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In a hotel conference room in Tokyo, the heads of some of the world’s biggest airlines - Lufthansa, United, All Nippon and SAS - were discussing their biggest headache. How could they get more flights into Heathrow?

The council of war took place in October 1999. All those present were part of the Star Alliance, an airline group spoiling for a fight with Oneworld, a rival led by British Airways.

The Star executives wanted to invade BA’s home turf, but were unsure how to do so. Heathrow’s runways were full. The only way to secure more flights was to cosy up to an incumbent airline.

There was an obvious target; BMI British Midland which, under the canny direction of chairman and majority shareholder Sir Michael Bishop, had become Heathrow’s biggest player after BA.

Bishop, however, was playing hard to get, and had begun flirting with another alliance, Skyteam.

Jurgen Weber, chief executive of Lufthansa and the chief architect of the Star group, decided to make Bishop an offer he couldn’t refuse. BMI would join Star, and in return Lufthansa and its European partner SAS would underwrite any losses the British airline made, and buy him out within nine years at an agreed price.

Last week the pigeons that took flight in Tokyo finally came home to roost. Bishop took Lufthansa up on its offer and handed it his controlling stake in BMI. The German group is expected to take over the British airline, and with it 11% of flights at Heathrow, early next year.

Although the sums involved have not been confirmed by either airline, it is understood Lufthansa will pay Bishop £317m, putting a total value on BMI of more than £600m - a decent price at a time when the airline industry is heading into recession.

For a long-awaited deal with the potential to transform European aviation, it came with little fanfare. Lufthansa made no special announcement, but buried Bishop’s decision in the small print of its third-quarter results.

“You would think they weren’t particularly pleased it had finally happened,” said one rival airline executive.

And despite years of predictions that Lufthansa and Star would follow the 1999 plan, and use BMI to build a sizeable presence at Heathrow to attack BA, it was unclear last week exactly what the Germans would do with their new toy.

Some insiders believe that rather than BMI being the platform for a grand expansion, it may be quietly broken up.

“The plan was always to get hold of the take-off and landing slots at Heathrow, which were viewed as priceless. But now events have caught up with the plan. BMI is losing money and the industry is staring recession in the face. I think Lufthansa will take its time working out the best way forward,” said one analyst.

There are several options. Lufthansa could stick with plan A, and take on BA with a full range of services from Heathrow, with domestic and European services feeding long-haul flights - in particular across the Atlantic to America, where BA makes most of its profits. The BMI brand would stay in place, just as Lufthansa kept the “Swiss” name in place when it took on Swissair.

This strategy’s Achilles heel is that Lufthansa and Star would still be smaller than BA at Heathrow (Star would have a combined share of nearly 20% of Heathrow’s runway slots, compared with BA and its partners’ 48%), and offer less of the frequency and spread of network that makes business trav-ellers choose one carrier over another.

Building up Heathrow might also detract from Lufthansa’s own domestic hubs at Frank-furt and Munich, and burn up cash when airlines are trying to conserve it.

Lufthansa could merge BMI with Sir Richard Branson’s Virgin Atlantic, perhaps taking over Singapore Airlines’ 49% stake in Branson’s company.

Virgin has made no secret that it is open to suggestions, with chief executive Steve Ridgeway last week making a public statement about the attractions of such a deal - a move taken by some as an indication that there were no serious talks under way.

“If there was a deal in the offing, you wouldn’t hear a thing from them,” said one source.

Branson has tried to do a deal several times with BMI in the past, arguing that the combined airlines would create a serious rival to BA. However, the talks have always foundered over price, with Branson and Bishop unable to agree on the valuations of their respective companies.

Another option would be a more modest challenge, choosing selected routes from Heathrow - such as New York - on which to sap BA’s strength. At the same time, Lufthansa could sell off the slots that were surplus to requirements, although this would be a gradual process that could take several years.

If Lufthansa wanted to capi-talise on its investment quickly and put a big chunk of the BMI slots up for sale, the obvious buyer would be BA. “No other airline can easily digest a big new position at Heathrow. Lufthansa might see a way here to get half of BMI’s Heathrow slots in effect for nothing, by selling the other half,” said one source close to the talks.

BMI’s operations outside Heathrow - BMI Regional and a low-cost airline called BMI Baby – appear certain to be sold. The most likely buyer is FlyBe, the fast-growing Exeter-based airline that is owned by the Walker Trust.

It bought BA’s regional business last year and could, if Lufthansa was inclined, also take over some of the routes at Heathrow.

Last week airline executives and transport bankers were talking about another, more intriguing possibility. Might Lufthansa continue its march into London with a takeover of BA itself?

While there is no indication that Lufthansa has considered making such a move, BA is regarded as vulnerable.

Its own plan for a merger with Spain’s Iberia has run into the sand, hampered by the British airline’s bombed-out share price – it closed the week at 136p, down from a one-year high of 450p - and its mounting pension deficit.

