£25 million sales drop through the abolition of Duty Free sales inside the European Union.

The revision to its forecasts will take the total cost of the new rules to £60 million this year, although the company said sales were starting to pick up again.

New chief executive Mike Hodgkinson said BAA was winning the battle to explain to shoppers that most goods were the same price as before.

BAA has undertaken a major advertising campaign to explain the limited impact of the changes, including posters, discounts and leafleting at the check-in.

Mr Hodgkinson said: "It is a

complex message to get across to shoppers, but we want to stress to the City that we have not just been

sitting back doing nothing."

Improvement

There are signs of an improvement, with revenue falls narrowing month by month.

Analysts welcomed his reassurance and a number of stockbrokers upgraded their forecasts for the company.

BAA had already warned last month that the situation on Duty Free was worse than expected.

Pre-tax profits in the six months to September 30 came in at

£163 million against £307 million at the same stage last year.

Turnover was £1.15 billion against £1.03 billion before.

Shareholders will pick up an interim dividend of 5.7p against 5.3p at the same stage last year.

UK passenger traffic grew 5.1 per cent over the period compared with last year and continued to be strong in October.

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