COMMENT: The Stansted gamble

BAA has finally given up with its efforts to retain Stansted Airport.  Probably by the end of the year all of London’s major airports in terms of double digit passenger numbers will have separate owners. See also BAA and Stansted

Just to put the figures in perspective, last year 18m passengers used Stansted and the figure could be less for 2012.  In 2007 the airport recorded a record 24m throughput.  About 80% of the passenger traffic is via Ryanair.  The airport has a substantial cargo throughput.  Its executive jet facilities are first class but under-utilised.

Over the next few weeks bankers, investors and airport owners will be deciding just what Stansted is worth and what is its future.  Airlines will be monitoring the situation carefully and politicians will be hovering too, be it at Government level or more local, in the sense that London’s Mayor Boris Johnson has not ruled it out in his search for a future Heathrow replacement.

As things stand a second runway is not on but things could change.  The sale will presumably include land acquired (and retained) for such a move.

Stansted is 40 miles from central London with a secondary motorway passing by, with links to the west poor, but fine dual carriageway access into East Anglia.  Its greatest failing is a lack of a proper rail link. 

When the initial part of the present terminal complex was completed in 1991 it included what was in fact a (cheap) twin track siding off the London Liverpool Street – Cambridge line, itself considered a secondary railway and not Intercity.  Falsely named the Stansted Express (it now has four stops and retains the nickname ‘Stansted Slow’) it is the nadir of Stansted and has never made the numbers that the trains to City, Gatwick, Heathrow, Luton and pro rata even Southend are achieving.  The December 2005 BAA ‘Generation 2’ consultation pays lip service to the railway (a mention within a paragraph) and we believe that this has been Stansted’s greatest failure.  There is also a single track to the northbound Cambridge line.

Whoever buys the airport needs as a priority to sort out a high-speed rail link to London, either by conventional train or monorail!  It is essential for its future.   

In terms of immediate investment Stansted seems to be in good health, unlike Gatwick with the terminals virtually requiring a re-build.  The simple Lord Foster design was added to in 2009 and is capable of at least a 30m throughput.  Gatwick has proven what can be achieved with a single runway, although that airport does have a larger proportion of wide-body operation.

For some of the reasons above airlines have either not been attracted to Stansted, or if they have arrived, departed pretty quickly.  Gone are American Airlines, Continental (United) and El Al to name but a few.  Two transatlantic Business Class operators failed, Maxjet and Eos, and Air Asia X pulled out, moving to Gatwick where it did no better.  British Airways made a feeble attempt with Go, which soon collapsed, easyJet picking up the pieces.  Buzz also failed, a sort of KLM re-branding of what was initially AirUK.  easyJet operations are now much reduced from their peak, with the airline offering the Essex community flights from the re-built Southend (whose rail link is not branded as an ‘Express’ and serves a different market).

What is Stansted worth?  That is for others to suggest but as a comparison recent airport sales have included Edinburgh (£800m), London City (£750m), Gatwick (1.51bn) and Southend (£21m), each with a certain amount of immediate investment required. 

Ryanair says it wants to come in with partners.  Without owning Aer Lingus it would have a problem starting up low-cost transatlantic services, and any route developments into Eastern Europe it can do under the status quo.  Incheon Airport, Seoul, seems to have expressed an interest, but would the administration be Korean or European?  Manchester Airport Group (and partners) is said to be amongst the bidders.  It certainly has the operational and marketing skills, but the wherewithal, that is something else?  An investment or pension fund would need to buy in the management expertise.  That leaves a Middle East interest as a prime possibility with the money being no real constraint and usually with a ‘hands off’ way of doing things.

Within the next few months will be known what the future holds for Stansted in terms of ownership.  BAA will presumably sell to the highest bidder.  Everything has a sale price!  That is the Stansted gamble.

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