15th July 2005
Stansted viability under spotlight at BAA AGM
Shareholder concerns about the commercial viability of a second runway at Stansted Airport once again took centre stage at BAA’s annual general meeting (AGM) held in London today (15 July 2005).
Attention focused on the issue as a consequence of a special resolution on the AGM agenda proposing that the directors must first obtain shareholder approval before giving the go-ahead to any major investment decisions, defined as costing more than 50% of the company’s net value.
The resolution was submitted by campaign group Stop Stansted Expansion (‘SSE’) capitalising on widespread shareholder concerns about the commercial viability of investing up to £4bn on a second runway at Stansted, which has never been able to earn enough to cover its cost of capital.
Brian Ross, SSE Economic Adviser said: “The purpose of the resolution was not to ask shareholders to support the Stop Stansted Expansion campaign or to vote against major investment at Stansted. Its primary purpose was to provide a counterweight to government pressure upon the company to build a second runway at Stansted by 2011/12, regardless of the commercial realities.”
While the resolution did not succeed at today’s vote, Mr Ross expressed his satisfaction with the progress made to date: “Our resolution has focused attention on an important issue and generated enormous interest and debate amongst the institutional investors and forced BAA to provide its major shareholders with certain assurances regarding any future major investment at Stansted.”
Mr Ross continued: “There is no doubt that BAA directors have been shaken by the degree of City support for the principle behind this resolution and, over the past few weeks, the company has gone out of its way to demonstrate to its major shareholders that it is listening to their concerns and that these will be addressed. This is a good start but we must keep the pressure up.”
SSE intends to review the detailed wording of the resolution with major shareholders with the intention of resubmitting it next year. Feedback already received indicates that, whilst a large number of major shareholders are supportive of the principle behind the resolution, it is felt to be unduly restrictive to require shareholder approval prior to the application for planning permission.
Mr Ross concluded: “We are not seeking to start a shareholder revolution. We are simply trying to ensure that shareholder interests are not subordinated and shareholder value is not compromised in the face of pressure from the Government. If management want to bet half the company on a single throw of the dice, it seems perfectly reasonable to say that shareholders should be consulted.”
Note 1: SSE used Section 367 of the 1985 Companies Act to bring the resolution to the AGM – the same procedure it used last year to challenge BAA’s policy of providing free car parking passes to MPs and MEPs. At the 2004 AGM, SSE argued that these perks amounted to a political donation and required shareholder approval. Although the directors were able to fend off the challenge at the AGM, just six weeks later BAA announced that it would end the scheme.
Note 2: Stansted depends on Ryanair and Easyjet, for over 90% of its business and, historically, has always had to concede big discounts in its airport charges in order to keep their business. However, despite the difficulties with Stansted’s commercial viability, the Government wants a second runway to be built at Stansted by 2011/2012. (‘The Future of Air Transport in the United Kingdom’, White Paper, December 2003, Executive Summary, page 13.)