Overall revenues in the first three months of the Alpha Airports Group (AAG) financial year grew by 6%, Alpha Airline Services/Alpha Flight Services grew by 5% and Alpha Airport Services/Alpha Retail grew by 7% with

the UK up 8% and international business up 3%.

AAG disclosed these results yesterday in its first Interim Management Statement following its AGM, covering the period from 1 February 2007 to 23 May 2007.

In his report to the city, AAG Ceo Peter Williams reviewed the company's operations and began by pointing to a 6% increase in overall revenues for the three months compared with last year, although he added that group operating profit was in line with the same period last year.

Breaking the guideline results down by division, Williams said in a statement: ‘In Alpha Airline Services, which (trading as Alpha Flight Services) provides catering logistics, in-flight catering, bonded stores and management services to airlines, revenue increased by 5%.

‘In the UK, strong growth in inflight retail offset the impact of the terminations of the ThomsonFly and BA Connect contracts, resulting in an increase of 1% for the division. Internationally, revenue was up by an impressive 27% with particularly strong growth in Australia, following recent contract wins with Malaysia Airlines, Air New Zealand and Etihad, and in Romania.

‘In Alpha Airport Services, which (trading as Alpha Retail) operates retail stores and catering outlets at airports, revenue increased by 7%. Revenue growth in the UK of 8% was ahead of the increase in passenger volumes. At our international businesses, revenue was up by 3%, with a strong performance from the US offset by the impact of contract losses in Turkey and the heightened security issues in Sri Lanka.’

Moving on to the subject of contracts, Williams pointed to Alpha Flight Services division's new three-year contract to provide catering services for Etihad Airways? direct flights from Sydney to Abu Dhabi. He said this follows the successful commencement of the Air New Zealand contract in February 2007.

He added: ‘As expected, following its acquisition of BA Connect, Flybe made the decision not to take over Alpha?s contract with BA Connect and we therefore ceased providing services in March 2007. As previously announced, it is anticipated that this loss of business will have a net impact on profitability of approximately ?1m ($1.9m) in the current financial year.’

More positively, Williams said the company was very encouraged at winning a competitive three and a half year extension tender in the UK (commencing January 1 2008), for its contract with American Airlines for inflight catering services for all of the airline?s flights from London Heathrow and London Gatwick. He said the division has also been awarded a three and a half year contract – also effective from January 1 2008 – for American's inflight catering requirements from Manchester Airport.

Moving on to AAG's UK Retail division, he said the previously announced concession loss with BAA in respect of the ?World News? confectionery, tobacco and news stores at Heathrow Terminal 3, Edinburgh and Aberdeen comes into force on September 30 2007, but added that this will have no significant impact on management's expectations of profit for either this financial year or the next.

He added: ‘We were delighted to announce that our Alpha Retail division has signed a Licensing Agreement with Starbucks Coffee Company (UK) Ltd to open a number of coffee stores in various UK airports through a structured roll-out programme over the next few years. Alpha Retail will be working closely with Starbucks in seeking and developing premier retail coffee outlets in UK airports. The first store is set to open landside at Jersey Airport in October 2007.’

Turning to India, he explained that Alpha?s joint venture with Pantaloon Retail (India) Limited had been expected to commence trading at Indira Gandhi International Airport, New Delhi in January 2007, but the start up was delayed: ‘However, due to a number of issues, including delays in receiving various regulatory approvals and trading clearances, the stores were unable to open until the end of March. This delay has resulted in pre-trading costs being significantly greater than originally expected.

‘Additionally, in a market where the airport experience has traditionally left a lot to be desired, the first month?s footfall and trading performance were disappointing. We believe, however, that as awareness of our shops and the quality of the retail experience grows, we will see increased footfalls. In the meantime, we are encouraged by the high levels of spend once travellers enter our shops.’

Turning to the outlook ahead, Williams said the overall outlook ‘was in line’ with the company's expectations, although the issues in Delhi and the heightened security situation in Sri Lanka are expected to be factors in the full year results, although it was too early to say to what degree.

‘The implementation of the new group strategy is progressing well and is expected to bring a greater focus to the group?s activities. The recent agreement with Starbucks is an example of the new direction that the group is taking,’ he said.