LCY sold for £2bn

Tabnabs

For an airport that makes less than 30 times that annually, this seems like bad news for what is a very successful and (sometimes) reasonably priced route to/from Ireland.

London City Airport has been sold to a Canadian consortium for around £2bn.

The airport in Docklands largely serves a clientele of business executives and has been bought by a consortium led by the Ontario Teachers’ pension fund and Borealis, the pairing whose UK infrastructure investments include HS1.

Other reported bidders were the Chinese transport company HNA and another Canadian consortium, as the price for the capital’s smallest airport exceeded early expectations.

The value of the airport, which serves around four million passengers a year, has rocketed over the past two decades. Global Infrastructure Partners, its owner until now, also has Gatwick and Edinburgh in its portfolio. It paid a third of that price a decade ago to buy the airport from Irish businessman Dermot Desmond, who had purchased it in 1995 for just £23.5m. It was an investment that had been considered risky while Canary Wharf, a major source of business passengers, was in administration.

The Ontario Teachers and Borealis consortium also included Aimco and Wren House, while the defeated Canadian consortium included PSP Investments, a pension fund that covers the country’s mounted police.

Expansion plans for the central London airport have been blocked by the mayor, Boris Johnson. City airport is appealing against Johnson’s decision to block its proposed £200m expansion plan, which would have doubled its passenger traffic by 2030, extending the terminal and airfield to allow 50% more flights.

Campaigners attempting to curb its present operations due to noise and pollution concerns have warned that the 2030 vision would mean a huge increase in flights and disruption over inner north-east London.

The sale may raise the eyebrows of the boss of London City’s biggest customer, British Airways. Willie Walsh, chief executive of BA’s ower IAG, recently dismissed the £2bn valuation as “foolish”. He warned that BA was prepared to move its operations elsewhere should any buyer attempt to increase landing charges to cover the cost of its purchase.

The price is around 30 times London City’s earnings before interest, tax, depreciation and amortisation in 2015. Walsh said he could not see how any buyer could “recover or make any return on that investment unless they make significant increases in airport charges”.

The price tag dwarfs the £1.5bn paid by Manchester Airports Group for Stansted two years ago, which carries more than five times as many passengers and has permission to double that number.

However, London City airport, which is near Canary Wharf, has an unparalleled location and investors may believe airlines could sustain higher fares - despite Walsh’s claim about the margins BA makes at City.

Global Infrastructure Partners declined to confirm or comment on the reported sale. London City airport and Ontario Teachers did not respond to requests for comment.

http://www.theguardian.com/business/2016/feb/25/canadian-consortium-buys-london-city-airport-2bn

Lustrum

Will be interesting to see what, if anything, Willie does next. Both Cityjet and flybe have threatened to pull out aswell if the fees go up. However for both BA Cityflyer and Cityjet, the airport is their biggest base of operation so I'm not sure what other options they'd have that would allow them to keep their customer base

rameire

any chance it was purchased to flatten the airport and put high rise commercial and apartment buildings on the land?

Pat Dunne

rameire wrote: »

any chance it was purchased to flatten the airport and put high rise commercial and apartment buildings on the land?

Exactly what I was thinking!

afatbollix

There was a report last year that said the land was worth more as buildings than an airport.

The planning permission to extend the terminal and build the taxiway got rejected last year. If they cannot decide on the next runway in London they will never allow London city to expand. The Green party has won.

Silly money which is bad for us who use it.

MuffinsDa

With that sort of money it only make sense if they increase the fees significantly or change it completely to residential/commercial. Not sure residential makes sense - some back of the envelope calcs: assuming average cost of an luxury apartment in the area to be 8000, they need to be able to build 3000+ units for it to make profit. The land strip looks like its around 2.5km x 200m, not sure if it's possible to do anything at that scale there. Changing to commercial towers might make more sense, especially considering proximity to City and DLR connection.

737max

I think the Pension company overpaid for London City Airport but if planes like the one mentioned at http://www.boards.ie/vbulletin/showthread.php?t=2057567416 become common(decades from now) then that is a game changer as you'll have super-quiet 200 seat planes no bigger than an A319 flying in to London City Airport from all the major cities in Europe and perhaps east coast of America; that is a long way away so I think they are just going to price-gouge their way to break even.

munchkin_utd

is the new 320 neo a plane that can fly into London Docklands ? Its got 50% less noise footprint than the previous model.
https://www.lufthansagroup.com/en/themen/airbus-a320neo.html

EDIT: just saw that the runway is exceptionally short, so I presume such a large aircraft isnt a runner even if it has less noise than previously.

