British Airports Authority (BAA)

British Airports Authority (BAA) is experiencing a strong year, buoyed up by the confidence provided by its latest strong set of financials.

At the beginning of June, the multi-faceted company, which has ventures in retail, railways and property, revealed a 7.5 per cent surge in pre-tax profits that smashed market expectations.

But although 1999 is shaping up well for BAA, it is the future it should be concerned about.

A four-year battle to extend BAA-owned Heathrow Airport by adding a fifth terminal is far from over, much to the delight of the various environmental groups that oppose the move.

It is expected to take another two years before a Department of Transport and Enviroment appointed inspector makes recommendations to the Government on the expansion.

Also, with the incoming abolition of duty-free purchasing decreed by the European Union, BAA stands to lose the millions of pounds-worth of profits that it has enjoyed in the past from one of its core businesses, World Duty Free.

Robert Herga, head of legal at BAA, says: “The duty-free issue raises commercial and legal issues as to the way we continue to trade.” But he says the abolition of duty free is just one of a number of projects the legal department’s six lawyers are working on at the moment.

The London office currently consists of three property lawyers, one construction/procurement expert and two commercial specialists, plus one employment lawyer housed in the human resources department.

Internationally, the company works with one in-house counsel at World Duty Free in the US and one lawyer at Indianapolis airport, which is managed by BAA.

Because BAA is such a diverse company, the legal department works on a wide range of projects, which Herga says can sometimes leave the lawyers overstretched.

A good example is the company’s recent attempt to demerge its property arm BAA Lynton. The demerger was eventually called off.

But Herga says: “That was obviously a big drain on resources, which involved a large amount of work.”

However, in terms of employing more lawyers, Herga says: “It is a very difficult balance which all legal departments face. Without doubt we could extend the legal department but you have to staff for the troughs rather than the peaks.”

He adds: “I think we are always going to be overstretched but we juggle it with the careful use of external lawyers.”

Herga concedes that for a company of its size, BAA uses a restricted number of legal advisers – the main firms being Herbert Smith and Lovell White Durrant for its commercial requirements.

He says: “My approach to external lawyers is that I like to build up a relationship with a few suppliers. I don’t want a huge beauty parade every time a project comes up, though I do want to have competition at the same time.”

Apart from Herbert Smith and Lovells, which Herga describes as his “main firms”, the in-house team is also advised by Berwin Leighton on property issues and Cameron McKenna, which has acted for it in the ongoing Terminal 5 saga.

Herga says: “The in-house department has not worked on Terminal 5 to a huge extent. With a project such as this you cannot hope to do it on a part-time basis. You really need a full-time team on it.”

Although there has been speculation that the company is also hoping to extend London’s second airport, Gatwick, Herga says: “The jury is still out on that one. There is a lot of work we are doing with local authorities; we are trying to avoid a mini-Terminal 5.”

And as for staffing levels, he says: “We are not at this stage appointing any lawyers. We are waiting to see how things pan out.”

Robert Herga
Head of legal
British Airports Authority (BAA)

Statistics
Organisation British Airports Authority (BAA)
Sector Transport
FTSE 100 ranking 48
Market capitalisation £6.9bn
Employees 12,724
Legal function Six lawyers
Head of legal Robert Herga
Reporting to Director of strategy and compliance Richard Everitt
Main location for lawyers London
Main law firms Herbert Smith, Lovell White Durrant, Berwin Leighton, Cameron McKenna