Lufthansa’s directors, led by chief executive Wolfgang Mayrhuber, may be mulling whether, having established a bridgehead in Britain, they should push for an even larger prize.

Career that took off

SIR MICHAEL BISHOP, pictured left, never had any doubts about what he was going to do with his life. He grew up near Manchester airport and developed a passion for aviation that grew into a career.

After holiday jobs with an aerial photographer, he set up his own ground-handling business at Manchester, which was later bought by British Midland Airways, a regional airline based at East Midlands airport. He joined the company and worked his way up through the ranks to become its managing director. Opportunity came knocking in 1978 when, with the help of a wealthy Californian dentist, he mounted a management buyout.

While commentators tend to give the credit for the liberalisation of UK aviation to high-profile entrepreneurs such as Sir Richard Branson and Sir Stelios Haji-Ioannou, Bishop did much of the heavy lifting. He broke BA’s monopoly on domestic trunk routes from Heathrow, and then did it again on European services, unwittingly preparing the ground for the rise of the low-cost airlines.

His business interests expanded outside airlines. He was a board member at Williams when Sir Nigel Rudd was building it into one of Britain’s most successful conglomerates, and deputy chairman at Airtours when David Crossland turned it into one of the world’s biggest holiday companies.

Bishop was not talking about his future last week, but those close to the 66-year-old say he has no plans to retire.

Plans to link Heathrow airport to the national rail network and the Channel tunnel have been mooted by civil engineering experts.

The proposal could see Europe's most congested airport transformed into a world class transport hub linking major cities outside London to its services.

If agreed, the scheme, designed by engineering group Arup, would replace the possible sixth terminal building that has been proposed to accommodate the building of the controversial third runway.
Heathrow Express

Mark Bostock, Arup director, said he hoped the plan would make Heathrow more attractive for travellers arriving by rail rather than road.

"Looking to the future we could see travel times from Heathrow to Leeds and Manchester by rail reduced to less than two hours," he said.

" Passengers travelling to Heathrow would be encouraged out of their cars and on to trains delivering environmental benefits."

Arup envisages building the new rail station on the Great Western main line - making the airport accessible to the west, the south-west, Wales and the Midlands.

It would also provide cities to include Birmingham, Oxford and Cardiff with direct train services to the airport.

The plan would include a 12-platform station, a twin-track 24km high-speed rail link and extra terminal capacity for check-in and baggage facilities.

The first step would be to extend the present high-speed rail line from the Channel tunnel which currently terminates at London's King's Cross St Pancras station.

It would then terminate at the new Heathrow Hub which would be built 3.5km to the north of the airport, in place of the sixth terminal building awaiting planning permission.

The scheme is likely to impress critics of the 2,200m third runway - part of a £7 billion draft expansion plan.

The proposal has caused a lot of anger and resentment among residents surrounding the airport who claim it will cause more noise and air pollution.

They are backed by many environmental charities who claim the additional runway will breach air quality control regulations in the capital.

Mr Bostock said his scheme would be more environmentally-friendly, cutting road pollution and reducing the number of short-haul flights and replacing them with rail services.

The engineering group has already begun discussions with BAA, the operator of Heathrow airlines, local councils and government. It believes it can deliver the proposal for less than £10 billion and that the hub could be operating by 2017.

A decision on the proposal is likely to be made before the results of the consultation on terminal six are revealed later this year. If the sixth terminal and third runway are approved, they will be built by 2020.

British airports operator BAA, a unit of Spain's Ferrovial (FER.MC: Quote, Profile, Research), said on Tuesday it intends to migrate existing bondholders into an investment grade, ring-fenced securitization structure backed by its assets.

The structure would be backed by its designated assets -- Heathrow, Gatwick and Stansted airports and Heathrow Express, the rail link between London and Heathrow airport, the company said in a statement to the Spanish stock exchange.

BAA said it will in due course begin a consultation process with leading bondholders under the auspices of the Association of British Insurers to move BAA's existing euro and sterling bondholders into the proposed new structure.

"A separate bank debt financing of the group's other UK airports ... is also proposed. The proceeds of both the designated and non-designated financings will allow the group to make the requisite repayments of its acquisition facilities," BAA said.

BAA said talks with rating agencies and banks providing facilities for both refinancings are well advanced but "final quantums and pricing for both facilities have not yet been agreed."

The company said it hopes to start the refinancings in the second quarter of 2008 and complete them early in the third quarter.

Ferrovial, BAA's parent, is desperately trying to cut the 10 billion pounds of debt it borrowed to buy BAA, having seen the credit crunch double interest payments on the loans to around 1.5 billion pounds a year.

Apart from refinancing, it is also in the process of selling some of BAA's property assets which it regards as non-strategic. (Reporting by Joe Ortiz, editing by Gerald E. McCormick)

It should have been a proud moment as Rafael del Pino welcomed the Queen to the official opening of Heathrow airport's gleaming Terminal 5 this month.

