Civil Aviation Authority voices concern that airport operators relying on debt would not be able to invest in service.

Spanish construction group Ferrovial's attempt to buy airport operator BAA has suffered another setback over warnings that its £8.75bn offer would load it with too much debt.

The Civil Aviation Authority yesterday said that it would increase penalties on airports where service standards have been damaged by a failure to invest, and would stop airport operators from charging higher prices to airlines due to debt.

In a policy document on price controls at BAA's main airports from 2008, the CAA said: "Higher debts mean higher annual interest payments, reducing net cashflow available to fund investment."

The CAA believes that BAA airports Hathrow, Gatwick and Stansted will need investment of around £9.5bn over the next ten years, adding to concern over bids for the company that rely on debt.

The Ferrovial-led consortium said it had in recent weeks "engaged in an open and constructive dialogue with the CAA and the UK government", and that the necessary investment had been accounted for in its business plan.

The CAA's warning to potential bidders came as BAA posted pre-tax profits of £710, up 8% on last year. However, passenger numbers slowed by 2% at 144m.

BAA said that it had run up costs of more than £15m in dealing with Ferrovial's takeover bid in the period up to March 31.

BAA chief executive Mike Clasper said: "'These results are a reminder of BAA's core strengths that enable us to consistently generate shareholder value: a unique portfolio in a dynamic sector; strong growth of our London airports; even stronger returns from our other businesses; and a first rate management team creating value."