Cardiff Airport is bought by the Welsh government for £52m (over-priced?)
The current owner of Cardiff Airport, Abertis, which bought the airport from local councils in 2005, has now managed to sell it to the Welsh Government for £52 million. That price is well above market value when compared to recent transactions involving UK airports. The airport was valued at about £34 million in 2010. It has been making large losses and losing passengers for many years. The Government is desperate that it gets more passengers and gets back to making a profit. Welsh First Minister Carwyn Jones said it would not be operated by the government and would be managed “at arm’s length” and “on a commercial basis”. Cardiff’s passengers have declined from around 2 million in 2007 to just over 1 million in 2012, as many have chosen Bristol airport instead. Bristol airport is now concerned that Cardiff would now unfairly benefit from state support. Cardiff was hit by the loss of bmibaby in 2011. The airport’s board will try and get in a commercial operator and hopes to attract long haul and transatlantic flights. Only recently there was news that Swiss airline Helvetic will pull out of Cardiff, 2 years after the Welsh government spent £500,000 marketing Wales in Switzerland.
27 March 2013 (BBC)
Cardiff Airport is sold to the Welsh government for £52m
Troubled Cardiff Airport has been sold to the Welsh government for £52m.
First Minister Carwyn Jones said it would not be operated by the government and would be managed “at arm’s length” and “on a commercial basis”.
Mr Jones has been critical of the airport after a slump in passenger numbers from a peak of two million in 2007 to just over one million in 2012.
Rival airport Bristol raised concerns that Cardiff would unfairly benefit from state support.
Speaking after the government announced the deal, Mr Jones said it was vital for the number of passengers to be increased.
Figures showed just over one million passengers used Cardiff in 2012, down about 200,000 in a year.
Meanwhile, nearby competitor Bristol Airport, which has sought assurances that Cardiff will not get state handouts, had seen almost six million passengers last year.
Cardiff was hit by the withdrawal of flights by budget airline bmibaby in 2011, but has said it expects 5% – 8% growth during 2013.
Last May, Mr Jones called on the then owners TBI to invest in its future or put it up for sale.
“Cardiff Airport is a vital gateway to Wales for business, tourists and general travellers alike,” he said on Wednesday.
“It is essential that its future is secured and that we develop high-quality sustainable services.
“The airport will not be operated by the Welsh government. It will be managed at arm’s length from government on a commercial basis and, over time, I expect to see a return to the public purse on the investment.
“A chief executive of the airport will be announced in due course. In the meantime, I am delighted that Lord Rowe-Beddoe has agreed to serve as chairman of the airport board.”
In the longer term, the board will look at the possibility of bringing in a commercial operator and Mr Jones also opened up the prospect of the airport looking to attract long haul and transatlantic flights.
Mr Jones said the Welsh government had been contacted by a number of interested parties.
After hearing of the sale, Bristol Airport chief executive Robert Sinclair was sceptical that government involvement would be “arm’s length”.
‘Highly competitive’
“However, the purchase price of £52m paid by the Welsh government – which is well above market value when compared to recent transactions involving UK airports – gives us concern that ongoing government involvement and support is highly likely,” he said.
“Airports across the world are commercial businesses operating in highly competitive markets and the global trend is towards privatisation of these assets, not nationalisation.
“Bristol Airport has never been concerned about competition from Cardiff or other airports, provided that competition is on a level playing field without any form of state subsidy or government support.”
The airport’s existing staff will remain but only 40 are employed directly.
An average of around 1,000 staff work on the site as sub-contractors but that figure can vary considerably.
In the months leading up to today, Mr Jones said the airport gave a bad impression of Wales as it fell behind its rivals.
The owners said at the time that they had no plans to sell but would listen to offers.
Only this month there was bad news when Swiss carrier Helvetic announced it was pulling out, two years after the Welsh government spent £500,000 marketing Wales in Switzerland.
Helvetic started flying to Zurich from Cardiff in 2011, but had already dropped winter services after low demand and will not fly this summer.
‘1970s-style nationalisation’
However, Spanish airline Vueling said it was increasing services to Malaga and Alicante from Cardiff after a “positive response from Welsh travellers”.
Asked if the purchase was a gamble, Business Minister Edwina Hart said it was “the right thing to do.”
But opposition politicians were sceptical of the Welsh government’s involvement in trying to turn around the airport’s fortunes.
“I have yet to be convinced that a 1970s-style nationalisation is the answer to the airport’s problems,” said the leader of the Welsh Conservatives, Andrew RT Davies.