Ferrovial, the Spanish conglomerate he heads, owns BAA - and with it, London's main airports. It has transformed itself from the construction company Mr Del Pino's father founded in 1952 by snapping up not just airports but toll roads, car parks and other service companies.

But since June 2006, when Ferrovial (along with Singapore's government investment arm and Quebec's state pension fund) bought BAA, the purchase has given the company little but grief. "BAA is still a great asset. We are not sorry we bought it," says Iñigo Meirás, head of the airports division at Ferrovial. Outsiders, though, are concerned that the financial burden Ferrovial took on to buy BAA has undermined its ability to manage it.

"It's difficult to get away from the fact that BAA is simply too indebted," says Andrew Fitchie, transport analyst at Collins Stewart, the London stockbroker. "There will be a reckoning."

The fear is that Ferrovial is struggling to cope with both the financial and operational challenges the company faces - and that if BAA goes down, it could even take Ferrovial with it. Even at the time of the £16bn deal, at the height of the credit boom, the Spanish group and its partners were considered by many to have paid a lofty price for the airports operator.

If BAA were to collapse, there would be huge political repercussions, even possibly a backlash against foreign ownership of UK companies. "[BAA's] future is of central importance to the United Kingdom's transport infrastructure," parliament's all-party transport committee said this month. "BAA's monopoly position in the UK airports sector is unnecessary." The Competition Commission, meanwhile, will this year deliver its verdict on whether the UK's largest airports should remain under a single owner or whether BAA should be broken up.

Ferrovial concedes that the financial risks BAA faces have started to bite. "The financing of the BAA deal was well thought out, with all possible negative and positive scenarios taken into consideration," says Mr Meirás. "However, I would have to say that almost all the negative scenarios have been played out and none of the positive."

The purchase was predominantly financed by debt. Even Ferrovial's £2.5bn "equity" contribution was funded largely by debt at the Ferrovial group level, secured in turn against its stake in BAA and other parts of the Spanish group. Since the take-over, not only have credit conditions deteriorated but the financial terms under which BAA operates have been made less generous. Its regulator, the Civil Aviation Authority, has said airlines must pay more to use London's airports. But it has reduced the return BAA is allowed to make between now and 2013.

Ferrovial is not just facing financial headaches. Faith in its ability to manage BAA,which contributed more than onequarter of Ferrovial's €15bn (£11.7bn) revenues last year, has also been shaken during the 21 months of its ownership. It failed, for one, to anticipate operational problems such as the security crackdown in August 2006. As chaos descended on London's airports after the discovery of an alleged plot to blow up transatlantic flights, BAA floundered.

"We estimate that literally in the space of an hour on that night our security workload went up 400 per cent," says Tom Kelly, BAA's director of corporate and public affairs. But the scale of the task elicited little sympathy from passengers, politicians or the media, which condemned the airport operator for the resulting queues, flight delays and baggage mishandling as well as inadequate facilities in Heathrow's older terminals.

BAA's new owner responded, with some justification, that it could not be held accountable for the years of underinvestment at the root of Heathrow's problems. But users of Heathrow and Gatwick airports, who according to the Association of European Airlines suffered the worst flight delays in Europe last year, are starting to vote with their feet: passenger growth is slowing. Ferrovial, long accustomed to uncritical admiration for its global ambitions in Spain, was caught off guard by the public relations crisis.

Amid an exodus of senior managers Stephen Nelson, BAA's chief executive, is the most telling casualty. Unlike other departing staff, Mr Nelson, who formerly ran BAA's retail operations, was promoted to his latest position by Mr Del Pino himself.

Ferrovial'sproblems with BAA are fast approaching crunch time . The group has tried to refinance more cheaply some of the debt it loaded on to BAA, as well as £4.5bn of bonds issued by the airports operator. Its plan - to raise the money in a securitisation backed by the assets of Heathrow, Gatwick and Stansted airports - did not seem unreasonable at the time of the takeover. Others including Australia's Macquarie were using similar models. But the uncertainty at BAA, as well as the turmoil in the credit markets, has derailed the refinancing timetable.

Ferrovial says it expects the securitisation to go ahead by June. But if this deadline is missed, credit rating agencies would be likely to downgrade BAA's bonds to "junk" status, triggering a bondholders' option to demand repayment. Investor anxiety over BAA's ability to service its debt is reflected in the cost of insuring against a default. The price for this on BAA senior five-year credit default swaps, around 20 basis points before the takeover, has risen to about 400 basis points, according to Thomson Financial.

But even if Ferrovial concludes a refinancing successfully, that solves only one of its problems.BAA must still generate enough cash to service its own borrowings as well as further Ferrovial debt. Yet BAA's operational cash flow, some £1bn in 2007, remains insufficient to meet debt service payments as well as its tax and capital expenditure bill. Since BAA has promised the regulator a £4.7bn investment programme running to 2013, it must therefore borrow to pay for that as well.

