Heathrow's profits rose by more than 10 per cent last year, despite the UK's largest international airport coming under repeated criticism for its poor service and standards.

Accounts for the private holding company that owns BAA, the airports operator, show that Heathrow's operating profits rose by £40 million to £438 million in 2007.

Profits at Stansted rose 68 per cent to £86 million after BAA doubled the charge for each passenger using the airport.

The sharp rise in profits angered airlines who use BAA's facilities.

They claim that the company is making huge profits but is failing to offer a good service. Heathrow, in particular, has faced repeated criticism for long security queues and the poor quality of its infrastructure.

The rising profits will provide airlines with further evidence that BAA is abusing its position as the owner of London's three main airports.

The Competition Commission is expected this month to deliver its preliminary findings on whether BAA's London monopoly should be broken up.

Jim Callaghan, the head of regulatory affairs at Ryanair, said: “BAA is abusing its monopoly position by charging outrageous fees while providing a rubbish service and that is why they can enjoy huge profit increases.”

BAA was bought by Ferrovial, the Spanish infrastructure company, in 2006 through a subsidiary called Airport Development and Investment Limited (ADIL), which filed 2007 accounts with Companies House last week.

The ADIL figures show that revenue for BAA's seven UK airports, as well as Naples airport in Italy, was £2.2 billion, up 7.9 per cent from the previous year. The company made profits of £745 million, up 13.4 per cent.

The accounts also show that ADIL is reducing the amount that it spends on new infrastructure at Heathrow, despite BAA's claims that it is working to improve the facilities.

Capital expenditure was £875million last year compared with £977million in 2006.

BAA said yesterday that this was due to reduced spending on Terminal 5 as it neared completion.

However, Ferrovial has been unable to reap the full rewards of BAA's big profit increase because of enormous interest payments on the debt taken to finance the BAA acquisition.

ADIL was able to pay Ferrovial and its other backers only £86 million last year after interest payments of £964 million.

ADIL's total debt stands at £16.9 billion and Ferrovial has been unsuccessfully trying to refinance in order to reduce the interest payments.

If it fails to refinance within the next two months, BAA's credit rating is likely to be moved to junk status.

Ferrovial has sold World Duty Free and part of its property portfolio in an attempt to reduce its debt levels.

The criticism of Heathrow's profits comes as British Airways faces its own problems at the airport, particularly the recent chaotic move into its new home at Terminal 5.

Standard Life Investments, BA's second-largest shareholder, has begun a series of meetings with senior executives at the airline.

It is understood that Standard Life will meet Willie Walsh, BA's chief executive, today having spoken to Martin Broughton, the chairman, yesterday.

The problems at Terminal 5 are thought to be only one of a list of issues that will be raised with management.

The meeting comes as investors are becoming increasingly alarmed at the bad news coming from Britain's flag carrier.

The T5 debacle followed a profits warning last month and shareholders are concerned that a malaise has started to set in at senior management level.

“We need to be sure that BA is prepared for a deteriorating operational environment. The economy is turning down and fuel costs have turned up,” a shareholder said.

BAA money-spinners

Airside shops
(not including Duty Free)
£74 million (+8.4%)

Landside shops and bookshops
£48 million (+0.3%)

Restaurants and cafés
£60 million (+3.6%)

Bureaux de change
£57 million (-1.3%)

Car parking
£164 million (+5.5%)

Car rental
£22 million (+5.3%)

Advertising
£36 million (+5%)

Full-year 2007 figures
(% comparison with previous year)

Source: ADIL accounts

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