BAA looking for heavyweights to join its board
27 August 2007
BAA, owner of Heathrow airport, wants to recruit new heavyweight non-executive directors as it moves to face off constant criticism from politicians, airline executives and the media. The UK's largest airport operator is entering a critical month as it awaits a ruling from the Competition Commission on the prices it can charge at Heathrow and Gatwick.
The move to bring new blood into the boardroom also comes after BAA's senior PR men resigned in protest at interference from the group's Spanish majority shareholder, Ferrovial. (See: BAA's PR boss quits in a huff)
The BAA boardroom suddenly emptied last year, when a Ferrovial-led consortium acquired the business in a competitive auction for £10.3 billion ($20.7 billion). Before the takeover, BAA's non-executive directors included Tony Ball, former chief executive of BSkyB, and Chris Fay, former chairman and chief executive of Shell UK.
BAA's board currently has no independent representation. It has six Ferrovial executives — including executive chairman Rafael del Pino, who has been accused of playing too strong a role in running the company — and three representatives of the minority shareholders in the ADI consortium that bought BAA.
The airport operator has several challenges ahead. The Competition Commission is due to report next month on the economic regulation of BAA over the next five years. The Civil Aviation Authority has indicated that it will cap BAA's return on capital at 6.2 per cent, whereas the airport operator is asking for 7.5 per cent.
BAA has warned that anything lower than 7.5 per cent will threaten its £9.5 billion ($19.1 billion) investment plan over the next 10 years. This includes the construction of Heathrow East, which will replace the airport's unpleasant central terminals at a cost of £4 billion ($8.05 billion).
A second study from the commission is examining whether BAA's monopoly of the UK airport market is anti-competitive, which could lead to the break-up of the business. The final verdict will come after two years, but there are reports about a pre-emptive sale of Gatwick, and would-be bidders are closing in.
Besides, BAA's director of corporate affairs, Duncan Bonfield, and the head of media relations, Mark Mann, resigned abruotly recently. Sources say the two were concerned that the group was not lobbying politicians and regulators strongly enough.