So, as global credit conditions continue to deteriorate, BAA needs to raise nearly £12bn in all. Ferrovial, whose shares have fallen 35 per cent over the last 12 months, is not in a position to bail out BAA since it faces severe cash flow constraints itself.

With finances so stretched, Ferrovial has few options. It has already sold a number of BAA's "non-core" businesses, such as World Duty Free, in order to pay down debt. But as Collins Stewart's Mr Fitchie points out: "The problem is that, as BAA sells assets, it is slowly diluting both its value and its cash flows."

Even if Ferrovial sold one of the London airports - as it may be forced to do by the Competition Commission - this would merely result in forgone earnings rather than change the overall ratio of debt to assets, thus bringing no improvement in its ability to service that debt.

Ferrovial - and BAA - will not run out of cash immediately. But the outlook for London's airports is grim, and the day when Mr Del Pino can feel full pride in his purchase appears far off.

This Thursday, Heathrow's T5 will welcome its first real passengers. But how does the new building measure up? Simon Calder reveals the best travel hubs in world

Terminal: that is the outlook for the building that proved the original concept for the modern airport. The revolutionary design of The Beehive, as Gatwick's 1936 circular terminal soon became known, provided a sleek, beautiful interface between two forms of transport – rail and air. Suddenly, northern France was an effortless couple of hours away from central London. But, in a week when Britain's bravest and biggest air terminal opens for business, the original Gatwick airport is about to lose its aviation connection. The Beehive is being vacated by its present tenant, GB Airways, when easyJet takes over next weekend.

The tunnel to the (former) Gatwick airport station has been blocked, and to reach the runway would require a pilot to navigate past several office blocks and across the A23 dual carriageway. In the age of the cheap plane, airline passengers are no longer able to savour the calm bestowed by serene Art Deco lines. The trouble is us, the mass market. At the time this masterpiece was created, the only time the average Brit could get airborne was as crew on an RAF warplane. Today, anyone on the national minimum wage will earn enough in 12 days for an off-peak return to Australia, and short hops to Europe can cost less than the fare on the Gatwick Express train to the airport.

Last year a number equivalent to four times the UK population flew from a British airport. That is 241 million users: every second of every day, an average of eight people begin the often-grim business of going through a UK airport. Airports are people-factories, in which normal people are processed so that they can become airline passengers. You and I submit to a sequence of indignities. We surrender our possessions, hopefully only temporarily. We have our identity checked and double-checked, with fingerprinting compulsory for domestic travellers at Heathrow. And we move into a transportational limbo where shopping is the only option to sitting down and keeping quiet until the airline is good and ready to get us on board, and the air-traffic controllers permit the plane to leave.

As with other industrial plants, aesthetics are trampled in rush for revenue. But could the public appetite begin to change? Perhaps when Terminal 5 opens at dawn next Thursday, passengers will start to perceive time spent at Europe's largest airport as a pleasurable diversion rather than a necessary evil. If so, they will have to give some credit to the great railway engineers. The Victorians and their Continental counterparts understood that a terminus should be a deliberate interruption to the often-tedious business of travel: an important gateway between the mode of transport and your destination, created for your delight.

Victor de Chavarri realised this. A bust of the Spanish businessman at La Concordia station in Bilbao shows an expression of self-satisfaction. He might well look smug, because the terminus that he bankrolled is nothing short of exquisite. The roof is supported by slender steel girders, but the main façade has sturdy classical stone columns that reveal the city to the world. This is the first sight of Bilbao for the new arrival, and frames the view as perfectly as any masterpiece. The three dimensions of the city loom over the station; the Nervion river that provides Bilbao's lifeblood laces beneath it; and grand municipal buildings are arrayed to provide a regal welcome for the traveller who has just paid the princely sum of €7.25 (less than £6) for the three-hour trip from Santander.

In London, Charing Cross does much the same: the final approach on the railways from Kent, over the Thames, presents all that is good – Big Ben, the London Eye, St Paul's – and then deposits you in a humdrum terminus that just happens to be at the heart of the capital.

Airports tend to be some distance from the cities they serve. Unconstrained by urban clutter, they can be free to express the joy of travel. Few of them bother. There are also the special cases of millions of transfer passengers who find themselves in geopolitical limbo as they change planes at a place they neither know nor care about. Yet Schiphol in Amsterdam and Singapore Changi have both grasped the notion that the transit passenger can be pampered out of the tyranny of time zones. Neither airport is much to look at, but they have much to look at, and enjoy.

I happen to have been born a couple of miles from the Beehive, but never flew from it; by 1956 it had been rendered obsolete by the artless angles of what is now Gatwick's South Terminal. Sussex happens to have a second international airport, also an Art Deco confection of the inspirational kind. Stay on the southbound train for 45 minutes to Shoreham-by-Sea, and you can fly, no more than nine at a time, to northern France.

