No sign of Prestwick airport sale

The New Zealand company which owns Prestwick has said there is no sign of a buyer for the airport, and its value has fallen. Infratil put its two UK airports, which include Kent, up for sale in March this year.

However it said the sales process for both had been "unsuccessful to date". As a result, Infratil said it had taken an impairment charge of £22m, which now values Prestwick at about £14.3m and Kent at £7.6m. Infratil said that it would "continue to seek a buyer for the airports and work with local stakeholders to review alternatives". 

Together Prestwick and Kent's Manston Airport recorded losses for the six months to the end of September of just over £2m. Passengers travelling through the airports fell by more than 180,000 during the period compared to the same time in 2011, although freight business increased.

Prestwick airport has had several owners in recent years. In 1991 the newly-privatised British Airports Authority, BAA, put it on the market. In 1992 the airport was bought by Canadian businessman Matthew Hudson. He sold it in 1998 to transport group, Stagecoach. Stagecoach then sold it to Infratil in 2001 for £33.4m.

A significant percentage of the airport's aviation revenue is derived from freight and other aircraft activity, with business and property income also playing a significant role.

bbc.co.uk 13th Nov 2012

Infratil is selling Manston, but wants to buy Stansted. Why?

In March 2012, Infratil announced that Manston was up for sale because it wanted to "refocus its investment profile" and concentrate on retail, production and supplying gas and electricity. What they didn't mention in their press releases was that Manston had lost them money hand over fist ever since they bought it.

In the previous couple of years Infratil had "written down" the value of its two European airports (Manston and Prestwick) from £70m to £36m. These write-downs were simply more realistic estimates of the actual value of the airports, in the light of their performance and the fact that they were losing Infratil about £6m a year.

Don't forget, dear reader, that Infratil is an infrastructure investment company. They buy and sell "big stuff" (putting it technically) to make money for their investors. On their website, Infratil state that "Infratil’s primary goal is to provide its shareholders with a consistent return of 20% per annum over the long term".

Clearly this 20% hadn't happened at Manston, and Infratil realised it wasn't going to happen soon enough to please their investors, if ever. So they decided to cut their losses.

But now we learn that Infratil are joining forces with Morrison & Co (the bank that owns a large chunk of Infratil) and a large pension fund to put in a bid for Stansted Airport. Stansted is owned by BAA, the largest airport operator in Britain, and the Competition Commission ruled some time ago that BAA owned to much of Britain's airport capacity and would have to sell some of it. BAA spent a lot of time and and money fighting this through the courts, but has finally accepted that it will have to sell Stansted.

This makes Stansted a very interesting purchase for a number of reasons. BAA also owns Heathrow, and has spent years carefully managing the mix of flights and carriers at the two airports to avoid them cannibalising each other's customer base. It hasn't been in BAA's interests to have Heathrow and Stansted competing with each other. Clearly, this will change when a new operator takes control of Stansted - there will be a massive increase in competition.

Stansted is well placed to take on new business. Throughout the recent hoo-hah about airport capacity in the south-east, one simple fact has been under-reported - there isn't a shortage of capacity in the south-east. BAA's own chief financial officer was reported as recently as April 2012 saying that Stansted is "only half full".

Both Stansted and Manston have spare capacity, long runways, and are in the "aviation-hungry" south-east. So why would Infratil balk at spending a few million a year at Manston, but leap at the opportunity to invest a BILLION in Stansted? The answer, of course, is in the question - it's the difference between "spending" and "investing". And this is also the answer to those who ask why not Manston.

Manston doesn't feature in any of the serious discussions about the future of aviation in the south-east (and it doesn't feature in Infratil's strategy) for one plain and simple reason - it's in the wrong place. If these two maps don't explain it clearly enough, have a look at this. 

Rival group enters battle for Stansted airport

A consortium led by an Australasian investment manager has emerged as an early rival to Manchester Airports Group in the £1bn battle for Stansted airport.

Morrison & Co, which operates out of New Zealand, Australia and Hong Kong, is heading a bid team that also includes the New Zealand Superannuation Fund and Infratil, a Wellington-based infrastructure investor.

