Industry | 2009.10.21
BAA sells Gatwick airport
Months of negotiations end with sale to owner of London\'s City airport but deal raises fears of job losses among 2,500 staff
The airports operator BAA is selling Gatwick to the investment group that controls London\'s City airport in a £1.5bn deal that will see the 51-year-old site upgraded and modernised but which has raised fears of jobs losses among its 2,500 staff.
BAA, owned by the Spanish infrastructure group Ferrovial, put Gatwick up for sale over a year ago amid concerns about its dominance of the market. Those concerns came to a head in March this year when the UK\'s regulatory watchdog, the Competition Commission, ordered BAA to sell Gatwick, Stansted and either Glasgow or Edinburgh airports.
Negotiations over the sale of Gatwick have been going on for months, but Global Infrastructure Partners (GIP) saw off competition for the West Sussex airport from Manchester Airports Group and the Canadian investment fund Borealis.
The price, however, is less than BAA wanted. It had originally slapped a price tag of £1.8bn on the airport and had hoped to at least get more than the £1.575bn at which it is valued on its books. Ferrovial will make a loss on the deal.
The deal ends BAA\'s four-decade long monopoly over the capital\'s major airports. Gatwick, opened in 1958, is the busiest single-runway airport in the world and last year handled over 32 million passengers. But transport analysts maintain that it has been neglected in recent years as investment has instead been pumped into Heathrow.
GIP – set up by Credit Suisse and America\'s General Electric but operated independently – will not take control of Gatwick until early December and todayits new owners were reluctant to flesh out their plans for the site until then.
But a GIP partner, Michael McGhee, said the company would work closely with airlines to improve Gatwick\'s performance, adding: "We will upgrade and modernise Gatwick airport to transform the experience for both business and leisure passengers."
Talk of modernisation, however, has raised fears among Gatwick\'s staff that the airport\'s new owners will introduce savage cost cuts, which will affect jobs.
Unite, the largest union in aviation, called todayfor a meeting with GIP to ensure that workers\' terms, conditions and pensions would be protected in the handover. Brian Boyd, the union\'s national officer for civil aviation, said the sale was to be welcomed as ending "months of uncertainty" but added: "Our primary objective now is to meet with GIP as soon as possible to ensure that the safeguards we associate with the continued employment of our members at the country\'s second largest airport are in place."
Steve Turner, Unite\'s national secretary for civil aviation, added: "We have an agreement in place with BAA which protects the workers\' terms and conditions including, importantly, their final-salary pension scheme. Our concern now is to ensure that this agreement has come through the sale intact."
GIP is expected to focus Gatwick primarily towards the leisure market, not least because its other airport asset, London City, is predominantly a business hub.
But it will not be able to deal with one of Gatwick\'s major constraints – its single runway – for many years. An injunction currently stops Gatwick\'s expansion for another decade, but in BAA\'s own disposal plans it suggested to potential bidders that a new runway could increase passenger numbers to 80 million – more than the number who used Heathrow last year.
The Gatwick Area Conservation Campaign, which represents local residents, hopes to maintain Gatwick within its current boundaries and opposes a second runway. It is also concerned that a proposal to expand the airport\'s north terminal could lead to more noise and pollution. Brendon Sewill, chairman of the group, said he hoped to establish a good working relationship with the new owners.
Meanwhile, Theresa Villiers, the shadow transport secretary, urged GIP to improve the level of service at Gatwick and also work with local communities to minimise the airport\'s environmental impact.
Airlines that use Gatwick gave the sale a cautious welcome. Paul Charles, director of communications at Virgin Atlantic, said: "For years, the airport has suffered from a lack of investment and the new owner now needs to work closely with the airline users to turn Gatwick into a world-class facility." EasyJet also said it welcomed the change of ownership.
Like other airports, Gatwick has suffered from the economic downturn. In July BAA reported that passenger numbers at the airport fell by 9.8% to 14.8 million in the first six months of 2009, which helped to push BAA into a £545m loss.
Most of the proceeds of the Gatwick sale will be used to cut debts at BAA, which as well as well as Heathrow, Stansted, Edinburgh and Glasgow owns Aberdeen and Southampton airports. The company, which has mounted a legal challenge to the Competition Commission\'s ruling that it sell Stansted and either Edinburgh or Glasgow, faces a £1bn debt payment in March 2010, and has total borrowings of almost £10bn.
BAA\'s chief executive Colin Matthews said the company would now focus on improving its other airports, including Heathrow. "BAA is changing and today\'s announcement marks a new beginning for both Gatwick and BAA. We wish Gatwick well for the future and are confident that the airport will flourish under new ownership.Graeme Wearden
Gatwick is being bought by the owners of London City Airport in a £1.5bn deal.
BAA announced this morning that it has sold Gatwick, one of three airports it has been ordered to offload by the competition watchdog, to Global Infrastructure Partners.
The deal is due to be completed in December. Michael McGhee, a partner at GIP, pledged to work closely with airlines to improve Gatwick\'s performance.
"We will upgrade and modernise Gatwick Airport to transform the experience for both business and leisure passengers," said McGhee."
Colin Matthews, chief executive of BAA, said BAAthe company would now focus on improving its other airports, including Heathrow.
"Gatwick and its people have long been a central part of BAA and we are proud of the airport\'s development as one of the world\'s leading international airports."
"BAA is changing and today\'s announcement marks a new beginning for both Gatwick and BAA. We wish Gatwick well for the future and are confident that the airport will flourish under new ownership," said Matthews.
GIP is paying £1,455m in cash for Gatwick, plus further payments of up to £55m. The price-tag is less than BAA had hoped for. Britain\'s second-biggest airport was recently valued at £1.6bn, and BAA was reportedly keen to raise as much as £1.8bn. But the recession, and the slump in airline traffic, appears to have driven the price down.
Most of the proceeds of the Gatwick sale will be used to cut BAA\'s debt. The company faces a £1bn debt payment in March 2010, and has total borrowings of almost £10bn.
In March
For more information, please visit
http://www.guardian.co.uk/business/2009/oct/21/baa-sells-gatwick