But for those unlucky enough to be reading this in one of the UK's many dreary terminals for trains, boats, planes and buses, you can now drool over the world's 10 best.

St Pancras International, London

The most absurd feature of the triumphant re-opening of Britain's finest railway station was the claim that it possesses the longest champagne bar in Europe: a banal irrelevance compared with the grand scale of the historic Barlow Shed.

The £800m resurrection of the north London station as the start and end of Britain's only high-speed line has been carried out with due reverence to the Victorian rail engineers.

The sense of space created by the soaring span lifts the eye, and the spirits, heavenwards. The harmonious glass and steel curves and stout brickwork provide inspirational punctuation for your journey – even if your final destination is Loughborough, from the annexe in the north-west corner for East Midlands Trains.

Departures, though, are more uplifting than arrivals: passengers coming to London on the Eurostar from Paris and Brussels are funnelled far too quickly into a subterranean labyrinth which eventually ejects the visitor onto a six-lane trunk road with the only brightness in the field of vision being a Burger King.

Changi airport, Singapore

Perhaps, you may reflect as the sun shimmers on the ripples left by your wake, long-haul air travel isn't that bad after all. The open-air swimming pool, complete with poolside bar, is the icing on the cake for an airport that has a simple concept. Approximately, it seems to go like this: you're probably only halfway through a long and arduous journey; you want to get out of here as quickly as possible, but are constrained by factors beyond your control such as airline schedules and unforeseen delays; so we're going to make it as bearable as possible. Free internet access? Help yourself. Hungry? Eat your way around the world from Sudan to Japan. Desperate for a touch of nature in the sterile world of international aviation? Try the indoor sunflower garden, or the cactus garden on the roof of Terminal 1, which is also where you'll find the pool. Keep three things in your hand baggage when take a connecting flight to Singapore: passport, camera and swimming gear. And if you have a long connection (four hours or more), seek out the free city-tour that gives you a glimpse of cosmopolitan Singapore, including a boat-trip on the river.

Zaragoza bus terminal, Spain

Las Delicias is the name for the terrestrial transportation hub in the city that hosts this year's Expo. It translates as "the delights" – not a term usually associated with a bus terminal. Previously, coaches squeezed into cramped stations around the city; Las Delicias concentrates them all in a home where buses cohabit with high-speed trains; this is the halfway point on the new AVE railway line between Madrid and Barcelona.

Spain does bus terminals with a flourish; Madrid's are frantic yet functional, Seville's mimics the scale of the city's vast cathedral, and Cartagena's takes its stimulus from the wheel itself. Zaragoza's dazzling concrete and glass structure is very different. It bestows the sense of wandering into a crystal; planes (in the geometric, not aeronautical, sense) meeting at acute angles, and which give an intuitive sense of purpose to the passenger's progress from street to stand. Buses glide in from Madrid and Barcelona, Bilbao and Valencia, and set out again to speed across the sun-bleached lands of Aragon.

You can see more of Las Delicias in The Independent's online video, '48 Hours in Zaragoza', which is available at www.independent.co.uk/spain

Victoria Terminus, Mumbai

In the continuing Hindu-isation of names, this pinnacle of Indian railway architecture has recently changed its official name to Chhatrapati Shivaji – the same as the city's airport. Confused? You're in Bombay. Or is it Mumbai?

Indian Railways is the world's biggest transport undertaking, and Victoria Terminus is where many of the billions of journeys taken each year begin. It owes an architectural debt to St Pancras in London. Yet the façade of trills and frills is uniquely Indian. "Possibly the most ornate Gothic frontage in the world," say The Men Who Know – the compilers of the Thomas Cook Overseas Timetable.

Circular Quay, Sydney

Half correct; the hub for the ferry services that slice serenely across Sydney Harbour is definitely a quay. But there is barely a curve to be seen; the yellow-and-green vessels moor squarely against jetties poking perpendicularly from a flat concrete quayside.

Location is the key to this quay. The Circular Quay in Australia's biggest city is pinioned by two of the world's great tourist icons, the Harbour Bridge and the Opera House. Indeed, the best way to view them is from the deck of a ferry. Take a trip to Balmain and you will sail beneath the bridge, where its muscular foundations are evident (look out for grey-clad figures making the bridge climb. Or, en route to see some masculine surfers, cruise past the Opera House en route to the beautiful Pacific beach at Manly.

Terminal 5, Heathrow

The world's most expensive air terminal will have an unfortunate effect on its predecessors at Europe's busiest airport when it opens to the travelling public on Thursday 27 March. Terminal 5's clean simplicity and soaring scale is such a contrast to the existing facilities (see 10 worst terminals, on page 7) it will destroy what remains of their fragile self-esteem.

