BAA faces further financial penalties unless it tackles ‘unacceptable delays to passengers, crew and flights’, the Competition Commission warned yesterday. The Times. Financial Times. The Guardian. The Daily Telegraph

In a report into baa’s charging regime, the commission proposed tough action against the airport operator if its standards of service did not improve. The regime for penalising BAA for poor performance based on service quality rebates paid to the airlines must be ‘extended and strengthened’, it said.

At the same time, the commission allowed BAA to levy higher charges on airlines to fund £3.5bn of planned capital expenditure. It proposes that passenger charges should be capped at £10.96 at Heathrow, up from £9.26, and £5.48 at Gatwick, up from £4.91. The regulators’ proposal implies a reduction in operating cashflows of about £150m a year.

This has blown a hole in plans by Ferrovial, BAA’s new owner, to refinance £9.3bn of the airport operator’s debts. The consortium controlled by the Spanish construction groupl, which paid £16.3bn, including debts, for BAA in June 2006 in a highly leveraged bid, was forced to tell the market that its refinancing programme was in trouble.

Stephen Nelson, the chief executive of BAA, said: ‘We see little in the Competition Commission’s report which delivers the incentives to transform the airports.

‘Nor do we believe that the commission recognises the scale and nature of the challenges we face in seeking to deliver a step change in the passenger experience.’