Stansted was finally put on the block last month after a three-year legal fight by owner, BAA, which tried unsuccessfully to halt the forced sale of the airport demanded by the Competition Commission. BAA’s controlling shareholder, Ferrovial, is thought to have issued non-disclosure agreements last week to interested bidders, effectively kick-starting the process. The sale is being handled by Deutsche Bank and ING.

The interest of Infratil in Stansted has surprised some industry observers because it is currently trying to sell its two smaller British airports Glasgow Prestwick and Manston in Kent after a difficult foray into the UK aviation market. Infratil, which runs about £2.5bn of assets, has twice written down the airports in the past two years, with their carrying value almost halving from £70m to £36m today. The two airports lost around £6m last year.

Even so, Infratil is an experienced airport operator, with its interests including a 66pc stake in New Zealand’s Wellington Airport. Infratil’s operations at Prestwick have also enabled the company to develop a relationship with Ryanair the low-fare airline responsible for almost 70pc of Stansted’s traffic. The Morrison consortium is believed to have held early talks with Ryanair. The NZSF, which has more than £9bn assets, devotes about 9pc of the fund to infrastructure investment, spanning airports, transport, energy and oil.

The Morrison consortium faces early competition from the council-owned Manchester Airports Group, which is building up its firepower via a potential deal with Australia’s Industry Funds Management. The giant antipodean infrastructure investor, which has around £21bn under management, has agreed to inject about £1bn for a 35pc stake in the Manchester airport company on the condition it wins the bid for Stansted.

The Stansted auction, which may also attract interest from JP Morgan, Citi Infrastructure Partners and Morgan Stanley Infrastructure Partners, is complicated by the Government’s review of airport capacity in the south east, led by former Financial Services Authority chairman Sir Howard Davies. While there will be no decision on where to build a new runway before 2015, the recommendations of the Davies Commission could have a major impact on Stansted’s value.

Michael O’Leary, the Ryanair chief executive, can also influence how much BAA gets for Stansted. He has already expressed interest in taking a minority stake in any new owner of the airport as long as it agrees to lower both landing charges and the cost of building new facilities. Mr O’Leary has also attempted to drive down the price by declaring that any bid based on the airport’s £1.3bn regulated asset base the regulator’s proxy for its value is “artificial” and based on “Noddy land” economics.

telegraph.co.uk 22nd Sep 2012

Boris shoots own foot in sympathy

NEWSFLASH: the real reasons Flybe quit Manston - click HERE

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'Boris Island' airport plan grounded over Johnson's briefing to Telegraph

An artist's impression of Norman Foster's design for a new four-runway airport on the Thames estuary

Downing Street told Boris Johnson on Wednesday that he had killed off any moves towards an airport in the Thames Estuary ahead of the next general election after an announcement by the London mayor was seized on by the Liberal Democrats. 

David Cameron and George Osborne, who have become alarmed by growing business anxiety about their opposition to expanding Heathrow, had indicated they were warm about a new airport which would assume Heathrow's role as a hub.

But the London mayor was told that he had handed a gift to the Lib Dems, who are opposed to any airport expansion in the south-east, when he briefed the Daily Telegraph that Downing Street had signed up to his proposal. A Whitehall source said:

"Boris is not going to get it. Yes to scoping on a new airport, but he won't get it. The way this has plopped out in the Telegraph, no doubt via Boris's team, has given people a chance to kill it."

The Lib Dems will support a consultation by Justine Greening, the transport secretary, on how to maintain a hub, but they will oppose any new airport. A Lib Dem source said:

"We are against airport expansion in the south-east. We are happy to go along with the consultation, but we have a policy which will not change."

Johnson was upbeat on Wednesday evening after he outlined his plans to a meeting of the Conservative 1922 committee.

"We must not count our chickens or over-egg this – to continue with a chicken metaphor – [but] the government is still looking at all the options. But George really gets the point about regeneration and jobs in the Thames estuary and the amazing capacity of a big transport hub to drive Britain's competitiveness for a long time to come."