If you are among the lucky minority of passengers who find themselves arriving, departing or changing planes at Terminal 5, the experience should be serene; you should "make it from check-in, via fast bag-drop and through security in around 10 minutes", says British Airways, the terminal's only airline. Then you are free to enjoy a building that BA's chief executive, Willie Walsh, calls: "An extremely sophisticated baggage system with a terminal built around it."

Whatever this says about BA's priorities, his new terminal shows how the commodities of space and reason, when applied to a completely new structure, can remove much of the unnecessary clutter from the process of travelling. Be warned, though: turn up at security less than 35 minutes before departure and you are off the plane.

Leipzig Hauptbahnhof, Germany

"This monolithic building could hold several cathedrals", assert The Men Who Know – the compilers of the Thomas Cook European Rail Timetable. Sixty-seven minutes after leaving the German capital, you arrive at Leipzig's temple to the train. It is the pick of the Continental crop mainly for its sheer scale – its façade is the length of two championship-sized football pitches.

Within its elegant columns there is space for 150 shops and more besides, such as an ice rink in winter. The terminus – which was completed a year into the First World War – provides a proper portal for the city. The only problem is that, after leaving the station, the rest of Leipzig looks a trifle drab.

Amsterdam Schiphol Airport

There's an art to a good terminal building. Or, in Amsterdam Schiphol Airport's case, there's some art in a good terminal building. The city's main Rijksmuseum may have been under repair since 2003, but for the past six years a small outpost has operated – with free entry from 7am to 8pm daily – at the airport itself, bringing a welcome dose of art and culture to disorientated, dishevelled travellers.

Not that there's any need to be disorientated in Schiphol: this vast airport (46 million passengers processed in 2006) may vie with Heathrow, Frankfurt and Charles de Gaulle as one of Europe's main travel hubs, but it does so with elegant simplicity, rather than claustrophobia and panic. Three departure halls and six runways are united in one airy terminal building – designed in a distorted semi-circle – which means there's a fair amount of gliding along on conveyor belts to be done if you have to switch flights, but absolutely no lengthy transfers using groaning monorails or grubby buses. And as for being dishevelled, well, the shopping opportunities at Schiphol are legion: everything from Antwerp diamonds to clogs.

Even true love can be found at Schiphol: since 2006, marriage ceremonies have been conducted here (www.schipholweddings.nl), with couples leaving for their honeymoon aboard the next available flight.

Marseilles Provence 2, France

You could buy at least 200 copies of "MP2", as this breathtakingly simple terminal is styled, for the price of one Heathrow Terminal 5.

MP2 is what happens when designers start with a blank piece of paper and devise an airport terminal that includes everything you need and nothing that you don't: a few check-in desks, though these days many travellers will have already printed out their boarding pass at home; a central point for depositing baggage, rather than a complex series of conveyor belts; a café that serves adequate food and decent coffee at reasonable prices; and concrete corridors leading to the apron and the waiting plane.

Form scrupulously follows function, and by removing any pretence that you are there to have a good time MP2 manages to feel remarkably cheerful. Or maybe it's because you've just been in the South of France.

Easter Island airport

This weekend, a few hundred fortunate folk will be flying in from Tahiti or Santiago de Chile to the world's most isolated airport. If their luck holds, no fog will cloud the final approach of the LAN Boeing 767 – otherwise they face a scarcely credible five-hour onward flight to the nearest diversion airport.

All being well, which over Easter weekend it certainly should be, they will touch down at what is arguably the simplest international airport in the world. The terminal is a small shed with a café attached, which is where transit passengers can sip cafe con leche while they bemoan their short stay on this fascinating island.

But because the terminal is on the edge of the onlysignificant settlement on the island, transit passengers can easily stretch their legs down to the harbour and along the shore to marvel at the mysterious stone heads that populate the island whose isolation is so splendid.

Terminal cases: The 10 worst travel hubs

European architectural prizes are a mystery. The Stirling Prize judges who gave Lord Rogers the 2006 award for his Terminal 4 at Madrid airport had presumably never tried to begin or end a journey there; the transfer to the rest of the airport takes almost as long as the flight from London.

At least Heathrow Terminal 4 has an excuse for its awfulness; the youngest of the existing four terminals was always a hopeless compromise. It is in the wrong place, with half the aircraft movements having to cross an active runway. It also proved inadequate for the mish-mash of airlines that have ended up using it: KLM, Kenya Airways, SriLankan and (the main tenant) BA, though only for some of its short-haul and most of its long-haul operations. As a result, an awkward extra arm had to be bolted on, with some extraordinarily long walks – or, if you are late, runs. Heathrow Terminals 1 and 3 are grim, too: both require you to endure a long and rambling retail labyrinth before you get anywhere near a departure gate. But Heathrow Terminal 2, the oldest at the airport, is much more tolerable – the closest to the Tube and bus stations, and with very short walks to most gates. Too bad that it will be the first to be demolished once Terminal 5 is up and running.

