Couldn't BAA have come up with a contingency plan?

Richard Wachman
Sunday August 20, 2006
The Observer

What do the following individuals have in common? Step forward: Marcus Agius, chairman of Lazard investment bank in London; Alice Perkins, civil servant and wife of foreign secretary Jack Straw; Mark Clare, ex-finance director of Centrica; Tony Ball, one time head of BSkyB; and David Roberts, a senior executive at Barclays Capital.
The answer is that they were all non-executive directors at BAA, the former British Airports Authority, which is at the centre of a storm about its lack of preparedness following the terror alert of 10 days ago.

They held their positions until last month, when a Spanish-led consortium spearheaded by Madrid-based construction group Ferrovial took over BAA with a number of other foreign backers.

But what on earth have the non-execs been doing since 9/11, when it must have been obvious that the UK would one day face a terror scare at its airports, including Heathrow, Stansted and Gatwick, where tens of thousands have endured misery because no one seems to have come up with a viable contingency plan?

It is possible, of course, that in the few weeks since BAA has been taken over by Ferrovial any plans devised by the old board have been ditched, but I doubt it.

Passengers - and BAA's airline customers - are right to have expected more. And yet, the company's feeble response is not that surprising if you consider that BAA is a regulated body, and one that is allowed by the civil aviation authority to pass on three-quarters of any extra costs to the airlines that pay for the slots at its seven airports.

With fat operating margins - at 40 per cent, about double those of Ryannair - BAA has coined it by skimping on security, while at the same time reaping dividends from a regulatory regime which allows it to make a 7 per cent return on capital projects, no matter how big or unnecessary (such as an expensive new runway at Stansted, which could be built for far less than the estimated £4bn if it didn't have to cater for wide-bodied aircraft such as the A380).

The Office of Fair Trading is looking into whether BAA should be broken up by allowing different owners for the large London airports. If it helps to shake management from its torpor and complacency, the answer is yes.