Release - 24 May 2004
BAA SLASHES HOMEOWNER COMPENSATION BUDGET
Stop Stansted Expansion (SSE) has written to BAA to seek a full explanation
for the airport operator's decision to dramatically reduce the estimated
compensation costs for its airport expansion proposals.
The cut was announced last week when Mike Clasper, BAA Chief Executive,
presented the company's annual results, showing profits increasing to £539
million.† At the same time, Mike Clasper also announced that BAA was putting
aside "up to £100 million" to compensate people who would lose their homes
or have their value eroded by plans to build a second runway at Stansted.
BAA had previously told the Government in May last year that Stansted
compensation costs would total £250 million. [Note 2]
"BAA is becoming increasingly desperate in its attempt to cut costs," said
Norman Mead, Chairman of Stop Stansted Expansion, who continued:† "We all
know that BAA has a fundamental problem with the commercial viability of a
second Stansted runway and this problem has been compounded by the Civil
Aviation Authority's ruling that there must be no cross-subsidy from
Heathrow or Gatwick."
Mr Mead added:† "This attempt by BAA to reduce its compensation fund from
£250 million to £100 million is not surprising and we expect further cost
cutting attempts in future.† However, if BAA thinks it would be able to
expand Stansted 'on the cheap' and at the expense of local homeowners, then
yet again it has misjudged this local community.† The people of this area
are not a soft touch."
Earlier this month, SSE published a special report, which showed that local
homeowners had already lost an average of £28,000 as a result of BAA's
expansion proposals for Stansted.† The report slated BAA for seeking to
limit compensation to only 500 homeowners whereas the official Land Registry
statistics clearly indicated that at least 12,000 properties had been
devalued. [Note 3]
BAA is under intense pressure from its investors and from its biggest
Stansted customer Ryanair (which accounts for almost 70% of Stansted's
business) to minimise the cost of expanding Stansted and the airport
operator is concerned that the low cost carriers may refuse to pay the
higher charges that would be needed to fund major expansion of the airport.
Although BAA profits increased to £539 million last year, profits at
Stansted fell by 9.3% to £39 million while Heathrow's profits increased to
£364 million.† Once again, Stansted was the least profitable, per passenger,
of BAA's seven UK airports.
NOTES FOR EDITORS
BAA annual results were announced on 18 May 2004 and reported in the
financial press on 19 May 2004, including Clasper's comment on Stansted
compensation costs - for example, article in Daily Telegraph Business
Section: "BAA offers £100m as homes face bulldozer".† Full article is
The original estimate of £250 million is set out in Table 18.1, page
132, of† 'Responsible Growth' - BAA's formal response to the Government on the
SERAS Airports Consultation, 12 May 2003. BAA based this estimate on the
assumption that the measures, identified by the Department for Transport at
the end of Chapter 16 of the SERAS Consultation, were implemented.† The more
detailed assumptions made in arriving at this cost estimate, based on the
addition of one extra runway, were stated by BAA to be as follows:
* Purchase of households subject to noise levels greater than 69 dB(A) at market value, together with additional payments for home loss and
disturbance (10% and 2.5% respectively).
* Noise insulation for households subject to noise levels of 63 dB(A) daytime or more, at a cost of £8,000 per house.
* Cash compensation for households subject to noise levels greater than 57 dB(A) but less †than 63 dB(A), at a cost of £2,000 per house.
* Noise insulation for hospitals and schools at an average of £200,000 per property.
* For the purposes of the calculations, BAA assumed an average property value of £210,000 around Stansted.
* The values of cash compensation of £2,000 and noise insulation of £8,000 are notional, as is the average cost of £200,000 for hospitals and schools.
* The number of hospitals and schools affected at Stansted was assumed by BAA to be a total of 15 buildings.† This means that £3m of the £250m
related to schools and hospitals.
"Airport Impact on Local House Prices", Special Report by SSE, May
2004.† Available at
For example, see letter from Michael O'Leary, Ryanair Chief
Executive to the Daily Telegraph, 19.12.03 "Time for some competition" and
Questor, Daily Telegraph.† These sources are available at:
Further information and comment:
Carol Barbone, Campaign Director, SSE:† 0777 552 3091 or firstname.lastname@example.org
SSE Campaign Office: 01279 870558
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