Railway terminals can be grim, too. Far too many British branch lines have been manipulated so that they end their journeys at bleak, exposed platforms rather than handsome station buildings. Morecambe in Lancashire, Sheringham in Norfolk and Merthyr Tydfil in South Wales are the antitheses of excellence.

The grim Marseille ferry port cancels out the city's appearance in the top 10 courtesy of its new airport terminal. Users of the former thread through a tangle of dereliction to get from city to ship.

Russia is mostly a land of magnificence, in terms of terminals, but there are exceptions. Vladivostok, which translates as "lord of the east", is the city where the Trans-Siberian railway ends. Yet its station feels more like East Croydon than the gateway to the Orient. The world's worst airport terminal is also in Russia. Sheremetyevo 2 was created for the 1980 Olympics, and using it is always a Herculean task. Its location off the highway to St Petersburg is awkward; the design possesses in-built bottlenecks (always try to be the first off the plane); and officials appear to connive with the seedy characters who make an arrival at best an ordeal, at worst terrifying. By comparison Heathrow, even though it is handling 55 per cent more passengers than it was designed for, looks the epitome of civilisation.

A new era for Heathrow is beginning with the opening of Terminal 5, the new home of British Airways' operations, 18 years after it was first proposed.

It was in May 1995 in a ballroom at a hotel airport that arguments began about whether Heathrow should get its fifth terminal.

It was to become Britain's longest planning inquiry, but finally in 2001 the government gave permission to build Terminal 5 (T5).

The alliance of campaigners opposed to expansion was furious.

The government had gone back on a recommendation from the Terminal Four inquiry that the growth of the sprawling airport should end there.

But Heathrow's owner BAA, and the airlines operating out of the airport, insisted that it was Britain's premier hub for air travel, and warned that it was bursting at the seams and badly in need of expansion.

There were 'conditions' for going ahead with T5; a cap on flights of 480,000 a year, limits on noise, and restrictions on car-parking.

Mammoth building task

They weren't enough for the protestors, but regardless, the construction of the glittering new airport building began.

It was a mammoth task, not confined to the building itself.

Two rivers had to be diverted, and extensions were dug to London Underground and Heathrow Express rail lines.

A new road tunnel was bored, and a taller Control Tower erected to give better oversight of the bigger airfield.

Now Terminal Five stands huge, and strangely distant, at the far end of the airport, its size only apparent when you arrive at its doors, as passengers will do on March 27th.

Advantage BA

British Airways, which has the run of the place, believes T5 will transform its passengers experience of air travel.

Its rivals grumble that yet again, BA has been handed advantage on a platter.

The promise to passengers is that T5 will transform their experience of air travel, and banish 'Heathrow Hell' for good.

It is hoped 80% of passengers will check-in online or at computer terminals in the vast departure area.

Bags are dropped at desks nearby, and security is just beyond, expanded following the terror scares of recent years.

Another big idea is that no passenger should have to walk more than 5 minutes to reach their aircraft.

There should be no more frantic sprints along endless corridors.

This has been achieved by having the aircraft pull up at air bridges connected to the main building itself.

Terminal Five, BAA is eager to point out, has been completed on time and on budget, using entirely private money.

More space

So what has that money really bought?

Certainly space. Floor space within the terminal for passengers, freeing up crowded buildings such as Terminal One.

The extra departure gates will make aircraft operations easier, especially when things go wrong, which currently leaves planes queuing to load and unload.

The road traffic to the central airport area should ease a little, as a proportion of it heads instead to T5 to the west.

For British Airways, handling baggage should be easier.

A state-of-the-art system of conveyor belts, computerised baggage trucks and a new reclaim area will help improve the airline's reputation for losing its passengers luggage.

The development also buys BAA time.

The terminal expands the capacity of Heathrow by 30m passengers, but they won't all come on day one.

So the company can begin its next plan, knocking down Terminal 2, and building what it calls Heathrow East.

The airlines displaced will take BA's place in T1 and T4.

But T5 doesn't solve the airport's biggest problem.

Runway pressures

The pressure on its two runways.

Planes can take off and land every minute, such is the frantic pace of air traffic.

It is claimed by the airport that the new terminal will not radically increase flight numbers, despite the increase in passenger numbers.

This is said to be because bigger aircraft are being used, including the giant Airbus A380, due to begin UK operations with Singapore Airlines next week.

Environmentalists don't believe that for a minute, and local campaigners have tracked the growth of the Heathrow operation in the years since T5 was first agreed.

A consultation has been carried out into a third runway, north of the airport, and it seems likely the government will go ahead with this proposal too - triggering years of protest from green campaigners.

And so the cycle continues.

Demand for a bigger Heathrow, expansion to provide it, followed by more demand.

