BAA sees traffic at Stansted and Southampton airports slump

Colin Matthews, BAA chief executive, said the fragile state of Britain’s economic
recovery has hit demand for air travel
11.4.2011 (Guardian)
by Dan Milmo
Britain’s biggest airport owner, has warned of the twin dangers posed to the
aviation industry by fragile consumer confidence and rising oil prices as it reported
falling passenger numbers at Stansted, the country’s third-largest airport.

The group, owner of Heathrow, echoed fears that have gripped retailers in recent
months, warning that the leisure market, dominated by
Ryanair, easyJet and charter operators, remains weak. Stansted and Southampton were BAA’s worst
performers last month, posting year-on-year falls of 7.4% and 8.7% respectively.

Colin Matthews, BAA chief executive, said: “In the UK, consumer confidence remains
fragile, affecting airports up and down the country. Continued rises in the price
of oil are a concern for airlines and passengers in all our markets.”

Airline travel has endured a three-year recession in the UK, with traffic at
all airports last year falling to the same level as in 2004.

The March traffic figures were flattered by seven days of strikes by British Airways cabin crew in the same month last year, with BA’s Heathrow base reporting a
2.3% increase in passenger numbers last month as it handled 5.3 million people.

However, Stansted does not host BA flights and its performance underlined the
vulnerability of secondary airports to the cost factors of low-cost carriers,
which often move their fleets around, and to weak discretionary spending. Matthews
added: “While Stansted and Southampton’s traffic performance remains disappointing,
both are well placed to benefit from an upturn in leisure travel as the economy

Andrew Macmillan, BAA’s strategy director, said budget airlines have dented Stansted’s
performance by moving their jets around in search of cheaper landing fees. “The
low-cost carriers are moving their planes around Europe.”

Gatwick, Stansted’s main London rival, has also taken some traffic from the Essex
airport and reported a 1.4% increase in traffic last month, despite its popularity
with low-cost airlines such as easyJet, Ryanair and Flybe.

With the weak economic recovery giving consumers second thoughts about long-distance
holidays or weekend breaks via short-haul flights, industry experts have warned
that rising oil prices could further dampen demand by pushing up fares. Last week
BA increased its fuel surcharges for the third time in less than four months as
the price of jet fuel rose to $134 (£82) a barrel – three times its low point
in early 2009. Fuel accounts for nearly a quarter of airline operating costs and
is largely out of carriers’ control, although they can mitigate some of the financial
pain through hedging, or betting on the long-term fuel price.

John Strickland, an industry consultant, said: “The big concern in the industry
is still the oil price. It is rising rapidly.” Strickland added that charter operators
will be dealt a double blow by the unrest in the middle east, which is affecting
demand for destinations such as Tunisia and Egypt as well as raising fuel prices.