“When you consider the recent decision by Helvetic to withdraw, in spite of the Welsh government having invested around half-a-million pounds, it is far from clear that the first minister is the best man for the job of rescuing this airport.”
Eluned Parrott, Welsh Liberal Democrat economy and transport spokesperson, called on the Welsh government to “urgently announce its plans to transform the airport”.
Plaid Cymru also said it wanted to see the detail of the government’s plans.
“There is no reason why a publicly-owned national airport for Wales could not be far more successful than the airport in its present state,” said party leader Leanne Wood.
Cardiff Airport
- The airfield at Rhoose in the Vale of Glamorgan was built in 1941.
- Control was transferred from the Ministry of Defence to the former Glamorgan County Council in 1965, and then to its three successor councils of West, Mid and South Glamorgan in the 1970s.
- The airport was privatised in 1995, with TBI now owned mainly by the Spanish company Abertis with a minority stake held by the Spanish airports operator AENA.
- Just over one million passengers used Cardiff in 2012, down about 200,000 in a year
- Passenger numbers peaked at two million in 2007
Analysis
Nick ServiniBBC Wales business correspondentThe debate will now begin on whether £52m is a good price for the Welsh taxpayer.
The Welsh government says it follows intensive negotiations and was based on independent valuations.
When Abertis bought Cardiff Airport in 2005, it was said then to have a valuation of £150m.
So today’s price is well below that, but back then the airport was in a healthier state. Since then passengers numbers have dropped and latest figures show it made a loss of more than £300,000 in 2011.
Whatever your views on the price, it has always been striking how passionate people feel about Cardiff Airport.
Bringing it back into public ownership, in what is one of the most high profile acquisitions ever undertaken by the Welsh government, will inevitably heighten those passions.
REACTION TO AIRPORT SALE
Reaction has been mixed to the Welsh government’s purchase of Cardiff Airport but almost everyone agrees a thriving airport would be good for the economy.
Business organisation CBI Wales said “strong and effective commercial stewardship” was required.
“To compete on the world stage, Wales needs world class infrastructure and a key part of that is a modern and effective international airport,” said director Emma Watkins.
“Welsh business needs a dynamic and thriving airport that can drive investment and deliver growth.”
The Federation of Small Businesses in Wales said infrastructure around the airport, such as roads and rail, needed to be improved.
“Increasing the number of flights and destinations would no doubt enable businesses to search for new markets and boost their trade internationally,” added Janet Jones, FSB Wales policy unit chair.
South Wales Chamber of Commerce “warmly welcomed” the sale.
“We need to see an effective plan developed that will enable a smooth transition of ownership and ensure that the commercial operator appointed has significant international experience to bring new initiatives to the airport model,” said director Graham Morgan.
http://www.bbc.co.uk/news/uk-wales-21952079
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The Financial Times says that
The airport brought in £2m in earnings before interest, tax, depreciation and amortisation last year, compared with £9m in 2007. [ie. 2 : 52 = 26] That suggests the government paid a higher multiple for Cardiff than Manchester Airports Group did for Stansted airport, which it bought for 15.6 times 2012 earnings.[cf. 26].
