP) has posted a +8.4% increase in revenues to £1,164.2 million for the six months ended 30 June. Adjusted EBITDA increased +8.8% to £555.2 million, resulting in an adjusted EBITDA margin of 47.7%. These figures reflect higher tariffs and continued growth in retail income in London’s Heathrow and Stansted airports, BAA said.

London 2012 is Britain’s biggest peacetime transport challenge and we are spending more than £20 million to ensure Heathrow is ready for its busiest ever period
Colin Matthews
Chief Executive Officer

BAA Chief Executive Officer Colin Matthews said: “BAA is reporting a strong operational and financial performance for the first half of 2012. Higher passenger numbers and increased yields are driving revenue growth which is being invested in new facilities for passengers. Passengers tell us they are noticing the improvements with Heathrow receiving its highest ever passenger satisfaction scores in the two most recent quarterly Airport Service Quality surveys.

“We are pleased that Olympic arrivals have gone smoothly so far but there is a lot more to do. London 2012 is Britain’s biggest peacetime transport challenge and we are spending more than £20 million to ensure Heathrow is ready for its busiest ever period, including building a temporary Games Terminal; preparing to host remote check-in at the Olympic Village; and training more than 1,000 volunteers who are giving a warm welcome to athletes on behalf of London.”

Retail income for the six months ended 30 June increased +3.0% to £254.0 million. However, due to one-off benefits at Heathrow of approximately £5 million in the second quarter of 2011 not repeated in 2012 (principally in car parking, duty and tax free and other retail income), on a like-for-like basis retail income grew by approximately +5%, BAA explained.

In addition, year-on-year performance varied between the first and second quarters due to stronger traffic performance in the first quarter of 2012 than in the second quarter driven by the leap year effect and changes in the timing of Easter compared to 2011.

Reported net retail income (“˜NRI’) per passenger increased +2.4% to £5.72, with growth of +2.1% at Heathrow and +1.4% at Stansted. Taking into account the prior year adjustment outlined above, growth in the group’s NRI per passenger was around +4.5%.

At Heathrow, retail income increased +4.4% to £216.7 million and NRI per passenger increased +2.1% to £6.10. The underlying growth in Heathrow’s retail income of approximately +7% was broad based, BAA said, with duty and tax-free, airside specialist shops, bureaux de change, catering and car parking all performing robustly.

Source: BAA (SP)

Heathrow’s duty and tax-free and airside specialist shops continued to see increases in the underlying average spend of passengers purchasing items in the in-terminal retail facilities, BAA said. This was driven by factors including an increased proportion of higher spending non-EU passengers, the major refurbishment of Terminal 3’s airside specialist shops and the new walk through area in the World Duty Free store in Terminal 3. In airside specialist shops, trading was particularly buoyant in the luxury and fashion segments. There were signs in the latter part of the period of the weakening of the Euro versus Sterling causing some moderation in duty and tax-free sales growth, the company noted.

A strong performance in bureaux de change at Heathrow was due to a combination of increased passenger traffic and improvements in contract terms with business partners. Catering income grew well ahead of passenger growth due to rebalancing of the portfolio towards premium outlets, enhanced contractual terms and a general focus on speed and quality of service. Finally in car parking, income growth reflected both passenger and tariff increases as well as the success of initiatives to increase car park usage and yield.

Stansted’s retail income declined -4.8% to £37.3 million. While this was marginally above the decline in Stansted’s passenger traffic, retail expenditure reduced to £3.4 million, resulting in NRI per passenger increasing +1.4% to £4.16. On a per passenger basis airside specialist shops, advertising and catering showed increases, although this was partially offset by a decline in duty and tax free and bureaux de change. Car parking showed a decline in income due to both reduced usage and a decrease in the length of stay.

Source: BAA (SP)

Heathrow sets new passenger traffic record for first half

BAA’s passenger traffic in the first half increased +0.8% to 41.8 million passengers. This was driven by Heathrow where traffic increased +2.2% to 33.6 million passengers, a new record for the first half of the year (the previous record being 33.0 million set in 2006). In the 12 months to 30 June 2012, Heathrow annual rolling traffic was 70.1 million. Heathrow’s strong performance was partially offset by a -4.5% decline in traffic at Stansted to 8.2 million passengers.

Adjusting for 2012 being a leap year, underlying growth is estimated at +0.3%, with an increase of +1.7% at Heathrow and a decline of -4.9% at Stansted. Year-on-year traffic performance for the group was stronger in the first quarter of 2012 (+2.5%) than in the second quarter (-0.5%) driven by both the leap year effect and a change in the timing of Easter compared to 2011.

Source: BAA (SP)

Heathrow’s performance has continued to be driven by North Atlantic traffic which increased +4.7% to 7.7 million passengers. This performance reflects the success of American Airlines’ and British Airways’ joint transatlantic services, albeit moderated since passing the first anniversary (in March 2012) of the launch of these services. Traffic to other long haul destinations also increased robustly, up +1.8% to 10.0 million with particular strength in services with Brazil (due to increased services) and the Middle East (due to recovery in key markets from the unrest in the region that impacted 2011). Heathrow’s European traffic also grew, increasing +1.6% to 13.7 million passengers, with strong performance in markets such as Germany (+4.2%) and Switzerland (+5.6%) offset by weakness in markets such as Italy (-9.7%), Greece (-8.0%) and Spain (-1.6%).

Stansted’s traffic declined -4.5% to 8.2 million passengers. Stansted’s core European scheduled market saw traffic decline -2.0% to 6.5 million passengers, with the decline limited to -1.2% in the second quarter. Declines in traffic in other markets were driven mostly by cessation of a limited number of services, such as Prestwick and Newcastle in the domestic market and Kuala Lumpur (Air Asia X) in the long haul market.

The group expects turnover and adjusted EBITDA for 2012 as a whole to be consistent with the forecasts set out in the investor report issued in June 2012 at approximately £2.5 billion and £1.27 billion respectively.


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