It must all seem very strange for the Queen.

After all, when she opened the first terminal building at Heathrow half a century ago, in 1955, airport travel was still in its infancy.

Now it is clear that it was just the start of something very big.

Six years after construction started in 2002, Heathrow's Terminal 5 will open this month. The building has been designed around technology, and British Airways hopes innovative use of IT will help lead to a better experience for passengers.

BA and the airport's owner, BAA, have worked together on the project, each developing different systems. None of the technology is new, but the way it is being implemented is unique, according to BA's CIO, Paul Coby.

"Terminal 5 is about putting proven systems and proven processes into a new building. It will be the most technologically advanced airport in the world," he said.

British Airways wants 80% of passengers to check in online or using one of 96 self-service kiosks at the entrance hall of the building. Passengers can check in quickly by leaving their bags in fast bag drops behind the kiosks.Their boarding passes contain a bar code holding information such as which flight the passenger is on, and whether they have enough time to get to the boarding gate.

Domestic and international passengers will share the same departure lounge, raising possible immigration concerns that international passengers could swap boarding cards with domestic passengers and enter the UK without going through immigration.

To avoid this, BAA is using a biometric system developed by Atkins Advantage Software called Pass at the departure gates. Domestic passengers will provide a fingerprint and photo at the security gate. The Pass system will compare the fingerprint at the boarding gate with a record held on the database to ensure it is the same person. BAA says it will hold the biometric data for no more than 24 hours.

BA hopes a system called Trip will improve the number of flights leaving the airport on time. It allows flight dispatchers to record information on a flight, such as its position and destination electronically, using a digital pen to write on plastic "paper". The pen transmits data through the Vodaphone mobile network to a third-party application running on a BA server. The system makes the flight's status available to airport staff, through a web browser interface, on BA PCs. The system is quicker because dispatchers can now do their paperwork on the airfield, instead of having to return to the office.

BA and BAA hope the new baggage system will improve BA's record on losing bags.

The barcode system uses 2D barcodes and scanners can be used to find out where a bag is meant to be going. The main difference with this system, officials say, is that it will now work efficiently. "Before, the technology was crammed into buildings that were too small for it," a BAA spokesman said.

LONDON -(Dow Jones)- Spain's troubled Grupo Ferrovial SA (FER.MC) - reeling from a 49% fall in net profit for 2007 caused by higher costs on its EUR30 billion debt pile - may consider asset sales to alleviate some of the pressure, people familiar with the matter said Tuesday.

Infrastructure investors including Macquarie Bank Ltd, Babcock & Brown Ltd, Goldman Sachs' (GS) Infrastructure Investment Group and Deutsche Bank's (DB) Rreef Alternative Investments unit could be among the interested parties if any airports are spun out of Ferrovial's subsidiary, BAA Ltd, the people said.

Ferrovial, which led a group of investors in the GBP10.3 billion takeover of BAA in 2006, declined to comment. BAA operates seven U.K. airports, including the London hubs of Gatwick, Heathrow and Stansted.

Out of the three London airports, Ferrovial would be most likely to spin off Gatwick, which could sell for around GBP5 billion, one person said. Heathrow is regarded as BAA's prime asset and Stansted has a lot of growth potential, the person added.

Maquarie has already started discussions with some of its related infrastructure funds over the potential purchase of airports owned by BAA, according to media reports. Maquarie is an adviser to Ferrovial and a major investor in airports internationally through its listed Macquarie Airports company (MAP.AU).

Ferrovial may have to consider asset sales because of an upcoming competition review in the U.K.

The Spanish group also needs to refinance the debt that supported the takeover of BAA.

The company's banks have been trying to launch an asset-backed securitization of its regulated London airports for that purpose for about a year. The refinancing has been difficult because the credit crunch has dramatically reduced demand for asset-backed facilities in Europe.

Ferrovial Chief Financial Officer Nicolas Villen said Feb. 26 that the company continues to work on its debt refinancing plans. He said he expects the refinancing plan to be completed in three to four months, including a credit facility backed by BAA's revenue from unregulated Scottish airports.

In the credit derivatives market, the cost of insuring BAA debt against default dropped slightly Tuesday, traders said.

It cost around EUR480,000 a year to insure EUR10 million of BAA bonds or loans against default for five years, compared with over EUR510,000 late Monday.

Traders said that the move was in line with a general tightening of credit spreads Tuesday, but that BAA default swaps had outperformed the market slightly.

And credit rating agency Fitch Ratings said that it thought the plan by BAA's owners to move the company's existing unsecured bonds into a ring-fenced financing vehicle, and refinance debt via a securitization, "is still achievable in the near-term, particularly after BAA's pricing review has been finalized."

by Victoria Howley, Dow Jones Newswires; 44 20 7842 9261; victoria.howley@ dowjones.com (Marietta Cauchi and Mark Brown contributed to this article.)