Full FT article at http://www.ft.com/cms/s/0/bdd36eca-9705-11e2-8950-00144feabdc0.html#axzz2OrUcUaqz
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Wikipedia says:
The 2010 accounts quoted the net worth of Cardiff Airport Ltd to be £34,311,000 (calculated as Shareholders Funds minus Intangible Assets). Accounts filed with Companies House show Cardiff International Airport Limited suffered a £319,000 loss in 2011, compared with a profit of just over £1 million in 2010. http://en.wikipedia.org/wiki/Cardiff_Airport
In May 2012 the BBC said:
BBC Wales has been told that Abertis valued the airport at about £150m when they bought it in 2005 but the asking price had increased to £200m, despite falling passenger numbers and profits. Abertis would not confirm the figure, although one industry expert has valued the airport at just £30m. http://www.bbc.co.uk/news/uk-wales-18068772
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Some recent news about Cardiff airport and the sale:
February 21, 2013 The Welsh Government is expected to complete its acquisition of Cardiff Airport by the end of March in a straight cash deal understood to be around £50m with current owner Abertis. A due diligence process is being undertaken on behalf of the Welsh Government. The deal will not see the Welsh Government taking on any debt at the airport – which posted pre-tax losses of just over £300,000 in 2011. In the short to medium term the Welsh Government would need to inject about £6m a year in capital expenditure and airline route development support – including agreeing to underwrite any losses in the first few years accrued by airlines establishing new routes out of Cardiff. ie public subsidy. It is understood that representatives of the Welsh Government have already sounded out a number of low cost airlines over setting up operations, including Ryanair – which was asking too much. Discussions are continuing. It is unlikely that the airport, post deal, would be directly owned by the Welsh Government but by some special purpose vehicle instead. Click here to view full story…
Abertis considers sale of UK airports – Luton, Cardiff and Belfast International
February 25, 2013 Abertis, the Spanish owner of Luton, Cardiff and Belfast International airports, may sell them. According to The Sunday Times, Abertis has decided to sell the 3 airports as part of a review of its €1 billion transport division, and Citi and AZ Capital have been appointed to review the division. Luton airport has been surrounded by controversy over its development plans with the local council opposing Abertis’ plans for its development. The Welsh government is reported to be on the verge of buying Cardiff airport, which has had a large drop in traffic during the past few years. Albertis’ airport assets in Bolivia were nationalised by President Evo Morales last week, and it has lost money in Spain in recent years. Campaigners at Luton said the timing of the sale was unfortunate, with the airport’s current planning application – for which planning permission has not been secured. The sale threatens the investment on which the airport’s hugely expensive expansion plans are based. Click here to view full story…
Bristol Airport flies more Welsh passengers than Cardiff
February 16, 2013 Provisional figures for 2012 indicate that more passengers from Wales use Bristol Airport than Cardiff. Over 1 million passengers used Cardiff in 2012, down about 200,000 in a year, with nearly 6 million at Bristol. The statistics suggest the scale of the task facing the Welsh government in improving Cardiff Airport’s fortunes as ministers finalise a deal to buy it. It is estimated that it amounts to the equivalent of about 1.1m passengers over a year flying from Bristol, having come from or going to places in Wales. The Welsh government is expected to take over Cardiff Airport over the next few months after a slump in passenger numbers from a peak of 2m in 2007. It is negotiating a price with Spanish owners Abertis and carrying out various checks and balances on the airport’s finances. The Mayor of Bristol says both airports have their problems, and it would be better if they could work together. Click here to view full story…
Cardiff Airport: Carwyn Jones tells Assembly Members ‘no concerns’ over deal
January 31, 2013 The First Minister of Wales, Carwyn Jones, has said the Welsh government is close to signing a deal to buy Cardiff Airport from its current owners, Abertis. He has told Welsh Assembly Members that checks on the airport’s finances had revealed “no concerns” though some experts had told him its commercial future as an airport was limited to a few years. The deal would be subject to a final price being agreed and due diligence being carried out on the finances of the airport. Cardiff had just over one million passengers in 2012, which is a drop of some 16% compared to 2011, which was itself some 14% lower than in 2010. The airport had two million passengers in 2007, and has been in decline ever since. It has hopes of growing its passenger number by 5 – 8% this year, which appears unlikely with a continuing recession. Ministers are considering a range of options on how to run the airport. Assembly Members are concerned the airport does not become a drain on taxpayers. Click here to view full story…
Cardiff Airport buyout by Welsh government: Conservatives’ question if it’s value for money
January 10, 2013 On 18th December the Welsh First Minister, Carwyn Jones announced that the Welsh government wanted to buy Cardiff Airport from its current owners, TBI. He said they would be working towards a purchase over the next few months. and hoped the airport would be run on a commercial basis by an independent commercial operator on behalf of the government. Conservatives are calling on the Welsh government to prove that buying Cardiff Airport would be good value for the taxpayer, and see it as Labour’s attempt to “nationalise” the airport. Cardiff airport has had declining passenger numbers, down 13% in 2011 to a little over 1.2m, while passengers at Bristol increased by 1%. There was a further fall in the first half of 2012 to 440,000 from 558,000 – partly due to the departure of bmibaby. Despite assurances that it will not receive subsidies or burden the taxpayer, there have been questions about whether public ownership will succeed in turning around the airport’s fortunes. Click here to view full story…
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Comment from an AirportWatch member:
Another shameful example of private debt being nationalised – this one, it seems, largely aimed at placating the Welsh Nationalists. As an investment proposition it is disastrous – there’s not even a slight chance that the project could in any realistic timescale achieve a positive NPV (Net Present Value) taking into account the sale price.