10 AUGUST 2015
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The surprise story of last week was the confirmation that London City Airport (LCY) has been put up for sale by majority shareholder New York based Global Infrastructure Partners (GIP), at a higher price than either Gatwick or Stansted secured for Ferrovial, the previous owner of both the former BAA airports. GIP owns 75% and Oaktree Capital, Los Angeles based, 25% of LCY. The price paid for the airport in 2006 was £750m.
The timing was odd to say the least, the day of the London Tube strike, Declan Collier, Chief Executive of LCY, brought back from holiday for an overnight and Michael McGhee, Director for Transport at GIP, about to go on leave.
GIP says that there is a market for large infrastructure units, and the announcement, featured in the Financial Times, has created world-wide interest. London is currently the place to invest in. Heathrow’s owners include Qatar Holdings (20%), Government of Singapore Investment Corporation (11.2%) and China Investment Corporation (10%).
The real question is would you buy a house with an essential planning extension not agreed? A house said to be valued at £2bn.
Also under question is a Crossrail station at the former Silvertown for London City station site, just over 100 yards from an existing airport entry point. It is for some incomprehensible reason not in the Crossrail plan. Inclusion for the 2017 start-up is according to one expert “simple and cheap”.
Your Editor concedes a long standing interest and familiarity with the project since first visiting the site in early 1982 (LCY actually opened in November 1987). The DLR was completed in December 2006. In 2007 passenger numbers jumped 23%. Around 50% now use the train as a means of access. Crossrail is essential at the Whitechapel interchange to Essex, for London’s West End, and onward to Heathrow.
A 4.1m throughput is expected in 2015, a rise of more than 10%. July was 18% up. At a recent visit the airport was ‘heaving’, barely able to cope with the outbound numbers.
It is expected that the brand new (and not yet certificated) Bombardier CSeries aircraft, partly built in Belfast, will come into service next year, designed for LCY operations with the possibility of opening up non-stop destinations such as New York, Moscow and the Gulf States. Indications are that 6m passengers by 2023 is a distinct possibility, the vast majority business travellers. The airport is a key factor in the regeneration of the Albert Dock area, North Woolwich and Silvertown.
Following a public enquiry London City was given permission to increase movements from the present 70,000 to 111,000 per year. Newham Council then passed the detailed extension plans, but this was subject to approval by the Mayor of London. Most surprisingly this was turned down personally by Boris Johnson citing his Heathrow opposition. Subsequently the Mayor has stated the need for air routes into London from the UK regions, which City Airport epitomises.
The application has gone to appeal, and there is every indication that the cynical political move by Boris, will be annulled. The airport has lost a year with no final decision until probably after a new Mayor has been elected. Boris will be saved the embarrassment of his decision overturned.
The question remains. Why has the airport been put up for sale at this time? Is this anything to do with Gatwick, which GIP owns 42%, losing out with the Airports Commission’s recommendation? And will it realise £2bn with not only the planning and transport problems but £200m more needed for the proposed development. Underway is an upgrading of the main, western, pier costing £16m.
The indications are that GIP are smiling.
All comments are filtered to exclude any excesses but the Editor does not have to agree with what is being said. 100 words maximum
David Bentley, Manchester/UK
The suggestion GIP might wish to offload (its part of)LCY has been floating around for three years or so. It's a very valuable piece of real estate after all - more so than most - and it's possible they are testing the waters for an LGW disposal when all hope for R2 there is finally gone. GIP is not committed to airports after all. The 'recall of parliament' situation you mention suggests the airport people are not involved in the decision process.