HC Deb 03 February 1984 vol 53 cc409-10W
Mr. Bellingham

asked the Secretary of State for Transport whether he has determined a new financial target for the British Airports Authority to run from 1 April 1983.

Mr. Ridley

Yes I have agreed with the authority that a reasonable financial duty for the British Airports Authority would be to achieve on average, over the three financial years 1983–84 to 1985–86, a minimum annual rate of return on average net assets of 3 per cent. plus one fifth of the annual percentage growth in terminal passengers on a cumulative basis profit in each successive year. The target is related to trading profit after taking account of current cost depreciation but before any adjustments for loss on disposal of fixed assets and for monetary working capital and before interest and tax. It is an agreed objective that the authority should achieve break-even at its Scottish airports within the same period, and this was taken into account in determining the target.

The target is supplemented by the establishment of two performance aims which have also been agreed with the authority. Over the period of the financial target the authority will aim:

  1. (i) to reduce costs (at constant prices, excluding depreciation) per terminal passenger by ½ per cent. per annum, plus an additional reduction equivalent to two fifths of the percentage growth over the three-year period; and
  2. (ii) to increase the number of terminal passengers per payroll hour by ½ per cent. per annum plus two fifths of the percentage growth in terminal passengers over the three year period.

If these objectives are met, they should lead to an improved performance by the BAA in terms of increased profits and productivity. The targets combime a basic under-pinning element with a variable growth-related element, to provide a more realistic and appropriate challenge than a single figure: they recognise the demand-sensitive nature of the authority's business.

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