Airport operator BAA yesterday delivered its starkest warning to date that it could scrap its £3.7bn investment in a fifth terminal at Heathrow unless it gets permission from regulators to raise landing charges for airlines.
The company's chief executive, Mike Hodgkinson, said all construction work carried out so far at Heathrow would have been necessary anyway for the introduction of Airbus's A280 "super-jumbo" aircraft.
In an increasingly tense game of brinkmanship, BAA has refused to give the civil aviation authority more time to study its application to raise prices to airlines. It says it must have an answer in January, when it plans to lay the first bricks for the fifth terminal building.
Mr Hodgkinson said: "We told them very clearly that we had to have the answer by the end of January, then we'll be able to get on and do the site works."
The CAA and the Competition commission have clashed on whether to allow BAA to raise its prices by as much as 40%. British Airways, Virgin Atlantic and other leading carriers are strongly opposed to an increase.
Mr Hodgkinson said that without the extra income, the company would "reconsider" its £8.1bn 10-year programme of airport improvements, of which almost half is devoted to terminal five.
"The country desperately needs that investment programme," he said, adding that it was "pretty unlikely" that any other company could build terminal five.
BAA saw its half-year profits slip 3.6% to £326m, with in come from airlines down 1.1% to £361m due to a decline in the number of long-haul flights since September 11. The figures pleased the City, sending the shares up 31p to 586p, a rise of 5.59%.
The company spent an extra £13m on insurance and security, including the recruitment of 700 extra security guards.
However, its retail income rose 5% to £274m, with takings at airport shops boosted by thousands of passengers buying snacks and drinks before catching budget flights on "no-frills" airlines.
Mr Hodgkinson said it "remains difficult to predict" the rate at which transatlantic air traffic will recover.
Irrespective of market conditions, he anticipates the installation of more hi-tech security equipment over the next five years, including machines to identify wanted terrorists: "There will, in my judgment, be some form of biometrics, whether it's palm, iris or face recognition."
BAA confirmed that it intends to invest £65m in National Air Traffic Services as part of a rescue package for the part-privatised air traffic control network, which will be matched by £65m of government cash.
BAA's money is contingent on the CAA's latest proposal on Nats' pricing being rubber-stamped by the government.
Mr Hodgkinson said it was essential to BAA's business that air traffic control runs smoothly: "If it goes the way of Railtrack, all that will happen is that things will get worse, we won't be able to expand our airports and the service will spiral downwards."
BAA will publish its submission this month to the transport secretary's consultation on airport expansion.