737max

compare and contrast with FRAPORT's deal with Greece where Greece had a gun held to its head forcing it to privatise its Airport infrastructure.

LCY has 4 million passengers per year. Dublin is nudging 25m and in a perfect world with honest capable politicians Dublin Airport would be sold off or managed for a fixed contract time of 20 to 40 years on a terminal by terminal basis bringing in billions of Euro of revenue.
I don't trust anyone in Ireland to be able to do this and ensure that the airport operates competitively or for our Public Representatives to spend the money responsibly so best leave it as is as a public Monopoly.
If Ireland needed a bailout then Ireland could end up like Greece having to sell prize jewels like the Airports(the big squares on the monopoly board).

Idbatterim

I flew into and out of stansted yesterday, flew into and out of LCY in November, LCY is a dream compared to any of the other airports if your destination is central London...

Chris_5339762

MuffinsDa wrote: »

With that sort of money it only make sense if they increase the fees significantly or change it completely to residential/commercial. Not sure residential makes sense - some back of the envelope calcs: assuming average cost of an luxury apartment in the area to be 8000, they need to be able to build 3000+ units for it to make profit. The land strip looks like its around 2.5km x 200m, not sure if it's possible to do anything at that scale there. Changing to commercial towers might make more sense, especially considering proximity to City and DLR connection.

I'm a huge supporter of LCY, flown into there a few times and its just so convenient. But as well as the raw landvalue of the airport plot, there are building height limits all over Canary Wharf etc due to the airport as well, if it wasn't there then you'd see a lot more high-rise in time.

I really hope it stays though, Stansted I hate, Heathrow is a pain for connections (Crossrail will help), Luton isn't worth mentioning and Gatwick is very slow to get into London with.

Idbatterim

I really hope it stays though, Stansted I hate

I found getting there handy with Stansted express, I got an offer and think it was only E20 return, the eating and shopping area is nice, but the gates etc are a disgrace, those areas, needed doing up a decade ago, I literally couldnt believe it yesterday...

Tabnabs

Good news for LCY

Plans for a £344m expansion of London's City Airport have been given clearance by the Government.

The decision, the Treasury said, would see the creation of 1,600 jobs and potentially add £1.5bn to the UK economy by 2025.

It was made against the backdrop of local opposition on environmental grounds and furious debate over airport expansion in the South East.

While City Airport's investment would allow for more flights, the Government is under pressure to make a decision on which major airport, between Heathrow and Gatwick, is to get a new runway.

The plans for the Docklands airport allow for an extended terminal, new aircraft taxiway and parking spaces for planes at what it calls "one of the capital's fastest growing airports".

The Chancellor, Philip Hammond, made it clear that the UK's vote to leave the EU was a factor behind the decision.

He said: "London City Airport's ambitious growth plans will boost international connections, strengthening the City of London's links to destinations across the world, and send a clear signal that Britain is open for business.

"Making it easier to visit and do business in the City of London will help drive forward our economy and further strengthen the city's status as the world's leading financial centre.

"This is a real vote of confidence in the resilience of our economy, creating over a thousand new jobs."

The airport's sale - by Global Infrastructure Partners to a consortium including Canadian pension funds and Kuwait's investment arm - was agreed earlier this year for a sum of £2bn.

City carried 4.3 million passengers in 2015 - an 18% rise on the previous year - and plans to double passenger traffic by 2030.

Its ambitions drew protests from residents who feared more noise and pollution.

They were supported by former London mayor Boris Johnson but his successor, Sadiq Khan, withdrew City Hall's objection to the airport buying land that it needed for its expansion.

The Government said the airport would provide a "generous" compensation package to local residents affected by increased air traffic.

http://news.sky.com/story/london-city-airport-granted-163344m-expansion-10513942

Chris_5339762

Excellent. LCY is just such a useful little airport for getting into London. Someday I'll fly out of it... but Ryanairs sub €20 deals from Stansted win over there.