The proposed airport would be an international hub that could open up new routes to south-east Asia and have capacity for connecting flights. At present, the British aviation industry says the nation is losing out to rivals airports such as Schiphol in Amsterdam and Charles de Gaulle in Paris. The government has ruled out a third runway at Heathrow, as has Labour since leaving power, a current political reality that has been reluctantly accepted by the industry.

Colin Matthews, the chief executive of airports operator BAA, said he was "pleased there was an acknowledgement that there was a need" for more airport capacity, but it would take decades to construct a whole new airport.

"The recognition today is that it matters to the UK economy, to jobs and to growth. There's no reason why any option should be ruled out."

Greening, however, has also ruled out further runways at Gatwick and Stansted in answers to parliamentary questions. Johnson told the BBC:

"You can't go on expecting Britain to compete with France and Germany when we simply can't supply the flights to growth destinations."

Heathrow, he said, was "fundamentally in the wrong place". He said listening to the "Heathrow recidivists" who argue that other options for airport expansion take too long would only lead to paralysis.

In his autumn statement, Osborne indicated the government would consider all options for airport expansion, which he sees as an opportunity for economic regeneration.

The architect Norman Foster has drawn up plans for an airport on the Isle of Grain, the easternmost point of the Hoo peninsula, with four runways and which could handle 150m passengers a year – double the current number passing through Heathrow. It is the latest in a range of proposals dating back decades for the estuary, including a mooted "Boris Island" airport at nearby Shivering Sands.

Aircraft would, however, have to contend with the multitudes of birds that flock in the area – a hazard to aviation and an issue that has brought opposition from environmental groups. The RSPB said it was a vital habitat for wildfowl and wading birds. Balpa, the pilots' union, said it would seek reassurances on the dangers posed by birdstrikes, as well as potential air traffic conflicts with Brussels, Heathrow and London City airports.

Guardian 18th Jan 2012

Outlook gets gloomier for Infratil

BAA airport sale squeezes Prestwick

Have you ever had one of those weeks when things just seem to go from bad to worse? If so, you'll be able to empathise with Infratil.

In response to the general downturn and gloom, the bucket shops are reducing capacity and cutting routes. Flybe, the mainstay of Manston's struggling passenger business, is on the ropes and cutting routes that are busier than the infrequent services out of Manston - which doesn't bode well.

And now, to cap it all, BAA (easily the largest airport operator in the country) is moving the goal posts and increasing the competitive pressure on Prestwick, Infratil's busiest airport outside New Zealand.

Back in 2009, the Competition Commission decided that it was against the public interest for BAA to own so many airports across the UK, and ordered it to sell some. Stansted was flagged as one to sell, and BAA were told to choose which of their Scottish airports (Glasgow or Edinburgh) to put a price sticker on next.

BAA kicked up a stink and spent over 2 years arguing the toss through the courts. The Competition Commission have now surprised most people (not least BAA) by apparently accepting that there's plenty more arguing to be done over Stansted, and telling BAA that, in the meantime, they will have to reverse the original sequence of the sell-off and sell one of the Scottish airports before they sell Stansted.

So what? Well, BAA are being pushed to decide quickly, and have said that the decision will be made "shortly". In fact, it's quite likely that the decision has been made already. In the full year of 2010, Edinburgh carried 8.59 million passengers, Glasgow 6.52 million. Edinburgh carried 20,357 tonnes of freight, Glasgow 2,914 tonnes. Mail is another money-spinner: Edinburgh carried 23,726 tonnes of mail, Glasgow carried 19 tonnes.

In BAA's shoes, which airport would you sell? Yup, it's goodbye to Glasgow. There have been rumours that Infratil could be among the bidders, but with numerous airport owners and other investors lining up to make bids, several sources say that the Competition Commission is likely to opt for a new competitor. According to Louise Congdon, managing partner at leading consultancy York Aviation:

"A new owner can only mean increased competition for Prestwick. For whatever reason, BAA has chosen to promote growth at Edinburgh more than Glasgow. A new owner with only one airport in the central belt would behave differently."

