BAA's foreign owner under fire as £10.3bn buy leads to bumpy ride

Ferrovial, the Spanish owner of BAA, thought it made a safe bet when its consortium paid £10.3bn for Britain's largest airport owner 18 months ago. It was buying the operator of Heathrow, an indispensable flight hub for millions of international businessmen and tourists, and taking over a cash-rich business that threw off £600m in profits a year.

Instead, the Madrid-based conglomerate bought itself a bruising encounter with the British public, politicians and regulators that shows no sign of ending peacefully. Yesterday's confirmation that its relationship with staff has broken down adds another group to the list of aggrieved parties who lay the blame for BAA's woes firmly at the door of Ferrovial.

The group has seen a stream of senior BAA staff leave the airport operator since the acquisition, including the managing director of Heathrow and the executive in charge of managing security queues. Meanwhile, BAA management has been savaged by ministers and regulators for low service standards - epitomised by lengthy waits at security checkpoints and poorly maintained terminals.

Ferrovial's fraught relationship with its new employees led to the departure of BAA's top two PR men over the summer, after they became exasperated with what they considered to be constant interference from Madrid. Rafael del Pino, Ferrovial's chairman, is considered by trade unions to be the root cause of the labour dispute that threatens to bring seven of Britain's biggest airports to a standstill next month.

"Rafael del Pino is a strong influence. Nobody says no to him," said Brendan Gold, the Unite union official who led negotiations over the pension dispute. "If he says the company needs to close the final salary pension scheme because his bankers think it's the right thing to do, or carpets need to be ripped up at Heathrow, then BAA will do it. If he makes his mind up on something it gets done."

A perception has built up that Britain's biggest airport operator has been hamstrung by a distant owner, forcing Ferrovial to take symbolic action. Since the summer del Pino has stepped down as BAA chairman and hired a City heavyweight, Sir Nigel Rudd, as his replacement. Rudd took a hard line when he was appointed, saying that he would not let BAA become "a multi-headed monster where nobody understands who is the boss and who is running the business".

Ferrovial reiterated BAA's independence yesterday. A spokesman for the group said: "It is BAA's decision to close the pension scheme to new entrants. Ferrovial is part of the BAA board and has representation, but it is a BAA decision." BAA is also adamant that it arrived at the decision to change its pension scheme independently, without interference from Madrid. Its senior team also argues privately that it is normal for the majority shareholder in any company to demand a say in how its investment is managed.

A BAA source said: "The ownership issue is a red herring. It ignores the fact other major UK companies have made similar decisions on pension schemes."

The nationality of Heathrow's ultimate owner remains a problem for some politicians. Gwyneth Dunwoody, chair of the House of Commons transport select committee, has accused Ferrovial of running BAA in the interest of profits and not passengers: "Until we decide as a nation to do something about this it will continue to be the case that decisions of national strategic importance will be taken in the interest of a company based in Madrid and not in the national interest."

BAA has also brushed off the departure of its corporate communications team, citing it as proof that only a small number of staff were unable to bond with the new employers. However, the story behind the fallout with Duncan Bonfield, BAA's former head of corporate affairs, and Mark Mann, its ex-head of media relations, painted a picture of a patrician owner that was startled by the scale of the media onslaught against BAA.

According to BAA insiders, Ferrovial imposed a media embargo on the press team during the summer after a newspaper reported that BAA's chief executive, Stephen Nelson, held "crisis talks" with the then transport secretary, Douglas Alexander, over immigration queues. Alexander's office complained to Ferrovial, which ordered its top PR men not to answer press questions apart from requests for facts and statistics. Del Pino was also believed to have intervened personally to scrap an interview between Nelson and the London Evening Standard, one of BAA's most vociferous media critics.

BAA launched its PR fightback in October by hiring Tom Kelly, a respected former official spokesman for Tony Blair and a veteran of the backs-to-the-wall school of media management. Kelly is considered a safe pair of hands, but one of his most difficult tasks will be proving that they are not tied by his benefactors in Madrid.

FAQ What it is about

What are the strikes about?

The Unite union is furious that BAA is closing its final salary pension scheme to new entrants without consulting the workforce.

So current staff are not affected?

Unite disagrees. It says the move is a breach of trust by BAA management and could endanger the pension rights of existing staff. BAA says it is offering guarantees on pension rights for current staff.

Why is BAA closing its pension scheme to new entrants?

Union leaders say it is cutting back on pension benefits because it has debts of more than £9bn and faces a financially uncertain future. BAA has been warned by regulators that its earnings could be slashed over the next five years, reducing its cashflow by up to £150m a year and ratcheting up the pressure from its annual interest bill. However, BAA says the move is not related to its financial position.

Can the dispute be resolved?

Both sides were making optimistic noises yesterday. However, Unite is adamant that BAA has to reverse the decision to limit access to the scheme before holding sit-down talks in the spring. Negotiations are expected to take place over Christmas .

Can the government intervene?

The Department for Transport is refusing to get involved and hasdescribed the dispute as a "commercial matter for the unions and BAA to sort out".

What effect will a strike have on the UK economy?

It will cost millions of pounds, according to the British Chambers of Commerce. But the biggest impact could be on Britain's reputation.