BAA

Procurement policy
The bulk of BAA's construction work is let under framework agreements. These cover all types of project and are aimed at promoting long-term relationships with a preferred list of suppliers.

The goal is to produce "seamless project teams" comprising representatives from the company and from suppliers with the intention of promoting learning and greater efficiency.

BAA is currently looking at its second generation of framework agreements.

Current and future projects
In its 2001/02 annual report, BAA estimated that over the next 11 years, it will need to invest a total of £8.1bn in its UK airports in order to meet the growing demand for air travel, which is expected to double in the UK over the next 20 years.

Heathrow will dominate investment, including construction of Terminal 5. Investment at Heathrow will total £6.6m over the next 11 years, and apart from Terminal 5 will include completion of work on Terminal 3, and a £235m upgrade of Terminal 1. At Gatwick, BAA plans to invest £980m to facilitate growth in passenger numbers to about 40 million by the end of the decade.

The airport experiencing the most rapid growth in passenger numbers and investment is Stansted. BAA will invest £600m in Stansted over the next 11 years. Planning is being sought to further expand the terminal building, and associated facilities will include a hotel and new transport links. Investment will remain strong at BAA regional airports: Southampton, Glasgow, Aberdeen and Edinburgh.

In its latest interim results (released November 2002), BAA reported capital expenditure of £326m over the six months to September 2002. This compares with £305m in the same period the previous year. The biggest rise in investment was at Heathrow, where it was £162m. In addition to this, the company spent £104m on Terminal 5.

Essential information
Like all companies associated with air travel, BAA has suffered over the past 12 months in line with the fall in air travel following the events of 11 September 2001. However, this seems to be slowly recovering, as according to the latest data, 12 million passengers passed through its UK airports in September 2002 – an 8% rise on September 2001.

Although passenger number have begun to pick-up, BAA remains cautious regarding the short-term outlook. Looking to the long term, however, it is optimistic, with confidence underpinned by the forecast of continued growth in air travel, which combined with undercapacity in the South-east, signifies the need for huge investment.