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.”
Head of legal
British Airports Authority (BAA)
|Organisation||British Airports Authority (BAA)|
|FTSE 100 ranking||48|
|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|