So a lean and hungry operator, let's call them ThinAir for the sake of argument, swoop in to snatch Scotland's second biggest airport from BAA's grasp. In contrast to BAA, who were happy to under-invest in Glasgow and lazily capitalise on Edinburgh's pre-eminence, ThinAir will promote and develop Glasgow aggressively. They will almost certainly start with the ambition to replace Edinburgh as Scotland's Number One Airport.

ThinAir's backers and bankers will be braced for a profitless year (or several), as ThinAir streamline operations, strike hard bargains, offer tempting deals, and work flat-out to make themselves the most attractive option for national and international carriers.

Meanwhile, Prestwick are facing 25% year on year falls in passenger numbers, and their staffing has already been cut to the bone. With a voracious new competitor just down the road (and a lot closer to Glasgow) Prestwick will see its passengers and its future disappear into, well, ThinAir.

Infratil is large-scale, professional and successful, and doubtless has a rolling programme of strategic reviews across its market sectors. Infratil promises its investors a 20% return on investment, and finds it increasingly hard to present its foray into European airports as anything other than a blunder.

The persistent and worsening European economic malaise, and the unfavourable shifts in the competitive landscape in UK aviation are large enough and long-term enough to trigger a cut-and-run firesale of Prestwick and Manston. Infratil would crystallise its losses and return to New Zealand to lick its wounds and concentrate on its core businesses in familiar markets.

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BAA Airports Ltd., the owner of London’s Heathrow Airport, will disclose “shortly” whether it plans to sell Edinburgh or Glasgow airport.

BAA, which is owned by a group of investors including Spain’s Ferrovial SA, won the agreement of the Competition Commission to bring forward the sale of one of its three Scottish airports while it challenges a ruling to sell Stansted, northeast of London, the company said in a statement today. Chief Executive Officer Colin Matthews said:

“Both Edinburgh and Glasgow are great airports with great futures. We will be sorry to see one of them leave BAA.”

The airport operator is seeking a judicial review of the regulator’s 2009 decision to force the sale of Stansted, one of London’s three airports. The regulator reaffirmed in July that it should sell Stansted to boost competition among airport operators. It’s already sold London Gatwick.

The commission said in 2009 and again in July that BAA had to sell Stansted before disposing of either Edinburgh or Glasgow airport. BAA is being allowed to keep Aberdeen airport, in north east Scotland.

Edinburgh, the busiest of Scotland’s airports, handles 9 million passengers a year, according to its website. Glasgow had 6.5 million passengers in 2010.

Bloomberg BusinessWeek 7th Oct 2011

YES WE CAN: make it work

Profitable. Sustainable. Sound commercial proposition. Good corporate citizen. These are just some of the good things that happen when you work with, rather than against, those around you.

It's not rocket science. It's not even science. It's sense.

Infratil have paid a lot for Manston, and have spent a lot on it since. To see any kind of return on their investment, they need Manston to generate a steady and healthy profit from the air traffic it handles.

BAA, the country's largest airport operator was recently deemed to have a near-monopoly, and has been forced to sell off some of its airports in order to increase competition. The increased competition will bring prices down as airports fight for market share. There won't be any plump, lucrative contracts left - making money will rely on the sheer volume of traffic.

Basic business logic and a few simple facts from the real world lead us to the conclusion that there's going to be a lot more planes over East Kent. This is the time to get our heads together and figure how to manage this so that it works out as well as possible. Recently we had a bit of a mad flurry when Infratil thought they were going to get a cargo contract from BA - everything was done in a rush and nobody was very happy with it.

Thanet District Council are planning ahead for how to deal with night flight requests. Infratil have set out their MasterPlan for the airport. Any change in the pattern of use of the airport, or growth in traffic, will mean that the S106 agreement has to be re-negotiated. The S106 is a bilateral agreement thrashed out between a few dozen people (Thanet Councillors and the senior management of Infratil) but the consequences of the agreement will affect the lives of tens of thousands of people for years to come.

And this, dear reader, is where you come in.

Over the next few posts, I'll be running though some of the things that I want to see in the S106. I cordially invite each and every one of you to comment on the posts, or email me direct with your shrewd and wise thoughts and observations. I will gather together everything you send, and press it on anyone who'll listen. And some who won't.