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British Airports Authority

Volume 979: debated on Tuesday 26 February 1980

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asked the Secretary of State for Trade whether he has determined a new financial target for the British Airports Authority to run from 1 April 1980.

Yes. I have decided that a reasonable financial duty for the British Airports Authority would be to achieve on average a rate of return of 6 per cent. per annum on net assets revalued at current cost over the three financial years 1980–81 to 1982–83. The target is related to current cost operating profit after taking account of depreciation but before interest and tax.This target is set in accordance with the principles given in Command 7131 and will be adjusted if necessary after the introduction of the proposed new current cost accounting standard. It is designed to be consistent with the BAA's progressing towards a rate of return on their airports operations of 5 per cent. in real terms on its new investment.The target implies increases in the productivity of capital and employees and it has been supplemented by the establishment of the following performance aims which have been agreed with the British Airports Authority. Over the period of the financial target the Authority will aim:

  • (i) to seek to ensure after allowing for changes which may occur in the activities of the BAA (for example, in passenger search and apron handling services) that the number of passengers handled per employee grows at an average rate of 3 per cent. per annum;
  • (ii) to seek to reduce expenditure per passenger before depreciation (excluding any excess of payments of levy to the aviation security fund over reimbursement of security expenditure from that fund) on average by 2½ per cent. per annum.
  • The implications of the financial target for the Authority's pricing policies will depend upon a number of factors including the annual rate at which the number of passengers at its airports continues to grow, and the return on the consequent capital investment which will be required during the 1980s. For its part, the Government will expect the Authority:

  • (a) to move towards break-even in real terms at its Scottish airports within the period covered by the financial target; and
  • (b) to take account of the Government's policy towards the London area airports system, including the transfer of traffic from Heathrow, in its user charging structure.