London Eye hits financial crisis

The capital's most popular paid for attraction lost £11 million despite attracting more than four million visitors in 2002 and increasing revenues by 18% to £38 million.

The losses are due to the £24 million a year interest being charged by BA on its loans to get the business up and running.

Accounts show that BA is owed a total of £55 million in interest at a rate of 24% a year on top of an original £51 million loan.

The board of the company is to meet next month to seek an agreement to refinance the loan.

With the Eye close to getting planning permission to remain on the South Bank until 2027, that board meeting will open negotiations with BA to see how much it is prepared to be talked down on the £106 million it is owed.

London Eye chairman Rick Wills, however, defended the arrangement. He said: "BA financed us, showing us great commitment on a project on which we just could not have got a commercial loan. The talks about refinancing the company are now on the agenda. As to how much BA is paid, that is open to negotiation."

Plans to refinance the Wheel will have to be passed by its three one-third shareholders – BA; its operator the Tussauds Group, which is itself up for sale by its venture capital owners; and its architects David Marks and Julia Barfield, who were paid £1.4 million as consultants over the year.

Wills told the Evening Standard: "We expect about 3.5 million visitors this year. Overseas tourist numbers are down, not least because of the Iraqi War. However, there is a general rule that attractions' numbers fall after the first two or three years of operating.

"We hope that the figures will plateau. We have created plans to ensure the Eye is not regarded just as an observation wheel. We want to create the Eye as the centre of a London viewing experience as part of a package that would include boat cruises, theatres and museums."