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Posted by: admin on 11/27/2009 04:01 PM
Updated by: admin on 11/27/2009 04:01 PM
Expires: 01/01/2014 12:00 AM
BAA is putting its Gatwick Airport near London for sale.
The British airports operator BAA is putting its Gatwick Airport near London for sale.
London Gatwick is to be sold by BAA in response to pressure from the Competition Commission, which is preparing to call for the break-up of the UK airports group.
Colin Matthews, BAA chief executive, said the group, which is controlled by Spain's Ferrovial, had decided to begin the process of selling Gatwick Airport immediately.
"We have decided to begin the process of selling Gatwick Airport immediately," BAA chief executive Colin Matthews said. "Gatwick is one of Europe's premier airports, the busiest single-runway airport in the world, and it was used by 35 million passengers last year."
Gatwick expects to handle 40 million passengers by 2010. BAA's Heathrow is much larger, currently serving 67.3 million passengers a year, but it is operating near its current capacity and that leaves room for growth among London-area rivals. Gatwick is prohibited from building a second runway until 2019 under the terms of an agreement with West Sussex council, but new owners might explore ways of overturning that deal.
As per the information available, potential buyers, which have indicated an interest in bidding for some of the BAA airports, include: Manchester Airport Group, the largest UK-owned airport operator; Global Infrastructure Partners, a fund in which Credit Suisse and General Electric were the founding investors and which already owns a 50 per cent stake in London City airport; and Hochtief, the German construction group and airport owner.
Matthews, according to guardian.co.uk, said sovereign wealth funds were likely bidders for the £2bn business as the credit crisis has limited financing options for private equity and infrastructure funds.
"Every observer of the market knows where the money is, and I am sure that sovereign wealth funds would be one of the groups interested," Matthews said.
BAA, the world's biggest airport operator, was taken over in mid-2006 by a consortium headed by Spain's Ferrovial, with minority partners Caisse de dépôt et placement du Québec, the Canadian pensions institution, and GIC Special Investments, the private equity arm of the Government of Singapore Investment Corporation.
easyJet, Gatwick's largest airline, said the move is not a surprise, but it is a possible cause for alarm. The airline said it has always argued that simply breaking-up BAA will do nothing to improve competition, and therefore the experience for the traveling public, unless three fundamental factors are recognised:
· Gatwick is a local monopoly and simply selling Gatwick to the highest bidder won't change that fact. Monopoly providers of nationally-important infrastructure always need to be regulated to prevent irresponsible price gouging.
· 95 percent of the £10 billion that Ferrovial paid to buy BAA in 2006 was borrowed and the Spanish company has struggled to refinances large swathes of its debt in the last few months. Selling Gatwick is Ferrovial's way of reducing its debt burden – but it means that UK airport policy is being dictated not by the Government but by the short-term financial constraints of a highly-indebted foreign owner. Such a situation cannot be allowed to be repeated.
· The Spanish company has persuaded the UK Civil Aviation Authority to allow it to increase prices by around 50 percent over the coming five years at Gatwick. This seems highly generous that there are no runways or terminals being planned or built at the airport. easyJet is challenging this decision through a Judicial Review."
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